If I were aiming to build a bulletproof passive income stream by investing $10,000 in S&P/ASX 200 Index (ASX: XJO) dividend stocks, here's how I'd go about it.
First, while it's not a hard rule, I'd tend to stick to the bigger dividend-paying companies.
Sticking to ASX 200 stocks should give my portfolio less volatility than investing in small-cap shares. That in turn should help smooth out the annual passive income I can expect to land in my bank account.
Second, I'd strongly lean towards companies paying fully franked dividends. This should see me hold onto more of that dividend income at tax time.
Third, I'd invest my $10,000 across a range of companies operating across a variety of sectors. That will decrease the odds of my passive income portfolio taking a big hit if any particular sector comes under pressure.
Now, I'd also keep in mind that the yields I generally see quoted are trailing yields. Future yields may be higher or lower depending on a range of company-specific and macroeconomic factors.
However, by spreading my $10,000 across the retail, finance, energy and resources sectors, my long-term aim is to see any dip in dividends from one stock balance out by increased payouts from another.
With that said…
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Four ASX 200 shares for diversified passive income
The first ASX 200 dividend stock I'd invest in for reliable passive income is home furnishings and white goods retailer Harvey Norman Holdings Ltd (ASX: HVN).
Over the past 12 months, the retail stock has delivered 25 cents a share in fully franked dividends. At Friday's closing price of $4.65, Harvey Norman shares trade on a trailing yield of 5.38%.
The second company I'd target for passive income is financial stock Australia and New Zealand Banking Group Ltd (ASX: ANZ).
Over the past 12 months, ANZ has paid out $1.75 a share in partly franked dividends. At Friday's closing price of $27.68, ANZ shares trade on a trailing yield of 6.32%.
Turning to the resources sector for passive income, I'd target mining giant Fortescue Ltd (ASX: FMG).
Over the past 12 months, Fortescue has paid out $1.75 a share in fully franked dividends. At Friday's closing price of $28.26, the ASX 200 resources stock trades on a trailing yield of 6.19%.
Which brings us to the fourth company I'd invest in for a bulletproof passive income portfolio, ASX 200 oil and gas stock Woodside Energy Group Ltd (ASX: WDS).
Over the past 12 months, Woodside has paid out $3.40 in fully franked dividends. At Friday's closing price $31.86, Woodside shares trade on a trailing yield of 10.6%.
To the maths!
To aim for that bulletproof passive income stream, I'd invest an equal amount into each of the above four companies. Or $2,500 apiece.
Based on the trailing yields, I can then expect to earn an average yield from these four ASX 200 dividend stocks of 7.1%.
This means my $10,000 investment should see me earning $710 a year in passive income, with potential tax benefits from those franking credits.
And, of course, I'll be hoping for some share price gains as well!
