Building a share portfolio that can complement a salary, or even, hopefully, replace it, is a common goal for many share market investors.
For investors who are looking for an income stream rather than capital gains, it pays to go with Australian-based companies that have committed to paying dividends over the medium to long term, and exchange-traded funds specifically set up to pay high dividends.
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How much do you need to generate $500 per week?
So, let's look at the yields you'll need for a $500 per week return. This, of course, translates to $26,000 a year.
So, what dividend yields do stocks normally pay?
According to S&P Dow Jones, the S&P/ASX 200 Index (ASX: XJO) delivered an average trailing dividend yield of 4.15% from July 2011 to December 2024.
But this includes plenty of companies that pay low or no dividends.
I'd argue it's quite possible to aim for a portfolio that delivers a dividend yield of around 5%, while also including some companies that pay a lot more.
At a 5% yield, you'd need a portfolio worth $520,000 to deliver $500 a week.
At a 7.5% yield you'd need just $346,666.
At a 10% yield you'd need just $260,000.
While there are stocks which pay more than a 10% yield, these are few and far between, and I'd argue that those sorts of yields are likely to be unsustainable.
What ASX shares can I invest in to achieve $500 in income?
On the ETF front, the Australian Dividend Harvester Active ETF (ASX: HVST) is currently paying a yield of 5.8%, which sits firmly in the ballpark of returns targeted.
There is also the Vanguard Australian Shares High Yield ETF (ASX: VHY) which has major holdings in BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA) and Rio Tinto Ltd (ASX: RIO).
This ETF currently pays a dividend yield of 5.47%.
Another income-focused security is WAM Capital Ltd (ASX: WAM), which is currently paying a trailing dividend of 10.4%, 60% franked.
Among the miners Fortescue Ltd (ASX: FMG) pays a healthy trailing dividend of 6.37% currently, while toll roads operator Atlas Arteria Ltd (ASX: ALX) – should it survive a current takeover approach – has committed to paying a dividend of 60 cents per share, or well over 10%.
Three other companies which are currently paying out better than 5% dividends are AGL Energy Ltd (ASX: AGL), APA Group (ASX: APA), and Stockland Corporation Ltd (ASX: SGP).
Other solid companies which pay a bit less than we're after are Telstra Ltd (ASX: TLS) with a yield of 3.93% and Westpac Banking Corporation (ASX: WBC) which pays a trailing yield of 4.37%.
So as you can see, with some diversification across stocks such as these, a 5% dividend yield appears to be within reach.
