Looking to earn an extra $10,000 a year in passive income by buying quality S&P/ASX 200 Index (ASX: XJO) dividend shares?
We'll look at two ASX dividend gems below that I think belong in every income investor's portfolio.
But first, some important reminders.
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Diversity and trailing yields
While we'll look at two quality ASX 200 dividend stocks below, a properly diversified passive income portfolio will contain a lot more than just two stocks. Though there's no correct number for everyone, around 15 or so is a decent target.
Ideally these companies will operate in various sectors and locations. This will reduce the risk of your income stream taking an outsized hit if any one company or sector runs into headwinds.
Also, bear in mind that the yields you generally see are trailing yields. Future yields may be higher or lower depending on a range of company specific and macroeconomic factors.
Which brings us to…
Two ASX dividend gems for a $10,000 annual passive income
The first ASX dividend gem you may want to buy for passive income is Woodside Energy Group Ltd (ASX: WDS).
Recently trading for $33.00 a share, the ASX 200 oil and gas stock has gained 33% over the past year.
As for that income, Woodside paid (or shortly will pay) $1.63 a share in fully franked dividends over the past year. The stock traded ex-dividend on 3 September. Eligible stockholders can expect to receive that payout on 25 September.
At the recent share price, then, Woodside shares trade on a fully franked 4.9% trailing dividend yield.
The second ASX dividend gem I believe should have a place in every passive income investor's portfolio is Telstra Group Ltd (ASX: TLS).
Recently trading for $4.76 a share, the ASX 200 telco is down 2.7% over the past 12 months.
On the income front, Telstra has paid (or shortly will pay) two dividends totalling 21 cents a share, franked at 90%. Telstra shares traded ex-dividend on 26 August. Eligible stockholders can expect to receive that payout on 24 September.
At the recent share price Telstra shares trade on a partly franked 4.4% trailing dividend yield.
How much to invest?
Assuming you invest the same amount in each ASX dividend gem, you could expect to earn a yield of 4.7%, based on those trailing yields.
To earn $10,000 a year in passive income, you'd need to invest $212,766 today.
Now, that's a sizeable amount to invest in one go.
But that's okay.
Investing is a long game. You can always invest a smaller amount on a regular basis, and you'll reach your passive income goal in good time.
