Building up a stream of passive income using ASX dividend stocks is no easy task. It may be one of the best and most fireproof ways of gaining a secondary income source. But it will still take time and money. So how does one get a shot at $10,000 in annual passive income with an ASX dividend stock?
Well, let's illustrate using one ASX 200 stock. JB Hi-Fi Ltd (ASX: JBH) is an ASX 200 retail share that most Australians would be familiar with. Its distinctive black-and-yellow signage has been gracing Australian shopping centres for decades now.
Although JB started out life selling hi-fi products, over time it has morphed into a purveyor of everything from white goods, televisions, and kitchen appliances to vinyl records, video games, and computers.
What most JB customers might not be familiar with though is this company's dividend prowess. JB has been a strong dividend payer on the ASX for many years.
But the company has turned up its income to a new level more recently. So let's assess how buying 662 shares of JB Hi-Fi could help you get a shot at $10,000 in passive dividend income every year.
How 662 JB Hi-Fi shares could get you $10,000 in dividend income
Over the past 12 months, JB shares have paid out two dividends to investors. The first was the final dividend of $1.53 per share investors bagged last year. The second was the interim dividend of $1.97 per share that was paid out just last month. Both dividends came fully franked, as is typical with JB.
So if an investor held 662 shares of JB Hi-Fi over the past year, they would have received a total of $2,317 in dividend income. That comes from the $3.50 per share in dividends, multiplied by our 662 shares.
Now an annual $2,317 is no small pile of change. But we're not anywhere close to $10,000. So what's next?
Well, let's take a look at how JB's dividends have grown over the past few years. In 2017, investors received an annual total of $1.18 in dividends per share. But by 2022, this had grown to $3.16 per share. That represents an impressive compounded annual growth rate of 21.78% per annum.
If the JB dividend keeps growing at this rate going forward (which is by no means guaranteed), then it will only take less than nine years before investors are bagging $10,000 every year from this ASX 200 dividend stock. That doesn't even assume dividends are reinvested either.
Of course, a lot has to go right in this scenario. But JB certainly has the runs on the board with its rate of dividend pay rises over the past decade. All an investor would need to get $10,000 a year from their 662 shares would be the continuation of the status quo and some patience.
It just goes to show that the best ASX dividend shares give investors a great shot at an ever-rising stream of passive income.
