Commonwealth Bank of Australia (ASX: CBA) shares have been a popular option for income investors for decades.
Australia's largest bank features in countless portfolios across the country and regularly lines the pockets of its shareholders with dividends.
But what would it take to generate $3,000 of passive income from the banking giant's shares?
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$3,000 of passive income from CBA shares
CBA shares have been on a tear over the past 18 months.
And while they have pulled back from recent record highs, they ended the week at $176.61. This means that it has a market capitalisation of approximately $300 billion.
It also means that to generate $3,000 of passive income, you are going to need to make a significant investment in its shares.
For example, according to a note out of Macquarie Group Ltd (ASX: MQG), its analysts believe the bank will pay a fully franked dividend of $4.98 per share in FY 2026.
As a result, an investor would need to own 602 CBA shares to pull in $3,000 of passive income in the next financial year.
Based on its last close price, it would take a sizeable investment of $106,319.22 to secure that parcel of shares.
And while the income would much welcome, especially in this low interest rate environment, would it be worth it? Let's find out.
Is it worth buying the bank's shares?
Macquarie doesn't think it would be a good idea to buy CBA shares.
In fact, if the broker is on the money with its recommendation, investors would end up losing significant wealth even after factoring in the passive income they generated.
Macquarie currently has an underperform rating and lowly price target of $105.00.
This means that if CBA's shares were to fall to this level, those 602 shares would have a market value of just $63,210. That's approximately $40,000 less than an investor would have started about.
Alternatives
Investing is about growing wealth, not destroying it. So, investors may be better off looking elsewhere.
One option is the Vanguard Australian Shares High Yield ETF (ASX: VHY). This ASX ETF gives investors access to a collection of ASX dividend shares that are forecast to provide higher than average dividend yields.
At present, the fund trades with a dividend yield of 4.7%. This would turn a $106,000 investment into passive income of just under $5,000.
And this comes without the real danger of a 40% share price decline over the next 12 months.
A fair better outcome if you ask me.
