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As a substitute of working longer hours, clever buyers purchase earnings shares to steadily make more money even whereas they sleep. And whereas the journey to incomes a chunky passive earnings can take a while, it’s a confirmed technique when aiming for monetary freedom.
So how a lot does an investor have to spend to unlock a significant sum like £500 a month?
Crunching the numbers
That quantity every month is the equal of incomes a £6,000 second earnings. However the required dimension of a portfolio finally relies on the yield an earnings portfolio generates.
For buyers aiming to depend on a FTSE 100 index fund, the yield proper now could be near 2.9%. And at this fee, an investor will want round £206,900. The FTSE 250‘s a bit extra beneficiant with a 3.2% yield, bringing the brink all the way down to £187,500.
Nonetheless, for buyers utilizing a inventory choosing technique, the quantity wanted could be diminished even additional. By being way more selective, buyers can personal shares in companies providing way more beneficiant shareholder payouts. And whereas this usually entails taking over extra threat, it additionally opens the door to incomes way more substantial yields.
After all, not many individuals have £100,000 sitting within the financial institution. However even when a customized portfolio solely matches the inventory market’s common 8% annualised return, drip feeding £500 a month when ranging from scratch can construct up this nest egg in round 11 years. That’s the magic of compounding.
Incomes a 6% yield
Throughout each the FTSE 100 and FTSE 250, there are many companies providing a 6% payout or extra. However don’t overlook, increased yields usually come paired with increased threat. That’s why buyers have to rigorously examine attractive-looking earnings shares earlier than throwing any cash into the ring.
With that in thoughts, let’s take a more in-depth take a look at ITV (LSE:ITV). Proper now, the shares of the TV leisure and streaming enterprise supply a tasty-looking 6.1% yield. However is that this payout sustainable?
Taking a deeper dive into its newest outcomes, issues do look a bit shaky. Throughout the primary half of 2025, ITV returned £123m to shareholders by means of dividends. The one downside is that the group solely generated £76m in working income. In different phrases, ITV is paying out greater than it’s bringing in.
That’s clearly unsustainable in the long term. And that is the place the danger enters the image. To be honest, the group’s digital enlargement by means of ITVX has been fairly spectacular. The streaming platform broke even two years sooner than anticipated. And consequently, ITV’s digital revenues are on monitor to exceed £750m in 2026.
If this money movement momentum continues, the higher-margin nature of ITV’s digital channels might assist shut the dividend hole.
After all, that isn’t assured. There’s no denying the fiercely aggressive panorama that’s digital streaming. And on the similar time, the regular decline in ITV’s linear TV enterprise might finally offset any good points made in digital.
Nonetheless, with administration seemingly making the appropriate strikes paired with a lovely yield, ITV might be value a more in-depth look. And there are many different earnings shares I’ve received my eye on proper now.
