How many NAB shares would I need to buy for $500 in monthly dividend income?

National Australia Bank Ltd (ASX: NAB) shares are having a poor session on Thursday.

At the time of writing, the banking giant’s shares are down almost 1% to $27.85.

While this is disappointing for shareholders, it could be seen as good news for the rest of us.

That’s because investors can now pick up NAB shares at a discount to what the market was prepared to pay just a day ago. And with NAB being a big dividend payer, this means the dividend yield on offer with its shares is now even more attractive.

Speaking of which, what would it take to generate $500 of monthly income from NAB shares? Let’s find out.

$500 of dividend income from NAB shares

Firstly, if you want a passive income of $500 a month, you’re going to have to generate $6,000 each year from dividends.

And as NAB pays its dividends every six months, you’ll need to distribute those dividends equally across the non-payment months.

According to a recent note out of Goldman Sachs, its analysts are expecting NAB to pay fully franked dividends of $1.66 per share in both FY 2023 and FY 2024.

This means that to generate a dividend income of $6,000, you would need to own approximately 3,614 NAB shares.

So, based on the current NAB share price, this would require a pretty substantial investment of $100,650.

But with Goldman having a buy rating and a $30.69 price target on the bank’s shares, your investment could be worth $110,900 within 12 months if it is on the money with its recommendation.

So, that’s $500 a month of dividend income and a $10,000 capital gain. Not bad!

Though, it is worth remembering that going all-in on a single stock is not advisable. Investors would almost certainly be better off building a diverse $100,000 portfolio filled with dividend-paying ASX shares offering similar yields.