If you're looking to generate consistent passive income from the share market, you don't need hundreds of thousands of dollars to get started.
With a focused approach and the right mix of income-generating investments, a $20,000 ASX share portfolio can become a reliable dividend stream — and grow over time.
Let's take a look at how Aussie investors could build a diversified passive income portfolio using ASX dividend shares and an ASX ETF, with the goal of achieving an average yield of around 5% per annum.
Building a passive income portfolio with ASX dividend shares
With $20,000 and an average dividend yield of 5%, this ASX dividend share portfolio could deliver around $1,000 per year of passive income.
But that doesn't necessarily mean that it stops there. This income can grow over time if companies increase their dividends. In addition, reinvesting those dividends can compound your returns even further and boost your income in the future.
Telstra Group Ltd (ASX: TLS)
Allocation: $4,000
Telstra offers a combination of defensive earnings, growing dividends, and exposure to 5G infrastructure. Its fully franked dividend yield is forecast around 4.2%, and analysts expect modest dividend growth over the next few years, supported by cost-cutting and operational leverage from its new Connected Future 30 strategy.
Accent Group Ltd (ASX: AX1)
Allocation: $3,000
Accent runs a portfolio of popular footwear and athleisure brands, including Hype DC, The Athlete's Foot, and Skechers stores. While retail can be cyclical, Accent has a history of strong dividend payouts and is currently forecast to provide a 7% dividend yield in FY 2026. This is being supported by long-term store rollout plans and athleisure demand.
Harvey Norman Holdings Ltd (ASX: HVN)
Allocation: $4,000
Harvey Norman is one of the few ASX dividend shares offering investors both real estate exposure and retail income. It's a high-yielding stock, with a forecast fully franked dividend yield of over 5%. The company's property portfolio adds a layer of support to its long-term income potential, especially during lower interest rate periods.
BHP Group Ltd (ASX: BHP)
Allocation: $4,000
The world's largest mining company is also one of the most generous dividend payers on the Australian share market. And while BHP's dividend fluctuates with commodity prices, it consistently returns capital to shareholders and currently yields around 5%. Exposure to iron ore, copper and other key commodities provides diversification and long-term relevance in global infrastructure and energy transitions.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
Allocation: $5,000
The Vanguard Australian Shares High Yield ETF tracks a diversified basket of high-yielding Australian ASX dividend shares and distributes income quarterly. It includes exposure to banks, miners, and infrastructure stocks — helping reduce stock-specific risk while maintaining attractive income. The ETF is a great option for hands-off investors seeking broad dividend exposure. It currently trades with a 4.8% dividend yield.
