Wondering whether you should buy BHP Group Ltd (ASX: BHP) shares or Commonwealth Bank of Australia (ASX: CBA) shares to secure a reliable passive income stream?
You're not alone.
As the two S&P/ASX 200 Index (ASX: XJO) titans continue to battle for the biggest ASX stock crown (BHP currently retains that title), they're also in competition to attract ASX dividend investors.
Both companies have a decade-plus long track record of paying twice yearly, fully franked dividends. And both companies historically trade at term deposit rate busting yields.
One significant divergence you should be aware of, is that while the dividend payouts from CBA shares are relatively stable over time, BHP's payouts vary significantly over the years, driven by moves in commodity prices like iron ore and copper.
With that in mind, are you better off buying Australia's biggest bank stock for passive income or Australia's biggest mining stock?
Let's dig into the numbers.
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Should I buy CBA or BHP shares for passive income?
We'll first look at the shorter-term picture encompassing just the past year.
A year ago, you could have picked up CBA shares for $167.72. Assuming you hold the stock until market close tomorrow (CBA trades ex-dividend on Wednesday 19 August), you'd then receive two fully franked dividend payouts totalling $5.05 a share.
That equates to a fully franked dividend yield of 3.0%.
So, how does the past year's passive income from BHP shares stack up?
Well, over the last 12 months the ASX 200 mining stock has paid out two fully franked dividends totalling $1.958 a share. At the recent BHP share price of $61.25 that works out to a fully franked dividend yield of 3.2%, just edging out CBA.
On the capital gains side, we should note that at recent prices, CBA shares are down 0.1% over the past year, while the BHP share price has gained 47.4%.
How about longer-term?
Taking a step back five years, as of late Friday's trade, CBA shares are up 60.6% while the BHP share price has gained 30.1%.
On the passive income front, five years ago you could have bought CBA shares for $104.03 each. Over that time, you would have received 10 dividend payments totalling $22.90 per share. That works out to dividends equivalent to 22.0% of your original investment over five years.
As for the longer-term passive income on offer from BHP, five years ago you could have bought the ASX 200 mining stock for $47.02 a share.
Over the past five years you would then have received 10 fully franked dividend payments totalling $14.918 a share. That works out to dividends equivalent to 31.7% of your original investment over five years.
So, while the BHP share price underperformed CBA's big five-year gains, the miner's passive income payments were superior.
