The ONLY True Form of Passive Income

Investing is a fundamental aspect of personal finance, and crucial to growing your wealth.

It’s also the home of the one true form of passive income…

Dividends.

Let me explain how you can build this genuine passive income stream today.

What Are Dividends?

A dividend is a recurring payment issued to the owners of a company, simply for being an investor in a business.

They’re typically paid out every month or quarter, and comes from company profits, to incentivise new investment.

The aim from a business perspective is to promote investment.

It’s almost like an advertisement in itself, to get money from investors, to grow the business.

Simple stuff.

It’s important to note though, that not every public company issues a dividend.

In fact, a lot of the biggest companies in the world…

• Apple

• Meta

• Tesla

• NVIDIA

…either issue very small dividends, or don’t issue them at all.

They prefer to reinvest that money back into the business, to grow it and raise the share price.

Benefits of Dividends

Passive Income

Dividends may not be the most rewarding, but they’re the purest form of passive income you’ll ever find.

The only time you ever have to put some work in is buying investments, and you can let the company take care of the rest for you.

Invest.

Wait to get paid.

Repeat.

Paid Out Regardless of Market Conditions

You don’t have to be in a bull market for you to receive your dividends.

Barring any fundamental changes to the companies, you’re dividends will continue to be paid regardless of the condition of the market.

Sure, it’s nice when your investments go up in value too.

But, if we’re just talking about dividends, these aren’t affected directly by market conditions.

Compound Your Returns

If you really want to grow your wealth, you don’t want to withdraw and spend your dividends.

You want to reinvest them, so your portfolio continues to grow, and continues to reward you with bigger dividends in the future.

We call this compound interest, and Albert Einstein once called compound interest…

“The eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

If you continue to receive dividends, and continue to reinvest them, you’re building an ever-increasing investment portfolio, whilst doing zero work.

How to Earn Dividends

The dividend of a stock or ETF is publicly shown when you go to invest.

A dividend is calculated as a percentage yield, so when you research a stock, you’ll see a percentage figure on the stock.

This percentage is the amount you’ll receive per share, per year, in either monthly or quarterly instalments.

So, if you buy a $100 share at a 5% yield, you’ll earn $5 per year, which doesn’t sound like a lot, but can soon begin to add up as your portfolio grows.

Aside from hitting the “buy” or “invest” button, there’s nothing you actually need to do to earn dividends beside… wait to be paid.

There are two dates to remember for dividends:

• The record date — the date of which a record is taken of all the shareholder of a business and their positions, to gain information on who needs to be issued a dividend.

• The payment date — the date of which the dividend is paid, typically a month or so after the record date.

It’s their obligation to pay you the percentage that’s been advertised, and this payments will occur automatically via your investment platform.

There are two things you’re in control of here:

• Your contributions — how much you invest is in your control. The more you invest, the more you’ll be paid in dividends.

• Reinvesting the dividends — this doesn’t always happen automatically depending on your investment platform. This is also the case if your dividend rewards are too small for a buy order to take place.

Despite these two, earning dividends are almost completely passive.

It’s up to you to invest & reinvest, but other than that, you’re free to sit back and watch the dividends roll in.