The Vanguard Australian Shares Index ETF (ASX: VAS) is the biggest exchange-traded fund (ETF) in Australia. Its shares are popular with passive income investors who want both income and long-term growth.
The ETF gives its investors instant diversification to a broad range of Australian shares across the top ASX-listed S&P/ASX 300 Index (ASX: XKO) companies. What sets the fund apart from the rest is that many ETFs track the S&P/ASX 200 Index (ASX: XJO), but only VAS mirrors the ASX 300.
As of the 31st of August, its top holdings include BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and ANZ Group Holdings Ltd (ASX: ANZ).
The benefit of its diversification across major companies is that it can access long-term capital growth potential and also a regular income through its dividend payments, including any associated franking credits. It's long-standing, too. The fund has been issuing payouts for over 17 years.
Let's find out what the VAS ETF passive income looks like. And exactly what it will take to earn $10,000 per year.
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What dividend does the VAS ETF pay its shareholders?
The fund pays out a shareholder dividend four times per year, usually in January, April, July, and October.
The VAS ETF most recently paid its shareholders 48.82 cents per unit in July, with 66.56% franking.
The estimated distribution amount for its upcoming dividend was announced yesterday. The fund expects to pay shareholders $1.29 per unit next month.
The shares are scheduled to trade ex-dividend on the 1st of October, with the payment date falling on 16 October.
The latest dividend means that the fund has paid an annual total of $3.44 per unit to investors. At the time of writing, that translates to a dividend yield of around 3.2%.
It's not the highest dividend yield out there, but you're paying for diversity.
So, how many VAS ETF shares do I need to own to generate $10,000 in passive income every year?
Based on the running total of $3.44 per unit over the past year, investors would need to own around 2,907 shares of the VAS ETF to earn $10,000 in passive income annually.
What would that cost me?
At the time of writing, the VAS ETF is $109.12 a piece. That means investors would need to invest roughly $317,200 in the fund to earn $10,000 per year in passive income.
It's not a small amount, but if passive income combined with capital gains is your goal, it could be worth it in the long run.
And remember, you don't need to invest the entire amount in one go. Start off small and let compound growth do some of the work for you.
