Income shares: how much do you need to invest to target £500 a month?

Instead of working longer hours, intelligent investors buy income shares to steadily make extra money even while they sleep. And while the journey to earning a chunky passive income can take some time, it’s a proven strategy when aiming for financial freedom.

So how much does an investor need to spend to unlock a meaningful sum like £500 a month?

Crunching the numbers

That amount each month is the equivalent of earning a £6,000 second income. But the required size of a portfolio ultimately depends on the yield an income portfolio generates.

For investors aiming to rely on a FTSE 100 index fund, the yield right now is close to 2.9%. And at this rate, an investor will need around £206,900. The FTSE 250‘s a bit more generous with a 3.2% yield, bringing the threshold down to £187,500.

However, for investors using a stock picking strategy, the amount needed can be reduced even further. By being far more selective, investors can own shares in businesses offering far more generous shareholder payouts. And while this often involves taking on more risk, it also opens the door to earning far more substantial yields.

Of course, not many people have £100,000 sitting in the bank. But even if a custom portfolio only matches the stock market’s average 8% annualised return, drip feeding £500 a month when starting from scratch can build up this nest egg in around 11 years. That’s the magic of compounding.

Earning a 6% yield

Across both the FTSE 100 and FTSE 250, there are plenty of businesses offering a 6% payout or more. But don’t forget, higher yields often come paired with higher risk. That’s why investors need to carefully investigate attractive-looking income shares before throwing any money into the ring.

With that in mind, let’s take a closer look at ITV (LSE:ITV). Right now, the shares of the TV entertainment and streaming business offer a tasty-looking 6.1% yield. But is this payout sustainable?

Taking a deeper dive into its latest results, things do look a bit shaky. Across the first half of 2025, ITV returned £123m to shareholders through dividends. The only problem is that the group only generated £76m in operating profits. In other words, ITV is paying out more than it’s bringing in.

That’s obviously unsustainable in the long run. And this is where the risk enters the picture. To be fair, the group’s digital expansion through ITVX has been quite impressive. The streaming platform broke even two years earlier than expected. And consequently, ITV’s digital revenues are on track to exceed £750m in 2026.

If this cash flow momentum continues, the higher-margin nature of ITV’s digital channels could help close the dividend gap.

Of course, that isn’t guaranteed. There’s no denying the fiercely competitive landscape that is digital streaming. And at the same time, the steady decline in ITV’s linear TV business could ultimately offset any gains made in digital.

Nevertheless, with management seemingly making the right moves paired with an attractive yield, ITV could be worth a closer look. And there are plenty of other income shares I’ve got my eye on right now.

The post Income shares: how much do you need to invest to target £500 a month? appeared first on The Motley Fool UK.

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• How much could a £3-a-day passive income plan deliver?
• Investors could target £1,982 in annual dividend income from just £5,000 in this overlooked FTSE 250 gem
• Want to earn £1k each month in dividends from an ISA? Here’s how

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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