If I were buying one ASX stock for passive income today, I'd be eyeing Fortescue Metals Group Ltd (ASX: FMG) shares.
The S&P/ASX 200 Index (ASX: XJO) mining stock had a strong run yesterday, with shares closing the day up 1.90% at $22 apiece.
Still, that leaves Fortescue shares down 25% since the opening bell sounded on 2 January.
Now, there's no guarantee that shares won't sell down further. But with Fortescue counting among the lowest-cost iron ore producers in the world, with additional possible benefits from its green hydrogen ambitions, I see this year's sizeable retrace as presenting a potentially opportune entry point.
Particularly with long-term passive income in mind.
We'll get to that in just a tick.
But first…
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Spread those eggs around!
'Don't put all your eggs in one basket' may be a trite expression. But whether you're investing for capital gains, passive income, or both, it's an expression to keep at the forefront of your mind.
While we look specifically at the potential of investing in Fortescue shares below, a proper income portfolio should contain a diversified basket of stocks operating in different sectors and ideally across various locations. There's no magic number, but 10 is a good ballpark figure.
Also, remember that the yields you generally see quoted are trailing yields. Future yields may be higher or lower, depending on a range of company-specific and macroeconomic factors.
With that said…
Tapping Fortescue shares for $2,000 a month in passive income
$2,000 a month in passive income, or $24,000 a year, could make a big difference to most Aussies' retirement plans. Mine included!
So, how many Fortescue shares do I need to buy?
Turning to the past 12 months, Fortescue paid a final fully franked dividend of $1.00 a share on 28 September.
The interim dividend of $1.08 a share will have landed in eligible investors' bank accounts on 27 March.
That dividend was up 44% from the interim dividend paid out the previous year. This big boost was driven by some strong half-year results, which included a 21% year on year increase in revenue to US$9.5 billion. And net profit after tax (NPAT) of US$3.3 billion for the six-month period was up 41% year on year.
All up then, Fortescue paid out $2.08 a share in passive income over the past year.
At yesterday's closing price of $22, the ASX 200 miner trades on a juicy, fully franked trailing yield of 9.45%.
And to garner my $2,000 in monthly passive income, I'd need to buy 11,539 shares today.
Now that's a big investment to make all in one go.
But that's okay.
Investing is a long game.
I can also purchase smaller amounts of Fortescue shares on a monthly basis, and I expect to achieve my passive income goal in due time.
