Earning passive income from ASX shares is one of the most common goals Australian investors set themselves.
Let's run the numbers on $100,000 split evenly between two income-focused ASX blue-chip shares.
Telstra Group Ltd (ASX: TLS) and BHP Group Ltd (ASX: BHP) make a great pair, because one is a defensive telco and the other a cyclical miner.
Importantly for investors, both pay franked dividends.
Image source: Getty Images
What $100,000 buys today
Start with $50,000 in each.
Telstra shares trade at around $5.00, which buys a neat 10,000 shares.
BHP shares change hands at around $60.50, which buys approximately 826 shares.
Both are among the most widely held stocks on the ASX, so the maths here is relevant to a lot of Australian portfolios.
Income portfolios are built from businesses that can afford to pay out.
The trade-off is that you give up most of the capital growth potential in exchange for the cheque.
The passive income before franking
Telstra paid 20 cents per share across its last two dividends, being a 9.5 cent final in September 2025 and a 10.5 cent interim in March 2026.
On 10,000 shares, that produces exactly $2,000 in cash.
BHP's annual dividend currently sits at approximately $1.89 per share, which produces approximately $1,561 on 826 shares.
Combined, the cash income is roughly $3,561 a year, or a yield of about 3.6% on the original $100,000.
How franking credits lift the passive income
This is where Australian dividend investing gets interesting.
BHP's dividends are fully franked, so at the 30% company tax rate they add approximately 81 cents per share in credits. On 826 shares, that is roughly $669.
Telstra's dividends were franked on all but one cent of the 20 cents paid, and the credits work out at roughly 8.1 cents per share. That is about $814 on the holding.
Add the two together, and the credits total approximately $1,483, taking the grossed-up figure to approximately $5,044 a year.
That is a grossed-up yield of about 5.0%, comfortably above today's cash rate of 4.35%.
Franking credits are not cash in hand, though, and their value depends entirely on your marginal tax rate.
An investor on a low rate, or in pension phase, captures the full benefit as a refund.
An investor on the top marginal rate captures far less.
Passive income calculations that ignore franking understate the return for most retail investors.
Foolish takeaway
A $100,000 portfolio of these two shares generates roughly $3,561 in cash passive income, or close to $5,044 grossed up.
That is modestly ahead of term deposit rates, with two important differences.
The dividends can grow over time, and the capital can appreciate or fall, neither of which applies to cash.
Two stocks are also not a diversified portfolio, and BHP's dividend is tied to volatile commodity prices that can move sharply in either direction.
