How wonderful would it be to dream of a great company you’ll own, be able to depend on, get paid simply for owning it, and have the value of your stake in the company consistently go up because of others clamoring to get a piece themselves? Let’s make the dream even better.
Let’s say you do not need to start from scratch and it will instantly be a multimillion if not a multibillion-dollar company. Oh, and you will not have to run it or go to any office ever. Who’s in? Believe it or not tens of millions of people are already in and if you aren’t you need to consider why that is the case. I’ll gladly sell you on it. Let’s discuss.
Dividend stocks provide the opportunity to take advantage of one of the best passive income methods on this planet. Dividend Stocks are provided by companies that choose to sell partial ownership of their company and pays out all or some of the company’s profit via dividends. These payouts range from 1% to 12%. Anything higher than that isn’t sustainable and you should be wary of those companies. Some pay less than 4% and that doesn’t cover the average inflation of the US so I’d avoid those also. Remember, the goal here is to own stock in companies that are going to give you frequent passive income. You want companies that pay a decent percentage which is called a dividend yield. That is the “1 to 12%” I mentioned.
If a dividend stock has a dividend yield of 8% and a stock value of $100 you’ll receive 8 dollars per year per share you own. This may not seem like much but compare that to the 0 you are collecting now. It also beats owning a $100 stock that doesn’t pay dividends. You see dividend stocks give twice. You also get the capital gains from the stock going up over time also. Let’s say you invest $1000 in the aforementioned dividend stock and in 1 year the stock has jumped to $110 per share. Your $1000 investment is now worth $1100 and has paid you between $80-$88 in dividends. That is about 18.5% from on investment. A bank pays 0.1% on a savings account. 12-month Certificate of Deposit (CDs) pays about 2%. Government bonds pay less than banks. You may want to take a deeper look at dividend stocks.
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Okay, so you agree this is a great opportunity but you want this to work a little faster. How can we make it happen? The simplest, most efficient way is to allocate your monthly savings to dividend purchases and reinvest your dividends into the stock that paid you. This will get that snowball effect of compounding returns (dividend income) working at warp speed.
There are even free brokerage applications (yes, free trades) you can get on your phone that allow you to do both automatically drawing the money for new purchases from your bank account of choice and auto reinvesting your dividends. I could tell you what they are or….you can show yourself you want it and begin doing your research as you’ll need to do regularly, looking for the best stocks that suit your goals.
In closing, you need to give this method a chance even if it is not your main stream of passive income it needs to be part of the team. Yes, it starts slow but eventually, 0’s are added to the numbers given in the scenario I gave and the perks are that much sweeter. Imagine getting to the point of having 1 million dollars of dividend stocks that pay 8% a year. That’s 80k a year for investing in and owning that great company we dreamt up at the beginning of this piece.
Oh, and let’s not forget the all-important lack of effort required to get those funds. I know 1 million sounds like a lot but let’s not forget about the capital gains (the stock’s value going up) and the reinvesting (purchasing more stock with the dividends). This will get you there. Don’t let not being a millionaire today make you feel like you cannot be one in the future. You can. I hope this has opened your eyes to an opportunity that can take care of you in your later days better than any social security or pension can. Play around here with different investment amounts and number of years in the future to show yourself this is real.
Food for Thought…You do the dishes.
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