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

Happy female friends taking self portrait through mobile phone at pool's edge, symbolising passive income.
Dividend Investing

Looking for passive income? Try this ASX 200 blue chip

This stock's 4.66% fully franked yield is hard to ignore.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Bank Shares

Everything you need to know about the NAB dividend

NAB will soon be sending its next payout to investors.

Read more »

Happy man holding Australian dollar notes, representing dividends.
Dividend Investing

2 high-yield ASX dividend shares for Australian retirees

Analysts are tipping big yields and big returns from these income stocks.

Read more »

A retiree relaxing in the pool and giving a thumbs up.
Dividend Investing

$30,000 in savings? Here's how I'd aim for $2,070 a year in passive income

Why not turn those savings into a regular passive income stream?

Read more »

A mother and her two adult daughters embrace outdoors.
Dividend Investing

3 reliable ASX dividend shares with yields above 6% that you can buy for less than $7 right now

These stocks are paying consistent dividends to investors.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Dividend Investing

Bell Potter says BHP and this ASX dividend share are top buys

Income investors might want to check out these shares that the broker is positive on.

Read more »

a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.
Dividend Investing

Brokers say these ASX dividend stocks are buys

Income investors may want to check out these buy-rated stocks.

Read more »

Woman on a swing at a beach, symbolising passive income.
Dividend Investing

Overinvested in Fortescue shares? Here are two alternative ASX dividend stocks

Let’s unearth some other passive income opportunities.

Read more »