Fancy receiving a substantial passive income stream with little effort? Who doesn’t? By investing in dividend shares, Brits stand (in my opinion) the best chance of building a large and stable income over time.
Finding dividend stocks to buy requires some time and effort at the beginning. But once set up — and with a little ongoing maintenance — the money can start to roll in.
Investors with £20,000 sitting in a savings account at the start of 2026 have a great shot at achieving a four-figure income. Here’s one strategy to consider.
High-yield heroes
Stock markets rallied in 2025, pulling the dividend yields on many income-paying shares sharply lower. The average yield on the FTSE 100 is now at 3%, at the bottom end of its 3% to 4% historical range.
Yet investors still have stacks of great, high-yield shares to choose from right now. What’s more, these dividend stars can be found across different sectors, while they also provide exposure to a variety of regions.
This in turn reduces concentration risk for investors. If one industry or territory comes under pressure, the impact on the portfolio’s overall dividend income is limited.
Let’s now look at a diversified portfolio that could deliver a £1,620 second income in 2026.
The top 10
| Dividend stock | Description | 2026 dividend yield |
|---|---|---|
| Legal & General | Financial services provider | 8.6% |
| Chelverton UK Dividend Trust | Investment trust | 8.3% |
| Greencoat UK Wind | Renewable energy | 11% |
| Aberdeen Asia Income Fund | Investment trust | 7.1% |
| Phoenix Group | Financial services provider | 7.9% |
| Global X SuperDividend ETF | Exchange-traded fund | 9.5% |
| CVC Income and Growth | Investment trust | 8.6% |
| ITV | Media | 6% |
| Schroder Real Estate Investment Trust | Real estate investment trust | 6.7% |
| iShares US Equity High Income (LSE:INCU) | Exchange-traded fund | 7% |
With an 8.1% average dividend yield, this portfolio — based on a £20k lump sum investment today — should deliver a £1,620 dividend income in 2026, based on broker forecasts.
I must point out that analyst figures are never guaranteed. Dividends can fall short of forecasts. They can also come in higher than expected. But what’s great about this portfolio is that it’s diversified across thousands of companies, which significantly reduces the risk of disruption to one’s income stream from any one company cutting its dividend.
Strength in depth
This huge footprint reflects the portfolio’s 50% weighting to investment trusts and ETFs. Take the iShares US Equity High Income fund, which “aims to generate income and capital growth with lower volatility than the broader US equity market“.
This ETF holds shares in 302 different US stocks. These span a multitude of industries, from information technology (like Nvidia) and banking (JP Morgan), through to pharmaceuticals (Eli Lilly) and consumer goods (Coca-Cola).
That’s not all. With large cash and US Treasury holdings too, the fund can provide a more stable income than pure-play equity funds. Fixed income holdings like this reduce exposure to short-term stock market volatility.
Dividends are never, ever guaranteed. But a portfolio like this gives investors a great chance of a large and stable passive income in 2026 and beyond.
