Here's how much I'd need to invest in BHP shares to generate a $250 monthly income

Here's what you need to do if you want to earn $250 of monthly income from BHP shares.

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Key points

  • BHP is one of the biggest dividend payers on the Australian share market
  • Its shares also traditionally offer above-average dividend yields
  • Here's what you need to do to generate $250 of monthly income from the Big Australian's shares

If you're an income investor, then BHP Group Ltd (ASX: BHP) shares are likely to be on your radar.

After all, the mining giant is traditionally one of the biggest dividend payers on the Australian share market.

With that in mind, let's take a look to see what it would take to generate $250 of monthly income from BHP shares.

A monthly income from BHP shares

Firstly, it is worth highlighting that the Big Australian pays dividends every six months. So, investors would need to take these dividends and then redistribute them monthly if they wanted a paycheck each month.

That said, in order to generate $250 monthly income you'll need $3,000 in annual dividends.

According to a recent note out of Goldman Sachs, its analysts are expecting BHP to pay fully franked dividends of US$2.11 (A$3.14) per share in FY 2023 and US$1.70 (A$2.53) per share in FY 2024.

This means that you will need to own 955 BHP shares in FY 2023 or 1,185 shares the following year to generate the desired level of income. Based on the current BHP share price of $42.96, this will mean investments of approximately $41,000 or $51,000, respectively.

If you're fortunate enough to have these funds at your disposal, then you're on your way. But if you don't, I wouldn't let that stop you from aiming for this in the future.

The Australian share market has provided a return of approximately 9.6% per annum over the last 30 years. While there's no guarantee that it will do the same in future, if it were to do so, investing $5,000 into ASX shares each year would turn into $51,000 in just seven years.

At that point, you can switch your focus to income and watch the passive income flow in each month.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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