Want $1,000 of passive income? Check out these ASX shares

Here is how investors can generate $1,000 of passive income from the Australian share market.

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Key points

  • The share market is a great place to generate a passive income
  • This is because many ASX shares pay their shareholders dividends every six months
  • Here's how you could generate $1,000 of passive income from ASX shares

The Australian share market is home to countless ASX shares that pay dividends every six months.

This makes it a great place to generate a regular and growing passive income.

But which ASX shares could you invest $20,000 into now in order to generate $1,000 of passive income?

Generating $1,000 of passive income with ASX shares

If you have $20,000 to invest, then you're going to need a 5% dividend yield to generate $1,000 of passive income.

One ASX share that is highly rated and is expected to provide investors with this level of yield is Rio Tinto Ltd (ASX: RIO). In fact, you'll get more bang for your buck than necessary with this mining giant's shares according to Goldman Sachs.

Its analysts are forecasting fully franked dividends per share of US$5.33 in FY 2023 and then US$5.98 in FY 2024. Based on the current exchange rates and the most recent Rio Tinto share price of $115.20, this equates to yields of 6.9% and 7.8%, respectively.

This means a $20,000 investment in the miner's shares would yield passive income of $1,380 this year and then $1,560 next year.

Goldman also sees plenty of upside for the Rio Tinto share price with its buy rating and $140.40 price target.

Another option for investors to consider for passive income is the Vanguard Australian Shares High Yield ETF (ASX: VHY).

Rather than picking one share to buy, this ETF allows you to invest in a diverse collection of ASX shares that pay larger than average dividends in one fell swoop. This includes Rio Tinto.

At present, the ETF is trading with an estimated forward dividend yield of 5.4%. This would mean that a $20,000 investment generates passive income of $1,080 over the next 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 recommended Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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