ASX dividend shares have the capability to produce really good passive income for investors. And I think there are a select group of stocks that could produce $2,000 of dividend income from a total investment of $20,000.
With interest rates now so much higher, savers can now get a very good return from term deposits and online savings accounts. So, income investors should aim for a good yield considering they can get risk-free returns of around 5%.
With that in mind, if I were trying to build a high-yield portfolio for passive income, the below four are the ASX shares I'd choose.
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Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop is a seller of a variety of hair removal products across more than 120 stores. It also sells products across a growing variety of other areas including oral care, hair care, massage, air treatment and beauty categories.
The company has grown its annual dividend per share each year since 2017. Commsec numbers suggest that the ASX dividend share could pay a grossed-up dividend yield of 15.75% in FY24, and it's trading at 8 times FY24's projected earnings.
I think that hair removal is a fairly defensive retail category, so Shaver Shop's earnings can hold up better than most retailers over the next 12 months. It has no debt and had cash of $34 million at December 2022. It's in a strong position to keep paying passive income.
It can retain and grow profit through store network expansion across ANZ, grow its brand awareness and sell more products exclusive to Shaver Shop.
GQG Partners Inc (ASX: GQG)
GQG is one of the largest fund managers on the ASX, with US$98.5 billion of funds under management (FUM) as at 31 May 2023.
Its main investment strategies have displayed outperformance against its benchmarks. That's likely one of the reasons why GQG has been able to achieve net inflows of US$5.9 billion in the first five months of 2023.
This combination of good performance by the existing FUM, plus inflows of new FUM, should be a natural boost for earnings and the dividend over time.
GQG has committed to pay 90% of its distributable earnings as a dividend to shareholders. Commsec numbers suggest it could pay a dividend yield of 9.5%.
Pacific Current Group Ltd (ASX: PAC)
Pacific Current is a fund manager that invests in other fund managers around the world. It actually owns a stake in GQG, but it is also invested in others including Aether, Banner Oak, Carlisle, Proterra and Astarte.
The ASX dividend share helps the fund manager grow, with capital, "institutional distribution capabilities and operational expertise."
The company is seeing a steady rise in its aggregate FUM. Excluding GQG, its 'boutiques' have received A$9.4 billion of new capital commitments since 1 July 2021 and A$4.5 billion from 1 July 2022.
Pacific Current has grown its dividend each year since 2018. Growth of FUM should help the business continue to grow its passive income.
Commsec numbers suggest that the company could pay a grossed-up dividend yield of 10.2% in FY24.
Metcash Ltd (ASX: MTS)
Metcash is a business that supplies a number of businesses including IGA, IGA Liquor, Bottle-O, Cellarbrations, Thirsty Camel and Porters Liquor. It's also the owner of the brands Mitre 10, Home Timber & Hardware and Total Tools.
I believe that food and liquor are defensive retailing categories that can provide Metcash with resilient earnings over the 12 months and beyond. The hardware category may face a little more uncertainty, but I think it can continue to do well and enable Metcash to keep paying large dividends.
The ASX dividend share has a dividend payout ratio policy of around 70% of underlying net profit. Commsec numbers suggest it's going to pay a grossed-up dividend yield of 7.9% in FY24.
I believe that Australia's growing population will be a useful tailwind in the coming years for Metcash's earnings and passive income.
Foolish takeaway
If I invested $5,000 into each of these businesses, I'd get an average dividend yield of 10.8%, which would be a total gross passive income of $2,160 in FY24, based on the dividend estimates.
