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Ever wondered how big a passive income stream you might be able to earn by buying a range of blue-chip shares that pay dividends?
The answer depends on a few variables. To help explain them, I will work backwards from a specific passive income target.
Setting a target
In this example, I will use £10k per year as a target.
One of the things I like about buying dividend shares to try and earn passive income is that the approach can be tailored to suit each person’s specific financial circumstances.
£10k per year works out as an average of around £833 per month, or £192 per week. But in reality the timing of the passive income may be uneven, as dividends may be sporadic.
It could be that none come for weeks or even months, then a few arrive in a short space of time, depending on what shares somebody owns.
Understanding the role of dividend yield
How much it takes to hit that target depends on the average dividend yield earned.
Yield is basically the annual dividend income expressed as a percentage of the shares’ cost. So, for example, at a 10% yield, a £10k annual passive income would require a £100k investment.
10% is unusually high. The FTSE 100 index yields 3%, so a £10k passive income target would require a £333k investment.
I think a yield above the average is possible while sticking to blue-chip shares. Say someone aims for a target yield of 6%. That would require an investment of close to £167k.
Thinking about timelines
Putting that money in today and starting to earn passive income within months or even weeks could be one approach.
But for the patient investor, it is also possible to start from zero and build up, either taking dividends along the way or initially reinvesting (compounding) them to speed things up, until they hit their target portfolio size.
Choosing the right investment platform
Returns can be eaten into by fees, costs, commissions and taxes.
So it pays to take some time to compare some of the available investing platforms, such as a share dealing account, Stocks and Shares ISA or trading app.
Looking for brilliant income shares in 2026
It also pays to take time when hunting for the right dividend shares to buy. Diversifying the portfolio across a few is a simple but important risk management step.
One share I think passive income hunters should consider is FTSE 100 asset manager M&G (LSE: MNG).
The company offers a dividend yield of 6.8%. It also aims to grow its dividend per share annually. It has done so in the past few years, albeit the latest increase was a modest one.
With its distinctive brand, customer base in the millions and multinational reach, M&G has proved it is able to generate sizeable sums of surplus cash. The asset management business space is large and benefits from huge customer demand, which I expect to last.
That also makes it a competitive sector, though. One risk I see for M&G is customers pulling out more funds than they put in, hurting profits.
It has grappled with that challenge in recent years and I will be watching to see how well it does in 2026.
