Want to live off passive income instead of working a job? I wouldn’t mind. After all, it would free a lot of extra time that I could use elsewhere.
To achieve this, I’m trying to build a stock portfolio that contains high-quality dividend stocks.
According to the ONS, the current median salary in the UK for full-time employees is £39,039. Therefore, it makes sense to create a strategy that targets earning this income annually.
Let’s see how it’s possible for an investor to replace their job with a passive income machine.
The passive income target
Now, let’s assume an investor was targeting a dividend yield of 5% in a diversified portfolio. If aiming to replace the median UK salary, that portfolio would need to be valued at £780,780.
However, I’m not sure many of you reading this have that much spare change to hand.
But I’m here to tell you some good news… you don’t need that much to start. An investor could instead aim to achieve this over time.
With a much more modest amount of £20,000 to start with (which is still a large sum of spare cash) and a small contribution of £125 a month, an investor could make £780,780 within 32 years.
This is assuming that both dividends and shares in the portfolio rise by 5% a year, and that the dividends are reinvested.
I appreciate that some of the additional income generated from the portfolio will be eroded away by inflation over that time. Investors should also note that dividends aren’t guaranteed.
But by investing in a stocks and shares ISA, the dividends earned in the portfolio would be tax-free income. Whereas, of course, you have to pay tax on your employment income.
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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Let’s now look at a UK share that could help an investor target this.
A juicy dividend yield!
ITV (LSE:ITV) shares currently sport a lovely dividend yield of 6.2%. This would be ideal for investors to consider buying for their portfolio, as it’s above the 5% target used in my example above.
The broadcaster faces some serious issues. Most notable is the competition it faces from streaming platforms. The way people are consuming TV is changing. More and more are watching platforms such as Netflix, instead of traditional broadcasters.
Because of this pessimism, the firm’s shares have struggled, pushing their valuation into bargain territory. Right now, it sports a forward price-to-earnings (P/E) ratio of 9.
However, while I acknowledge this risk, I think it’s a bit overblown. The company remains a staple in many households.
Furthermore, its own streaming platform, ITVX, has been quietly impressing in the streaming world. In 2025, total streaming hours increased 16% to 2.3bn. Monthly active users also increased 12% to 16.5m.
While ITV does face serious issues, this provides reasons to be optimistic for the company’s future.
Combined with a high dividend yield and cheap valuation, I think investors should consider buying ITV shares today.
