Generating a second income in the stock market is fairly straightforward. By focusing exclusively on dividend-paying companies, investors can start earning money passively while they sleep just by holding onto the right stocks. And in the long run, establishing a substantial secondary income stream from investments can open the door toward financial freedom.
So let’s say someone has a goal of earning an extra £1,000 each month. How many shares does an investor need to buy?
Crunching the numbers
The number of shares needed to earn £1,000 a month, or £12,000 a year, ultimately depends on which stocks an investor decides to buy.
Let’s start with one of the most popular investing strategies – index funds. The FTSE 100’s one of the UK’s flagship dividend-paying indices. Historically, the yield has sat around 4%. But following an impressive share price run in 2025, the index’s level of payout has fallen to around 3.3%.
That means a total of £363,640 will need to be invested in a low-cost FTSE 100 index fund to generate the £12,000 target second income. And looking at where the popular Vanguard FTSE 100 ETF (LSE:VUKE) currently trades, this translates into a total of 8,926 shares.
Obviously, that’s not pocket change. But by investing a small sum consistently each month over the long run, it’s possible to build to this position over time, even when starting from scratch.
Fortunately, the process can be significantly accelerated through stock picking. Investors can allocate their capital exclusively to the best and biggest yielding opportunities on the stock market. This not only opens the door to superior returns, but it also reduces the amount of money needed to reach passive income goals.
Exploring dividend stocks
One big FTSE 100 dividend winner of the last decade has been LondonMetric Property (LSE:LMP). The commercial landlord (which is a real estate investment trust — or REIT — with certain tax advantages) owns, manages, and leases a diversified portfolio of logistics, healthcare, retail, and entertainment properties to other businesses.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
While real estate is a cyclical sector, the long-term leases management has negotiated with tenants has generated fairly predictable and consistent cash flows. So much so that even with all the ups and downs, dividends have continued to flow. The result is 10 years of consecutive dividend hikes. And today, the yield stands at a far more impressive 6.8%.
At this rate of payout, investors seeking to earn £12,000 a year would only need around £176,470 of capital. That’s still significant. But it’s around half of what index fund investors need. And it translates into 95,390 LondonMetric Property shares.
Of course, dividends aren’t guaranteed. And in the case of Londonmetric, there are notable risks to consider. Higher interest rates are already wreaking havoc on the group’s property valuations. But more crucially, it puts pressure on its corporate tenants.
Long-term leases have so far mitigated the impact on LondonMetric’s cash flow. However, some critical lease renewals and rent reviews are on the horizon, which may put downward pressure on rental income due to higher vacancies or lower rental rates. And if earnings suffer, dividend growth could potentially be compromised.
Nevertheless, even with this risk, Londonmetric Property shares still look like a promising second income opportunity, in my opinion. That’s why dividend investors may want to consider investigating further.
