Passive income is a fantastic way of earning extra cash on the side from the comfort of your own home.
Two ASX 200 iron ore shares to look at for passive income are Fortescue Metals Group Ltd (ASX: FMS) and BHP Group Ltd (ASX: BHP).
So how could I earn $400 in monthly income by investing in these two ASX 200 iron ore shares?
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Could I generate $400 monthly income from Fortescue and BHP?
Starting from the beginning, a $400 monthly income equates to $4,800 of annual income.
Secondly, the calculations we are looking at here reflect the dividend payments made to shareholders over the past 12 months. Keep in mind, he dividend payments for ASX 200 iron ore shares could change in future years.
Fortescue paid a fully franked interim dividend of 75 cents per share in the first half of this year. This follows the company paying a final dividend of $1.21 per share fully franked in the second half of last calendar year. In total, Fortescue has paid $1.96 in total dividends in the last year.
This equates to a trailing dividend yield of about 9.4% based on the company's last closing share price of $20.94. Fortescue shares have lost nearly 4% in the last year as can be seen below.
Now, let's take a look at BHP. The company paid an interim dividend of $1.36 in the first half of this year. This follows the company paying a $2.55 final dividend in the second half of last year. In total, this means BHP paid $3.91 in dividends to shareholders in the last year.
Based on BHP's last closing price of $44.40, this equates to a trailing dividend yield of 8.8%.
How much would I need to invest to get $400 a month in dividends?
My average dividend yield, if I invested the same amount in both BHP and Fortescue, would be 9.1%.
Therefore, to generate $400 a month (or $4,800 in yearly passive income) with a 9.1% average dividend yield, I would need to invest $52,747 overall.
Alternatively, I could invest $4,396 per month for the next 12 months in these two ASX 200 iron ore shares to reach my goal.
