Using superannuation is a fantastic way to build wealth and create retirement passive income.
Lower taxes in the wealth-building phase and potentially no taxes in the retirement phase (depending on the superannuation balance) are a very compelling proposition. An Australian (retiree) investor is likely better off in net income terms to have dividends flow through superannuation than in their own name.
Everyone has a different taxation position, so I'm not going to focus on tax for the rest of the article.
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What's needed for $7,500 of monthly passive income?
I'd bet that many Australians would love to have $7,500 of passive income hit their bank account every month. In annual terms, that's $90,000 per year of dividends.
The required superannuation balance to generate $90,000 in annual dividends depends on the portfolio's dividend yield. It's a similar situation to the interest rate required from a term deposit or savings account.
With a 5% yield, someone would need a $1.8 million portfolio (ignoring tax) to make $90,000 per year.
With a 6% yield, an investor would need a $1.5 million portfolio to make $90,000 per year, or $7,500 per month.
With a 4% yield, an investor would need a $2.25 million portfolio for the passive income goal.
I often talk about my appreciation of the diversified investment conglomerate Washington H. Soul Pattinson and Co Ltd (ASX: SOL) as an option for reliable dividends, but its grossed-up dividend yield, including franking credits, is only around 3.5% right now.
There are plenty of ASX dividend share options that can provide a higher dividend yield, so let's run through some of the possibilities.
ASX dividend share ideas
How good would it be to have a portfolio of stocks in superannuation with dividend yields of 5%, 6%, or even more to generate the monthly passive income?
Charter Hall Long WALE REIT (ASX: CLW) is a real estate investment trust (REIT) that owns and leases various types of property, including service stations, hotels, telecommunication exchanges, distribution centres, and government-related buildings (such as Geosciences Australia). It expects to pay 25.5 cents per security in FY27, which translates to a yield of 7.8%.
Another idea is listed investment company (LIC) L1 Long Short Fund Ltd (ASX: LSF), which uses a combination of normal investing and short selling to look for opportunities across both ASX shares and international shares. It's increasing its dividend every quarter and could pay a grossed-up dividend yield of 5.1% in FY27, including franking credits.
Next, I want to highlight another REIT called Centuria Industrial REIT (ASX: CIP), which owns a portfolio of industrial properties across Australian cities. It's growing its distribution by another 3% in FY27 despite the higher interest rates, thanks to rising demand for industrial land for uses like distribution centres (including e-commerce purposes), refrigerated space (for food and medicine), and data centres. Its forecast yield is 6.1%.
Another name I'd highlight is the LIC MFF Capital Investments Ltd (ASX: MFF), which is increasing its payout every six months. It largely invests in strong international shares with good prospects for dividend growth. I expect it will pay an annual dividend of 25 cents per share in FY27, translating into a grossed-up dividend yield of 6.9%, including franking credits.
A portfolio of the above names, as well as other ASX shares, could be compelling to unlock a monthly passive income of $7,500 (or more) in superannuation.
