I'm sure most people would love to have $50,000 of passive income each year.
One way you could achieve this is through investing in ASX shares which pay dividends to their shareholders.
How do you do it?
In order to earn $50,000 in dividends each year from bank shares such as Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC), you'd need a hefty sum of money to invest.
Westpac's shares currently offer a trailing fully franked 7% dividend yield, which means you would need to invest approximately $715,000 to earn $50,000 in dividends.
Whereas ANZ's shares offer a trailing fully franked 5.7% dividend, which means an investment of approximately $877,000 would be required to achieve the goal of $50,000 in dividends.
This simply is not feasible for the average investor.
Is there another way?
If you have time on your side then there is another way.
Very few people would consider Domino's Pizza Enterprises Ltd (ASX: DMP) as a dividend share. But for shareholders that bought the pizza chain operator's shares ten years ago and held onto them it's a very different story.
A decade ago Domino's shares were changing hands at just $3.00. Last week it declared an interim dividend of 62.7 cents per share, which combined with its 49.7 cents per share final dividend means a rolling 12-month dividend of 112.4 cents per share.
This means that investors that bought its shares ten years ago have a yield on cost (the yield on the price they paid for the shares) of 37.5%.
Based on that yield an investment of ~$130,000 ten years ago would be generating $50,000 in dividends today.
Shareholders of market darling Altium Limited (ASX: ALU) have done even better. A decade ago investors could have picked up the electronic design software company's shares for just 41 cents per share.
Last week it declared an interim dividend of 16 cents per share. Added to its 14 cents per share final dividend, investors that picked up Altium's shares ten years ago would now be earnings a yield on cost of 73%.
This means that an investment 10 years ago of $68,500 would now be generating $50,000 in dividends.
Don't forget the capital gains.
And let's not forget the incredible capital gains that have been made from both Domino's and Altium shares. That $130,000 investment in Domino's would now be worth $1.9 million and the $68,500 investment in Altium would have grown to be worth a staggering $5.8 million.
Whilst very few shares will generate returns of this nature, I believe there are some on the ASX boards at the moment that could prove to be very rewarding investments over the next decade.
