There's nothing quite like a regular passive income stream from ASX shares to help boost your bank balance.
Not to mention opening the door for some of those discretionary items or travels you may have been eyeing.
And you might be surprised by how much passive income you could earn from $20,000 invested in ASX dividend shares.
That's especially true if you don't need the money right away and are able to reinvest those dividends to take advantage of the magic of compounding.
And you can achieve an added boost by targeting ASX shares paying franked dividends. That should enable you to hold onto more of that passive income at tax time.
With that said, here's how I'd aim for a tonne of passive income from a $20,000 ASX share portfolio.
Image source: Getty Images
Raking in passive income from ASX dividend shares
Keeping brokerage fees in mind, with $20,000 I'd split my investment between five companies.
I'd make sure these are all operating in different sectors. This way, if any one sector comes under temporary pressure, it won't have too dramatic an impact on my passive income stream.
I'd also stick to larger stocks listed on the S&P/ASX 200 Index (ASX: XJO) with long track records of reliable dividend payouts. These tend to be less volatile than small caps. And there's more readily available research for them.
Finally, I'd keep in mind that the yields I'm looking at are trailing yields. Future yields may be higher or lower depending on a range of company-specific and macroeconomic factors.
But by diversifying across five sectors, I hope to smooth out those payouts over time. And, of course, I'll be hoping to see the companies' share prices rise in time as well.
With that in mind, the first ASX dividend share I'd buy for tonnes of passive income is ASX 200 bank 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 the recent ANZ share price of $27.97, that equates to a trailing yield of 6.3%.
Next up we have ASX 200 utility share AGL Energy Ltd (ASX: AGL).
AGL has paid out a total of 49 cents a share in unfranked dividends over the past year. At the recent share price of $9.48, the stock trades on a trailing yield of 5.2%.
The third ASX share I'd buy to aim for tonnes of passive income is ASX 200 coal stock New Hope Corp Ltd (ASX: NHC)
Over the past 12 months, New Hope has paid out 47 cents in fully franked dividends. At the recent share price of $4.55, New Hope shares trade on a fully franked trailing yield of 10.3%.
Which brings us to ASX 200 retail stock Harvey Norman Holdings Ltd (ASX: HVN).
Harvey Norman has paid out a total of 22 cents a share in fully franked dividends over the past year. At the recent share price of $4.47, the ASX 200 retail stock trades on a trailing yield of 4.9%.
And the fifth ASX dividend share I'd buy to aim for tonnes of passive income is ASX 200 energy stock Woodside Energy Group Ltd (ASX: WDS).
Over the last 12 months, Woodside has paid out $2.16 a share in fully franked dividends. At the recent Woodside share price of $27.55, Woodside trades on a fully franked trailing yield of 7.8%.
To the maths!
So, just how much passive income can I earn from $20,000 invested in this ASX dividend share portfolio?
Assuming I invest the same amount in each stock, I'd be looking at an average yield (mostly franked) of 6.9%.
That means I'd expect to bank $1,380 in annual passive income from this portfolio. Plus some potential share price gains.
And as mentioned up top, if I don't need the money right away, I can reinvest those dividends and let the magic of compounding boost that payout over time.
