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.

| More on:
Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

More on Dividend Investing

Man putting in a coin in a coin jar with piles of coins next to it.
Dividend Investing

Where I'd invest $5,000 into ASX dividend shares right now

These stocks are strong contenders for passive income.

Read more »

Woman relaxing on her phone on her couch, symbolising passive income.
Dividend Investing

Why I think these 2 ASX dividend shares are ideal for income investors

These businesses offer a lot for income seekers.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Dividend Investing

Is the Suncorp share price a buy for passive income?

Investors could gain a lot of income from this stock.

Read more »

View of a business man's hand passing a $100 note to another with a bank in the background.
Dividend Investing

3 ASX dividend shares to buy with $10,000

Let’s see which shares brokers think are in the buy zone right now.

Read more »

Delighted adult man, working on a company slogan, on his laptop.
Dividend Investing

Why Macquarie predicts this high-yielding ASX 300 dividend stock is set to surge 32%

Macquarie expects some outsized returns from this ASX 300 dividend stock. Let’s find out why.

Read more »

A woman standing in a blue shirt smiles as she uses her mobile phone.
Dividend Investing

Buy Telstra and this ASX dividend stock for passive income

Macquarie thinks that these stocks could be top picks for income investors.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Dividend Investing

Analysts name the best ASX dividend stocks to buy this month

Let's see what they are saying about these income options.

Read more »

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Dividend Investing

Buy these ASX dividend shares for 5% to 7% yields

Brokers think these shares could be top picks for passive income investors.

Read more »