2 ASX passive income share ideas I'd use to generate $200 a month in 2027

I like how these stocks are growing their payouts year after year.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Following the announced Federal tax changes earlier this year, the attractiveness of ASX passive income shares may have shifted in investors' minds.

In my view, listed investment companies (LICs) may be some of the best options to consider, as they can provide a combination of growing dividends, a large dividend yield and long-term capital growth.

Let's run through why I think the two stocks below are so appealing for dividends.

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.

Image source: Getty Images

PM Capital Global Opportunities Fund Ltd (ASX: PGF)

This LIC is managed by an impressive investment team, led by Paul Moore, Chief Investment Officer (CIO).

Having the global share market as a hunting ground is very helpful for generating returns, in my view, because there is a wide array of opportunities across sectors that the ASX can't necessarily provide exposure to at a meaningful scale. Additionally, global stocks in sectors like banking and mining tend to trade at a lower earnings multiple than the ASX equivalent.

The five sectors that the ASX passive income share has the biggest exposure to European banks, industrial metal commodities, healthcare, industrials and leisure and entertainment.

The investment strategy has performed exceptionally well, with the net return being an average of 17.1% per year since the LIC's inception in December 2013.

Those net returns have been more than enough for the LIC to pay a good and growing dividend.

Aside from FY23 when it maintained its annual payout, the business has increased its dividend every year since 2016. So, it has already provided a decade of reliable dividends, and I expect the good dividend track record to continue.

In FY26, it grew its annual dividend per share by 26% to 14.5 cents per share. It expects to hike its FY27 annual payout by at least 10% to 16 cents per share. That translates into a forward grossed-up dividend yield of 7.2%, including franking credits, at the time of writing.

Future Generation Australia Ltd (ASX: FGX)

The other ASX passive income share I want to highlight is another LIC.

Future Generation Australia is a very different type of LIC. None of the fund managers involved charge management fees or performance fees – they all work pro bono (for free) – so that the LIC can donate 1% of its net assets each year to youth charities.

The fund is invested in more than a dozen funds that invest in ASX shares. The underlying portfolio is invested in hundreds of ASX shares, providing more exposure to smaller, faster-growing shares than the S&P/ASX 200 Index (ASX: XJO) does.

It's able to provide excellent diversification and less volatility than the wider market, partly thanks to its cash weighting.

The LIC has increased its annual dividend every year since it began paying in 2015, an impressive, consistent record of payout growth.

It expects to pay an annual dividend of 7.6 cents per share for 2026, which translates to a forward grossed-up dividend yield of 8.5%, including franking credits, at the time of writing. I expect the 2027 dividend will be larger, but I'm using the guided payout for my calculations.

$200 passive income per month

If someone is targeting $200 per month of passive income, that translates into an annual goal of $2,400.

Between the two picks I named above, the average dividend yield is 7.85%. Assuming equal investments in each stock, this would require a total investment of around $30,600 to generate that much passive income.

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

More on Dividend Investing

A golden egg with dividend cash flying out of it
Dividend Investing

Forget CBA shares! Buy these ASX dividend shares instead for passive income

CBA would not be my choice for dividends.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Dividend Investing

Are Telstra shares a good buy for passive income?

The telco offers its shareholders much more than just a potential share price upside.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Dividend Investing

Westpac, ANZ, NAB or CBA shares? Which ASX bank stock should I buy for $5,000 a year in passive income?

Are ANZ, NAB, Westpac, or CBA shares a better buy for a $5,000 annual passive income?

Read more »

Stacks of Australian dollar currency banknotes.
Superannuation

How much passive income can I earn investing $400,000 of my superannuation buying ASX shares?

If you were to invest $400,000 of superannuation savings into ASX dividend shares, how much passive income could you earn…

Read more »

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Dividend Investing

How many BHP shares do I need to buy to earn $100 a week in passive income?

With BHP’s dividends surging 42% this year, how many shares do I need to buy for a $100 weekly passive…

Read more »

View of a business man's hand passing a $100 note to another with a bank in the background.
Dividend Investing

If I invest $10,000 in BHP shares, how much passive income will I receive in 2027?

The ASX mining giant pays dividends to its shareholders twice per year.

Read more »

Elderly couple cosily walking together outside.
Dividend Investing

My top ASX passive income stocks for the next 10 years

These four businesses give me several different sources of income rather than depending too heavily on one part of the…

Read more »

Young ASX share investor excitedly throwing hands up in front of savings jar.
Dividend Investing

The ASX share I just bought for my child

I think this stock can offer investors of every age pleasing positives.

Read more »