If you're chasing regular passive income from the sharemarket, you've probably noticed a challenge — most ASX-listed companies only pay dividends twice a year. That means your income arrives in lump sums every six months, not in a steady monthly stream.
But there's a way to smooth things out. Instead of building a portfolio of individual stocks and waiting for their sporadic payouts, you could use a dividend-focused exchange-traded fund (ETF) designed to deliver income every month.
How ETFs make it simple
An ETF is essentially a basket of investments you can buy with a single trade on the ASX. Instead of picking and managing dozens of individual shares yourself, you hold units in the ETF, and the fund manager handles all the buying, selling, and portfolio balancing.
Some ETFs are built specifically to target income. They hold a range of dividend-paying shares and pass the income on to investors as regular distributions. Because they invest across multiple companies and sectors, they provide built-in diversification — reducing the risk of relying on just one or two shares for your income.
BetaShares Australian Dividend Harvester Fund (ASX: HVST)
One such option is the BetaShares Australian Dividend Harvester Fund. This ETF is designed with a high-yield strategy, actively seeking out companies paying franked dividends and rotating its holdings to capture payouts throughout the year.
Here's the appeal for income seekers: HVST pays distributions every month. That means instead of waiting for your favourite bank or mining stock to hit its dividend date, you can enjoy a steady stream of income hitting your account far more frequently.
Like other ASX ETFs, HVST distributions can include not just cash dividends but also franking credits — valuable tax offsets that can boost your after-tax returns.
Dollar-cost averaging for beginners
If you're just starting out, you don't need a large lump sum to get going. A disciplined approach like dollar-cost averaging (investing a set amount regularly, regardless of market movements) can be a powerful way to grow your portfolio over time.
For example:
- Starting from $0
- Investing $500 a month into HVST
- Reinvesting all distributions for 5 years
Even without assuming any capital growth, you'd have contributed $30,000 and built an income-generating portfolio. With reinvested distributions and potential market gains, your balance — and your monthly payouts — could be significantly higher by the time you decide to switch those distributions from reinvestment to cash in your bank account.
Why monthly income matters
For retirees, freelancers, or anyone wanting predictable cash flow, monthly income can make budgeting easier. It can also feel more rewarding as you see the results of your investing discipline sooner and more often.
Foolish Takeaway
Building a monthly passive income stream doesn't have to be complicated. A dividend-focused ETF like HVST offers diversification, franked income, and a predictable payment schedule without the effort of stock-picking.
Start small, stay consistent, and let time and compounding do the heavy lifting. Before long, your portfolio could be delivering monthly dividends straight to your bank account.
