How I'd generate $400 in monthly passive income from 2 ASX 200 iron ore shares

We take a look at how you could receive passive income from two iron ore miners.

| More on:
A woman looks quizzical while looking at a dollar sign in the air.

Image source: Getty Images

Key points

  • ASX 200 iron ore shares BHP and Fortescue pay reasonable dividend yields 
  • Fortescue has paid a trailing dividend yield of 9.4% in the last year 
  • Meanwhile, BHP's dividend yield in the last 52 weeks is 8.8% based on the latest share price 

Passive income is a fantastic way of earning extra cash on the side from the comfort of your own home.

Two ASX 200 iron ore shares to look at for passive income are Fortescue Metals Group Ltd (ASX: FMS) and BHP Group Ltd (ASX: BHP).

So how could I earn $400 in monthly income by investing in these two ASX 200 iron ore shares?

Could I generate $400 monthly income from Fortescue and BHP?

Starting from the beginning, a $400 monthly income equates to $4,800 of annual income.

Secondly, the calculations we are looking at here reflect the dividend payments made to shareholders over the past 12 months. Keep in mind, he dividend payments for ASX 200 iron ore shares could change in future years.

Fortescue paid a fully franked interim dividend of 75 cents per share in the first half of this year. This follows the company paying a final dividend of  $1.21 per share fully franked in the second half of last calendar year. In total, Fortescue has paid $1.96 in total dividends in the last year.

This equates to a trailing dividend yield of about 9.4% based on the company's last closing share price of $20.94. Fortescue shares have lost nearly 4% in the last year as can be seen below.

Now, let's take a look at BHP. The company paid an interim dividend of $1.36 in the first half of this year. This follows the company paying a $2.55 final dividend in the second half of last year. In total, this means BHP paid $3.91 in dividends to shareholders in the last year.

Based on BHP's last closing price of $44.40, this equates to a trailing dividend yield of 8.8%.

How much would I need to invest to get $400 a month in dividends?

My average dividend yield, if I invested the same amount in both BHP and Fortescue, would be 9.1%.

Therefore, to generate $400 a month (or $4,800 in yearly passive income) with a 9.1% average dividend yield, I would need to invest $52,747 overall.

Alternatively, I could invest $4,396 per month for the next 12 months in these two ASX 200 iron ore shares to reach my goal.

Motley Fool contributor Monica O'Shea 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 no position in any of the stocks mentioned. 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

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Resources Shares

Is Fortescue stock a buy for its monstrous 10% dividend yield?

We should always be careful about a high dividend yield on a mining stock.

Read more »

Excited woman holding out $100 notes, symbolising dividends.
Dividend Investing

$10,000 to invest? These 2 high-yield ASX shares could deliver a $700+ passive income

Analysts have put buy ratings on these shares and expect big dividends from them.

Read more »

A senior couple discusses a share trade they are making on a laptop computer
Dividend Investing

3 top ASX 200 dividend shares to buy in December

Great yields could be on the cards for buyers of these shares according to analysts.

Read more »

Happy young couple saving money in piggy bank.
Dividend Investing

Forget Westpac and buy these ASX dividend stocks

Analysts think these shares could be better options for income investors than the big four bank.

Read more »

A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall
Resources Shares

Which ASX mining shares make it into the passive income elite globally?

Clue: BHP isn't one of them.

Read more »

A man looking at his laptop and thinking.
Technology Shares

Why this superstar ASX 200 tech stock is sliding today

What could it be?

Read more »

Man holding Australian dollar notes, symbolising dividends.
Dividend Investing

2 ASX 300 shares with ex-dividend dates next week

Don't miss these key dates.

Read more »

Accountant woman counting an Australian money and using calculator for calculating dividend yield.
Dividend Investing

Invest $10,000 in this ASX dividend stock for $760 in passive income

Bell Potter thinks this stock could generate big returns and income.

Read more »