Passive income is a great way to set yourself up for success, both in retirement and earlier. There are several passive income options, although some are more passive than others. For example, real estate can be a passive investment. However, this also requires property management, so you will need to hire a property manager or deal with it yourself.
What are dividend stocks?
Dividend stocks are stocks that pay dividends, often quarterly, but sometimes annually or twice a year. Companies pay dividends to reward shareholders by distributing their profits to them. Firms are not required to pay dividends, but many choose to do so in order to demonstrate their profitability and encourage more investors to invest. Companies pay dividends in cash or additional shares.
Individual dividends are small, but you can get a good, steady stream of income if you add up the dividends from your stock portfolio. The portfolio of dividend stocks also sees good growth every year by the inclusion of so-called “dividend aristocrats,” that is, companies that have been increasing their dividends annually for many years. Investors looking to generate passive income outside the stock market have many opportunities to diversify their portfolio while still generating potentially attractive returns, ”said Wittney Rachlin, Chief Marketing Officer for Yieldstreet.
Dividend yield is a percentage that shows how much companies pay dividends each year in relation to the price of their shares. A return of 3% to 6% is generally considered a good target for dividend investors. If it is below this value, the stock may not be a good investment for those looking for dividends, and if it is higher, it may mean that the company is paying dividends from its future growth.
Here are some of the best dividend stocks for passive income
If you’re looking for a good place to start, your best bet is to look at companies that are steadily increasing their dividends. Dividend aristocrats have been increasing their dividends every year for over 25 years, so they are a great addition to any passive investment portfolio.
Standard & Poor’s launched the S&P 500 Dividend Aristocrat Index in 2005 and as of the end of December there were 66 companies on the list. It includes many famous names such as 3M, AT&T, Chevron, Coca-Cola, Colgate-Palmolive, ExxonMobil, General Dynamics, Johnson & Johnson, IBM, Sherwin-Williams, Procter & Gamble, PepsiCo, Sysco, Target, Walgreens Boots Alliance. and Walmart.
Passive income is a great way to increase the return on your investment and generate additional income that you don’t need to work for. Dividend stocks are a great passive income option, and you might especially want to build a pre-retirement portfolio out of them.