The ASX stock market is a wonderful place to find passive income investment opportunities that provide a good dividend yield and hopefully capital growth over the longer-term.
I'm going to talk about WCM Quality Global Growth Fund (ASX: WCMQ) and how many units we'd need to unlock $200 of monthly passive income.
WCM is managed by WCM Investment Management, which is based in Laguna Beach, California. The location gives the investment team a different perspective to the managers based around Wall Street in New York.
Let's look at how effective it would be at delivering excellent passive income.
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Distribution yield and units required
The ASX-listed exchange-traded fund (ETF) aims to provide investors with an annualised distribution yield of at least 5% per year.
That may not be the biggest dividend yield around, but I'd say that's a great starting point and allows the investment to balance giving investors passive income and capital growth.
It pays the distribution quarterly. That's not a payout every single month, so an investor would need to either divide the quarterly (or annual) amount into monthly amounts.
A monthly goal of $200 per month is an annual passive income target of $2,400. At a (minimum) 5% distribution yield, an investor would need 4,730 units of the ASX ETF, at the time of writing.
Great capital growth potential
Given how the fund links its distribution size to the net asset value (NAV) of the ASX ETF, it's the ETF's investment returns that will spur larger distributions.
It aims to invest in a portfolio of between 30 to 40 quality global stocks. The investment team have a fundamental belief that corporate culture is the most powerful force behind a company's ability to grow its competitive advantage.
Since its inception in August 2018, the WCMQ ETF has returned an average of 14.7% per year (after management and performance fees). This has outperformed the MSCI All Country World Index by an average of 2.3% per year during that time.
Past performance is not a guarantee of future performance. But, with its long-term return performance, it was capable of delivering that pleasing 5% distribution yield and still delivering capital growth (and distribution growth) in the high single digit in percentage terms.
Given how the investment team look across the world for high-quality businesses to buy – with positions across the Americas, Europe and Asia Pacific – I think it's a solid long-term contender as a passive income option.
