S&P/ASX 200 Index (ASX: XJO) coal stocks are trading at some very attractive trailing dividend yields.
Which means investors looking to build up some handy passive income shouldn’t ignore this sector.
Today we’ll examine two leading coal shares I’d look to tap for $100 a month in passive income.
Namely New Hope Corp Ltd (ASX: NHC) and Whitehaven Coal Ltd (ASX: WHC).
Now before moving on, there are a few things to bear in mind.
Cyclical stocks pay cyclical yields
First, the yields we’re discussing stem from the dividend payments of the past 12 months. Future years could see the ASX 200 coal stocks trading at higher or lower yields.
That will in large part depend on the price of coal.
Which is the second thing to bear in mind.
New Hope and Whitehaven, and their shareholders, have benefited enormously from rocketing coal prices. Thermal coal traded at all-time highs in September last year. The coal price has retraced since those highs but remains well above historic levels.
Now, global demand for coal is widely forecast to remain strong relative to supplies over the coming years. But ASX 200 coal stocks do operate in a cyclical market. Meaning the annual passive income they deliver will likely fluctuate as well.
With that said…
How I’d mine $100 a month in passive income from these ASX 200 coal stocks
On the back of rocketing revenues and profits, Whitehaven Coal paid out an all-time high final and all-time high interim dividend over the past 12 months, both fully franked.
Eligible Whitehaven stockholders will have received 40 cents per share on 16 September and another 32 cents per share in passive income on 10 March. That’s a total dividend payment of 72 cents per share.
At Whitehaven’s closing share price of $6.97 per share on Thursday, that works out to a trailing yield of 10.3%.
Atop those dividend payouts, the Whitehaven share price is up 45% over the past 12 months.
Which brings us to rival ASX 200 coal stock, New Hope.
Like Whitehaven, New Hope also enjoyed a big lift in revenue and profits. And the coal miner also paid out a record-high final and interim dividend, also 100% franked.
Eligible New Hope shareholders will have received a final dividend of 56 cents per share on 8 November. New Hope’s interim dividend of 40 cents per share will hit stockholders’ bank accounts on 3 May. The miner’s shares traded ex-dividend on Monday, 17 April.
At New Hope’s closing share price of $5.21 yesterday, the total dividend payout of 96 cents per share equates to a juicy trailing yield of 18.4%.
Atop that passive income, the New Hope share price is up 56% over the past 12 months.
How much to invest?
Assuming I buy the same number of shares in both ASX 200 coal stocks, my average yield works out to 14.4%.
That means for $100 a month in passive income (or $1,200 per year) I’d need to invest $8,362 and change.
Alternatively, I could invest $697 a month over the year across the two ASX 200 coal stocks.
Both strategies will get me towards my goal.
