A passive income stream of $12,000 a year sure would be nice.
It works out to $1,000 a month, which could help cover bills, boost savings, or provide extra breathing room in retirement.
But the key question is this: how much money would you actually need to invest to generate it?
Here is how the numbers stack up for three ASX exchange traded funds (ETFs) based on their current dividend yields.
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Vanguard Australian Shares High Yield ETF (ASX: VHY)
The first ASX ETF to look at is the Vanguard Australian Shares High Yield ETF.
This fund gives investors exposure to ASX shares with higher forecast dividends than the broader market. It is focused on Australian income shares and includes a range of large companies across sectors such as banks, resources, energy, and telecommunications.
Its holdings include the likes of BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and Telstra Group Ltd (ASX: TLS).
This makes the Vanguard Australian Shares High Yield ETF a simple way to gain diversified exposure to Australian dividend shares without having to choose individual income stocks.
Based on its current dividend yield of 4.15%, an investor would need to invest approximately $290,000 to generate $12,000 of annual passive income.
Betashares Global Royalties ETF (ASX: ROYL)
Another ASX ETF that could be used for passive income is the Betashares Global Royalties ETF.
This fund provides exposure to global companies that earn royalties from assets such as commodities, intellectual property, infrastructure, and other long-life revenue streams.
Royalty businesses can be attractive because they often receive income linked to the use or production of an asset without carrying the same operating burden as the companies running those assets directly.
Its holdings include companies such as Franco-Nevada Corporation (NYSE: FNV), Texas Pacific Land Corporation (NYSE: TPL), and Wheaton Precious Metals Corp (NYSE: WPM).
Based on its current dividend yield of 5.6%, an investor would need to invest approximately $215,000 to generate $12,000 of annual passive income.
Betashares S&P 500 Yield Maximiser Complex ETF (ASX: UMAX)
A third ASX ETF that may appeal to income-focused investors is the Betashares S&P 500 Yield Maximiser Complex ETF.
This fund provides exposure to the US share market while using an options strategy to help generate income. This means its distributions are not driven only by dividends from the underlying shares. A key part of the income comes from option premiums generated by selling call options.
Its underlying exposure includes major US shares such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Amazon (NASDAQ: AMZN).
This strategy can produce higher income than a standard S&P 500 ETF, though it may also limit some upside if markets rise strongly.
Based on its current dividend yield of 5.7%, an investor would need to invest approximately $210,000 to generate $12,000 of annual passive income.
