Imagine waking up each morning knowing your ASX share portfolio is quietly working behind the scenes — paying you, even while you sleep.

There are no spreadsheets, no bosses, no clocking in. Just reliable income flowing into your bank account, month after month, thanks to dividends from ASX shares.

It might sound like a dream, but with time, discipline, and the right strategy, it is absolutely achievable.

Here's how smart investors can build a portfolio capable of delivering $50,000 of passive income per year.

Start with ASX growth shares, finish with income

Unless you're already lucky enough to be sitting on a million-dollar cash balance, the first step isn't about chasing dividend yields — it is about building your capital base.

To earn $50,000 in annual income from ASX shares, you need a portfolio worth around $1 million, assuming an average dividend yield of 5%.

That might seem like a mountain to climb, but here's the good news: it doesn't need to happen overnight.

Many investors spend their early years focused on growth-oriented shares and ASX ETFs — building wealth through capital gains, reinvested dividends, and compounding. Over time, that disciplined approach can grow into a sizeable portfolio.

Then, once you've built up that capital, the focus can shift. That's when the real magic happens.

From builders to payers

Once your portfolio hits the million-dollar mark, you don't need to keep building. You can rotate into high-quality, income-generating ASX shares and ASX ETFs with a focus on dependable dividends.

The goal? A sustainable 5% average dividend yield, ideally with some franking credits to sweeten the deal.

Here's what a diversified income portfolio might include if you were ready to build it in today's market:

• Telstra Group (ASX: TLS) – Australia's largest telco and a fully franked dividend payer with exposure to essential services.
• APA Group (ASX: APA) – A defensive infrastructure play offering steady cash flows and reliable payouts.
• Super Retail Group (ASX: SUL) – Owner of brands like Rebel and Supercheap Auto, offering solid dividends and exposure to consumer spending.
• Smartgroup Corporation (ASX: SIQ) – A salary packaging and fleet services provider with a high dividend yield.
• Vanguard Australian Shares High Yield ETF (ASX: VHY) – For broad, diversified exposure to Australia's top dividend payers in one trade.

Importantly, these aren't speculative income traps. They're businesses (and funds) with solid balance sheets, sustainable payout ratios, and a history of rewarding shareholders.

Foolish takeaway

Building a passive income machine doesn't happen overnight. It takes patience, discipline, and a clear strategy: grow first, then harvest.

But with the right ASX shares and a long-term mindset, that $50,000 goal becomes far more than a fantasy. It becomes a plan — and with enough time, a reality.