I'd buy Woodside shares today to generate $1,000 of monthly passive income

At the current share price, I think Woodside can continue to deliver market-beating, long-term passive income.

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Looking for a $1,000 monthly passive income to boost your retirement prospects?

Or maybe to spend on a few luxury extras well before you enter those retirement years, like a fancy vacation, that new living room ensemble, or perhaps even an upgraded car?

While there are a number of quality S&P/ASX 200 Index (ASX: XJO) dividend stocks that can help build that passive income stream, the one I'd buy today is oil and gas company Woodside Energy Group Ltd (ASX: WDS).

Woodside shares have been in an uptrend since 24 June, with the stock up 9% in that time. Still, at yesterday's closing price of $29.40 a share, the ASX 200 dividend stock is down 18% over 12 months. Which, I believe, represents a potentially opportune long-term entry point.

Now the future, by definition, is uncertain.

But I believe that amid strong global energy demand, both oil and gas prices are more likely to rise over the next 12 months than they are to fall. And even at current Brent crude prices of close to US$86 per barrel, Woodside is well in profit range and likely to continue rewarding shareholders with outsized passive income.

We'll get to that below.

But first, an important reminder.

Happy couple enjoying ice cream in retirement.

Image source: Getty Images

Spread your risks

In this article, we look at only one ASX 200 dividend stock to garner our $1,000 in monthly passive income, or $12,000 a year.

Of course, if I only buy Woodside shares, then my entire income stream is reliant on this one company's performance. That might work out swimmingly. But if the company runs into unexpected headwinds it could also see my income take a big, unexpected hit.

With that in mind, I'd eventually expand my passive income portfolio to a larger number of ASX dividend shares. There's no magic number. But 10 is a decent target. Ideally, these will operate across a range of different sectors and locations, helping to lower my overall risks.

Also, bear in mind 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.

Drilling into Woodside shares for $1,000 a month in passive income

Now, let's return to the one ASX dividend stock I'd buy today.

Over the past 12 months, Woodside paid a fully franked interim dividend of $1.244 a share on 28 September and a fully franked final dividend of 91.7 cents a share on 4 April.

That equates to a full-year passive income payout of $2.161 a share, with potential tax benefits from those franking credits.

At yesterday's closing price of $29.40, this ASX 200 dividend stock has a market-beating trailing yield of 7.4%.

Now, to secure my $1,000 in monthly passive income, or $12,000 a year, I'd need to buy 5,553 shares today.

Granted, that's a large quantity of stock to buy all in one go.

But as I've said before, investing is a long game.

If I can't buy all those Woodside shares today, I can buy them in smaller allotments over time.

Eventually, I'll achieve my passive income goal.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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