S&P/ASX 200 Index (ASX: XJO) dividend stocks provide a unique means to earning a handy extra passive income.
First, they have the potential to deliver capital gains through share price appreciation.
Now, that probably won't happen in a nice linear path.
In some months (or years), even quality ASX companies will fall in value due to outside factors beyond their control. But over the long run, top Aussie stocks tend to deliver share price gains well in excess of what you'll get from any bank term deposit, albeit with some added risk.
The second benefit that's not available on most international stock markets is that many high-yielding ASX stocks pay out fully franked dividends. That should allow me to hold onto more of that welcome passive income when the ATO comes knocking each year.
As we're on the subject of high-yielding ASX dividend stocks, do take note that the yields you generally see quoted are trailing yields (based on the past year's worth of dividends). Future yields can be higher or lower depending on a range of company-specific and macroeconomic factors.
And it almost goes without saying that a properly diversified passive income portfolio will contain more than a single stock!
With that out of the way, here's what I could net from a $10,000 investment in Fortescue Ltd (ASX: FMG) shares today.
Drilling into Fortescue shares for passive income
Tackling the share price first, the ASX 200 mining stock has come under pressure in 2024, largely driven by a sharp retrace in the iron ore price.
This sees the Fortescue share price down 15% over 12 months.
However, taking a step back, Fortescue shares have gained 116% over the past five years, which is an annualised gain of 17.5%.
Now, how about that sought-after passive income?
On 27 March, Fortescue paid a fully franked interim dividend of $1.08 a share. Eligible stockholders will have received the final dividend of 89 cents a share on 27 September.
That equates to a full-year payout of $1.97 a share.
At Friday's closing price of $19.49, that sees the ASX 200 mining stock trading on a juicy, fully franked trailing yield of 10.1%.
At this price, it also means I could buy 513 Fortescue shares with my $10,000 investment with a bit of pocket change left over.
And with each share returning $1.97 in dividends, it means I could be netting a tidy $1,010.61 a year in passive income.
