Daring passive income investors who bought New Hope Corp Ltd (ASX: NHC) stock five years ago will be earning some sizzling yields on those shares today.
I say "daring" investors here because a look at your calendar will confirm that five years ago, markets were still being roiled by all the unknowns of the global pandemic.
With most S&P/ASX 200 Index (ASX: XJO) stocks having plunged over the previous month, it sure felt a lot safer to remain on the sidelines until the smoke cleared.
But passive income investors who followed Warren Buffett's advice and were "greedy when others were fearful" in the latter weeks of March 2020 are likely still being amply rewarded for their bravery.
Here's what I mean.
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Supersizing the passive income from New Hope shares
On 20 March 2020, you could have bought New Hope shares for $1.15 apiece.
Battered by ongoing global energy demand fears from pandemic border and business closures and a coal price in the low US$60 per tonne range, shares in the ASX 200 coal miner dropped to $1.07 by late October that year. But we'll stick with those passive income investors who bought during the height of the COVID sell-off.
So, $1.15 a share it is.
As you may recall, over the following years, New Hope's dividends climbed to record highs in 2022 as the coal price surged to US$440 per tonne. With the coal price retracing from there (around US$97 per tonne today), so too have New Hope's dividends.
Over the past 12 months, the ASX 200 miner paid a final fully franked dividend of 22 cents per share and declared an interim dividend of 19 cents per share. New Hope traded ex-dividend on Monday, 24 March. Eligible investors will receive that passive income payout on 9 April.
All told then, New Hope has delivered (or shortly will) 41 cents a share in fully franked dividends over the past year.
Now, here's why the price you pay for your dividend stocks can really have a material long-term impact on your returns.
If you bought New Hope shares on 3 July 2024, when the coal miner was trading for $5.26 a share, you'd be eligible for the full 41 cents a share in payouts.
This would see you earning a very respectable dividend yield of 7.8%.
So, how about those daring passive income investors who took the plunge when the market was paralysed with fear?
Well, at the $1.15 a share they paid on 20 March 2020, those shares will be earning a fully franked dividend yield of 36.5%.
Take that inflation!
Now timing the market and trying to get in right at the lows is all but impossible to do, especially with any consistency. But it does pay to keep an eye on market cycles. As any brave investor who scooped up bargains in the wake of the COVID sell-off will tell you.
