All Ordinaries Index (ASX: XAO) construction services specialist Shape Australia Corporation Ltd (ASX: SHA) counts among my top passive income picks today.
There's a lot to like about this stock.
First, the share price has been in a strong upward trend for more than three years now.
Second, it pays fully franked dividends. This give you credit for the 30% in corporate taxes the company has already forked out to the ATO on the profits it earns. Meaning you should be able to hold onto more of that passive income when it's time to pay your own tax bill.
And, importantly, Shape has been steadily increasing its dividend payouts for four years running now. That's a trend I like to see.
Over the past 12 months (as at Thursday afternoon) the Shape share price has rocketed 74.5%, recently trading for $7.40 a share.
Over this time, the ASX All Ords stock has paid – or shortly will pay – two fully franked dividends totalling 32 cents per share.
Shape shares traded ex-dividend on 28 August. Shareholders who held the stock on 27 August can expect to see the final 18 cents per share hit their bank accounts on 14 September.
At the recent share price, then, Shape trades on a 4.3% fully franked trailing dividend yield.
But some investors are earning a lot more from their Shape shares.
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Getting in early for that passive income boost
While trying to time the market is incredibly difficult – and nearly impossible to do consistently – buying the right ASX dividend stocks in their earlier growth days can pay off handsomely over time.
Which relates more to "time in the markets" than timing them.
In Shape's case, savvy passive income investors could have bought into the company for $1.80 a share in early January 2024. Now, I'm not cherry-picking a particularly low entry point here. Indeed, in January 2024, the Shape share price had gained 19% over the prior 12 months.
Now, if you'd bought Shape shares in January 2024, and held tight, you'd have been eligible to receive the past six fully franked dividends, totalling 71.5 cents a share. This would have already returned 40% of your initial investment to you as passive income alone, not to mention the 311% increase in the Shape share price over this time.
And at your buy-in price of $1.80, the past year's dividend payout of 32 cents per share equates to a fully franked dividend yield of 17.8%. Or 25.4% grossed-up, if we factor in those franking credits.
