No matter which way I look at it, if you're after passive income, it's hard to beat ASX coal stock Yancoal Australia Ltd (ASX: YAL).
And with the Yancoal share price down 17% in 2023, I believe investors buying now will continue to be rewarded with market-beating passive income streams.
The ASX stock has come under some selling pressure amid a retreat in coal prices, which hit all-time highs in mid-2022. But it's worth noting the Yancoal share price is still up 76% over two years.
We'll take a look at the miner's juicy dividend payouts below.
But first, a few important points.
Don't put all those eggs in one coal basket
Yancoal shares have delivered market-smashing passive income returns over the past two years. And I believe the ASX stock will continue to do so over the next two years.
But investors should always bear in mind the importance of holding a diversified income portfolio. That means investing in a decent number (10 is a good target) of ASX dividend shares operating across a variety of sectors.
Also take note that the yields you generally see quoted, and those we discuss here, are trailing yields. Future passive income streams may be higher or lower, depending on a range of company-specific and macroeconomic factors.
One of those factors in this case is coal prices.
On that front, in its latest quarterly report, Yancoal said it "remains focused on bolstering production and reducing cash operating costs to drive continued cash generation in all coal market conditions".
Indeed, the miner reported that output from its mines continued to improve as the company delivered on its recovery initiatives across its operations. This has helped Yancoal increase its coal production each quarter this year.
Which brings us to…
Why I believe this ASX stock is a top passive income play
With Yancoal increasing production every quarter this year, the company's balance sheet remains very healthy.
As at 30 September, Yancoal was debt-free with a cash balance of $920 million. And that's after paying the $489 million 2023 interim dividend.
That certainly supports the outlook for ongoing passive income from this ASX stock.
Adding some potential tax benefits to that income, the last two dividends were fully franked. And management sounded confident that more franking credits are on the horizon.
"A continuing strong revenue profile is likely to result in ongoing corporate tax payments and franking credit accumulation," the company stated.
And with this year's pullback in the Yancoal share price, the stock now trades at a very low 2.4 times price-to-earnings (P/E) ratio.
So, how about that passive income?
Well, the final Yancoal dividend of 70 cents per share was paid on 28 April. The ASX coal stock delivered its interim dividend of 37 cents per share on 20 September.
That works out to a full-year payout of $1.07 per share. At the current Yancoal share price of $4.76, that equates to a fully franked trailing yield of 22.5%.
This means that for $200 a month in passive income, I'll want to buy 2,243 shares.
