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How to generate $50,000 of income each year from ASX dividend shares

James Mickleboro
Dividends

I think many readers would agree that a passive income of $50,000 per year would be very welcome.

Whilst this may sound like a pipe dream, it is possible to do this with dividend shares.

How can you earn $50,000 in dividends?

If you are lucky enough to have a large sum of money sitting in your bank account then you’re already half way there.

In order to generate $50,000 in income each year from popular blue chip shares such as Australia and New Zealand Banking Group (ASX: ANZ) and Scentre Group (ASX: SCG), you would need to invest approximately $862,000 and $890,000, respectively, into their shares.

Though, not everyone is fortunate enough to be sitting on that sort of money, so this certainly isn’t feasible for all investors.

But if you have time on your side and a little bit of patience, then you can still achieve this goal.

How else can you achieve this?

By finding a dividend-paying share with strong long-term growth potential, you could be able to eventually generate $50,000 in dividends each year from a much smaller investment.

A prime example of this is appliance manufacturer Breville Group Ltd (ASX: BRG).

Just over 10 years ago its shares were changing hands for around $1.00.  Since then the company has established itself as one of the world’s leading appliance manufacturers, resulting its strong sales, earnings, and dividend growth. This strong form has been reflected in its share price, leading to it ending the week at $15.88. This is a return of almost 15x on an investment a decade ago.

Furthermore, the current consensus estimate is for a dividend of 41.5 cents per share in FY 2020. Which means investors that bought shares 10 years ago will be rewarded with a fully franked yield on cost (the yield on the price you paid) of 41.5% over the next 12 months.

This means it would have taken an investment of just $120,000 in 2009 to earn $50,000 in dividends in 2020.

And let’s not forget the many dividends it has paid since that original investment and the capital gains as the share price climbed. I estimate that a $120,000 investment in its shares, with the dividends reinvested, would now be worth approximately $2.1 million today.

The post How to generate $50,000 of income each year from ASX dividend shares appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019