How much must I invest in VAS ETF shares to earn a $1,000 passive income in 2027?

The VAS ETF could be an appealing option for dividends.

The Vanguard Australian Shares Index ETF (ASX: VAS) is one of the largest exchange-traded funds (ETF) on the ASX, and it's known for having a sizeable dividend yield.

The VAS ETF allows investors to gain exposure to the S&P/ASX 300 Index (ASX: XKO), which is an index of 300 of the largest businesses on the ASX.

Some of the biggest businesses in the portfolio are BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ), Wesfarmers Ltd (ASX: WES), Macquarie Group Ltd (ASX: MQG), Rio Tinto Ltd (ASX: RIO) and Woodside Energy Group Ltd (ASX: WDS).

I think it'd be fair to say that every one of the above stocks could be classified as an ASX dividend share with a decent dividend yield.

The Vanguard Australian Shares Index ETF simply passes through the dividends it receives onto owners of VAS ETF units. Therefore, it's beneficial if the holdings provide a good dividend yield.

Let's look at what it could take to generate $1,000 of passive income from the fund.

ETF on white blocks with a rising arrow on top of coin piles.

Image source: Getty Images

Targeting $1,000 of passive income from Vanguard Australian Shares Index ETF

Every month, Vanguard tells investors about various statistics regarding the fund.

For July, Vanguard reported that the VAS ETF had a dividend yield of 3.1%. That's not a huge yield, but it's significantly more than what's on offer from the international share market or US share market.

It's not guaranteed to have a 3.1% dividend yield in the coming 12 months, but it's the best figure we can use for this calculation.

To generate $1,000 of passive income with a 3.1% dividend yield, you'd need an investment of $32,258, so that'd mean buying 286 or 287 VAS ETF units.

The VAS ETF is able to provide a high dividend yield because more than 58% of the portfolio is invested in ASX bank shares and ASX mining shares. Those sectors typically have lower price/earnings (P/E) ratios and relatively generous dividend payout ratio, which both affect the dividend yield.

Other markets, like the international share market or US share market, are focused on other sectors like technology businesses, which usually have a lower dividend payout ratio and a high P/E ratio. That results in a much lower dividend yield.

The VAS ETF isn't dominated by growth stocks, so I'm not expecting significant capital growth in the coming years, though the dividend yield could remain pleasing.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Wesfarmers. The Motley Fool Australia has recommended BHP Group, Macquarie Group, and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Exchange-Traded Funds (ETFs)

Corporate businesspeople group discussing strategies in professional indoors setting.
Exchange-Traded Funds (ETFs)

3 excellent ASX ETFs for beginners in 2027

If you are starting out, then it could be worth considering these funds.

Read more »

Two work colleagues looking at a laptop and discussing something.
Exchange-Traded Funds (ETFs)

Why I would invest $5,000 in these top Vanguard ETFs

These three funds offer different ways to invest for long-term growth.

Read more »

Man with his hands out as if pondering his options.
Exchange-Traded Funds (ETFs)

Do you own this ASX dividend ETF? Fundie explains why 'we aren't fans'

This ASX ETF aims to maximise income using covered call options.

Read more »

A businessman's hands surround a circular graphic with a United States flag and dollar signs.
Dividend Investing

IVV ETF and other iShares funds are paying dividends today. Here's how much

Aussie investors love the IVV ETF, which tracks the US benchmark S&P 500 Index.

Read more »

Man smiling ahead while working on his MacBook.
Exchange-Traded Funds (ETFs)

3 strong ASX ETFs for investors who want quality

These funds provide investors with access to quality stocks from across the globe.

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Exchange-Traded Funds (ETFs)

Where to invest $15,000 in ASX ETFs in October

Wondering where to put your money? These funds could be worth a look.

Read more »

a man in a hoodie grins slyly as he sits with his hands poised on a keyboard. He is superimposed with a graphic image of a computer screen asking for a password, suggesting he is a hacker.
Exchange-Traded Funds (ETFs)

25% per annum: Is the BetaShares Cybersecurity ETF (HACK) a buy today?

Will this ETF keep banging out stunning returns?

Read more »

Two colleagues looking at a graph and comparing share prices.
Exchange-Traded Funds (ETFs)

VGS vs V500: Which Vanguard ETF would I buy?

I look at whether broader diversification or greater US exposure wins me over.

Read more »