Some people love their job – but others dream of quitting if they only had a way to finance it. Could the stock market be the solution?

Dividend stocks can be a lucrative source of passive income

In particular, can you replace your income with passive income from dividends paid on your shares?

The compact answer is yes, it can be. But there’s so much more to it!

Dividends can be lucrative. But even a stock with a 6% dividend yield – double current FTSE100 average – pays its owner only £6 a year for every £100 invested. This assumes dividends will come last, which is never guaranteed.

So trying to replace their current income (whatever that is) with dividends would mean investing over 16 times as much.

Replacement of income over time

While this may not be an overnight solution for most people, that doesn’t mean the idea doesn’t have value.

With a little patience and a long-term approach, it can assist someone accelerate their retirement.

For example, let me employ May data from the Office for National Statistics for average weekly earnings overall of £749. This weekly figure is £38,948 per year.

Earning such an amount on dividends from a stock portfolio generating an average of 6% would require a value of just over PLN 649,000. pounds.

That’s a lot. However, let’s assume someone invests £1,000 a month and initially grows the portfolio by 6% a year, only paying out cash dividends when the portfolio reaches its target size.

It would take 25 years to do this. That sounds like a long time. However, this means that someone starting from scratch today using this approach could eventually completely replace their income with dividends by the age of 60.

This is several years older than the current retirement age.

Getting started can be simple

Larger contributions could speed things up.

A higher rate of return would also assist and be possible, but in my opinion double the FTSE 100 average is already ambitious if we stick to well-known, proven companies.

Of course, to do this you need some way to buy the shares. Set-up can be straightforward, whether it’s a shares trading account, a stocks and shares ISA or a trading app.

Can this share assist you achieve your goal?

One income share that I think is worth considering in this context is Legal and general information (LSE: LGEN).

With a dividend yield of 7.5%, this financial services company is more lucrative than any other company on the FTSE 100 index.

Moreover, it intends to raise its dividend per share every year, as it has done over the last few years.

However, the 10% share price gain over the past five years falls well compact of the 47% achieved by the broader FTSE 100 index. This highlights some risks the share faces, such as the sale of a major US company this year, meaning revenues and profits could decline.

Despite this, Legal & General has proven its robust cash-generating potential. It has a vast client base and I also like its focus on the pensions and retirement savings market, where demand is resilient.

Which profitable companies do we like better right now than Legal & General Group Plc?

One of our Share Advisor analysts has just published a novel stock report that we believe is a must-read for any investor looking to generate potential income.

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No jargon. There is no strenuous sell. Just take a close look at the revenue share we think is worth your time.

Christopher Ruane does not hold any position in the companies mentioned.