Most ASX investors who buy shares for dividend income tend to build a diversified portfolio containing multiple blue-chip Aussie stocks. There's nothing wrong with this approach, of course. However, it is not the only option that those seeking passive income from dividends can pursue.
If an investor wishes to take a path of lesser resistance, they only need to buy one Aussie stock for lifelong income.
However, if an investor is only going to buy one stock, it should arguably be one that is inherently diversified. Buying a company like Telstra Group Ltd (ASX: TLS) or Commonwealth Bank of Australia (ASX: CBA) won't cut it, as it opens one up to severe industry risk.
Luckily, there are quite a few Aussie dividend stocks that do fit the bill if an investor wishes to buy one income-producing stock to set them up for life.
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Buying an Aussie dividend stock for lifelong income
It's my view that buying any one of the following Aussie stocks (or exchange-traded funds (ETFs)) will deliver that kind of sustainable income.
These Aussie income stocks can set anyone up for life.
To start with, an income-seeking investor could opt for either Argo Investments Ltd (ASX: ARG) or the Australian Foundation Investment Co Ltd (ASX: AFI). Both of these stocks are listed investment companies (LICs) that have been around for decades and own vast portfolios of underlying shares within them. These diversified portfolios, which are built on blue-chip stocks like Telstra and CBA, are managed on behalf of shareholders.
Both AFIC and Argo have long track records of providing substantial and fully franked dividend payments. As such, they make fine candidates for single, simple investments that can set income investors up for life.
Investors could also consider ETFs, though.
ASX ETFs for dividends?
Even a basic index fund like the Vanguard Australian Shares Index ETF (ASX: VAS) would make a compelling option. The ASX is home to dozens and dozens of strong dividend payers. This ETF houses them all and provides investors with what could be described as the average level of dividend income that the Australian stock market pays.
It has paid out four dividend distributions over the past 12 months, which gives this index fund a trailing yield of 3.09% today. As this yield does represent an average of the entire market, it does tend to fluctuate over time. But long term, the trajectory should be up-and-to-the-right.
If that yield doesn't look big enough, investors also have the option to go for an ASX ETF that prioritises maximising income. Two ETFs that could fit this bill include the Vanguard Australian Shares High Yield ETF (ASX: VHY) and the BetaShares S&P Australian Shares High Yield ETF (ASX: HYLD).
These funds hold a basket of underlying shares, all selected on their ability to fund large, sustainable income into the future. Again, the dividend distributions from these funds will differ from year to year. Both are offering trailing yields well north of 4% right now.
Foolish Takeaway
Those investors seeking dividend income need not build out a full portfolio of dozens of dividend shares. Any one of the options named above would, at least in my view, be a perfectly adequate lifelong income investment on its own merits.
If you choose one, invest as much as you can, and as often as you can, and reinvest all dividends to start with. Your passive income will snowball and become an avalanche before you know it.
