Looking to bag an extra $10,000 a year in passive income from a blue-chip ASX share?
Then you may want to have a look into National Australia Bank Ltd (ASX: NAB) shares.
On the reliability front, the S&P/ASX 200 Index (ASX: XJO) bank stock has paid out two fully-franked dividends every year for more than a decade now. And that includes the pandemic-addled year of 2020.
Atop that welcome passive income, NAB shares have also delivered benchmark-smashing capital gains.
At the time of writing, the NAB share price is $41.96. That sees NAB shares up 23% in 12 months and up 60.3% in five years. That's well ahead of the 6.5% one-year and 24.4% five-year gains posted by the ASX 200.
And remember, that's not including those twice-yearly NAB dividends.
With that in mind, we'll dig into how many NAB shares you'd need to buy today for a $10,000 annual passive income in a tick.
But first, a few important reminders.
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Don't put all your eggs in one basket
First, while we're looking at the income potential of NAB shares, do note that a diversified passive income portfolio contains much more than just one ASX dividend stock. There's no magic number. But somewhere in the range of 10 to 20 is a good ballpark, ideally operating in various sectors and locations.
This will reduce the risk of your passive income stream taking a big hit if any particular company or sector runs into a rough patch.
Also, take note that the dividend yields you generally see are trailing yields. Future yields may be higher or lower depending on a range of company-specific and macroeconomic factors.
For NAB, this includes the bank's risk management and cost controls. It also includes the future path of interest rates and the broader performance of the Australian economy.
With that said…
Banking on NAB shares for a $10,000 annual passive income
NAB paid a fully-franked interim dividend of 85 cents a share on 2 July. The ASX 200 bank paid its final fully-franked dividend, also 85 cents a share, on 12 December.
That works out to a full-year passive income payout of $1.70 per share.
So, for that extra $10,000 a year, you'd need to buy 5,883 shares today.
How much would that cost?
At the price of $41.96 a share at the time of writing, you'd need to invest $246,851 in NAB shares today to target that $10,000 yearly passive income stream.
Now that's a sizeable chunk to invest at one go. But that's okay. Investing is a long game.
You can also invest a smaller amount on a regular basis, and you'll reach your income goals in good time.
NAB shares trade on a fully-franked trailing dividend yield of 4.1%.
