You won't find many S&P/ASX 200 Index (ASX: XJO) passive income shares paying more than 8% yields and trading at price-to-earnings (P/E) ratios of less than 10 times.
For example, Commonwealth Bank of Australia (ASX: CBA) shares, which pay a fully franked trailing dividend yield of only 3.9%, trade at a P/E ratio of 20.3 times.
With that in mind, the two passive income shares we look at below could enjoy additional support from their outsized dividend payouts and relatively cheap valuations relative to their earnings.
How long can these ASX 200 passive income shares stay cheap?
When a company's share price goes up amid steady earnings, its P/E ratio will obviously increase. While its dividend payouts may remain the same, the yields offered by each share will fall.
Should earnings go up faster than the share price, the P/E ratio will fall, while investors will hopefully grab a bigger dividend payout.
Which brings us to our first 'cheap' passive income share, New Hope Corp Ltd (ASX: NHC).
The ASX 200 coal stock trades on a P/E ratio of 6.2 times.
And despite a big retrace in global coal prices since the record highs of late 2022, New Hope remains a top dividend payer.
The coal miner's future dividends remain linked to future coal prices. But with global coal demand proving surprisingly resilient amid limited new exploration and project starts, I believe coal prices should hold up well from current levels.
New Hope paid a fully franked final dividend of 30 cents per share on 7 November. The miner's interim dividend of 17 cents per share will be paid to eligible investors on 1 May.
All up that works out to a full-year payout of 47 cents per share. At the recent New Hope share price of $4.83, that equates to a fully franked trailing yield of 9.7%.
Also topping our list of 'cheap' passive income shares is Fortescue Ltd (ASX: FMG).
The ASX 200 iron ore miner trades on a P/E ratio of 9.1 times.
Fortescue's future dividend payouts remain closely aligned to the trajectory of iron ore prices, which are broadly forecast to come down over the next two years. However, the miner is also expanding its copper operations alongside its green energy ambitions, both of which could add fuel to its earnings.
Fortescue paid a fully franked final dividend of $1.00 per share on 28 September. The final dividend of $1.08 per share landed in eligible investors' bank accounts on 27 March.
That equates to a full-year payout of $2.08 per share.
At the recent Fortescue share price of $25.69, that sees this 'cheap' passive income share trading on a fully franked trailing yield of 8.1%.
Happy income investing!
And remember, if you're unsure how or where to invest your money, just reach out for some expert advice.
