Dividend Investing is the fastest way to earn passive income. There I said it. You can fight me all you want with your rental properties, start-up businesses, and MLMs.
I say this because you can literally start earning sit-on-your-lazy-ass-and-earn-dollars-in-your-bank-account-passive-income starting today for very little capital.
What is Dividend Investing?
A dividend is money paid to a company’s share holders that comes from the company’s earnings.
Let’s say you and your friend start up a lemonade stand. In the first year, you earn $100 in profits. You decide to put $80 back into the lemonade stand to grow it, expand it, and replenish supplies. The remaining $20 you split up between you and your friend.
This a dividend since you and your friend are shareholders in the lemonade stand.
So why is dividend investing the fastest way to passive income?
Becoming a shareholder is easy. All you have to do is buy at least 1 stock in a company in order to become a shareholder of that company. Once you own one share, you’re already on your way to earning passive income through dividend investing.
Let’s take a look at my favorite monthly dividend stock: Realty Income (O).
According to Nasdaq, Realty Income currently pays $0.226 per share. Its last payment day was on March 15, 2019 and the next payment date is on April 15, 2019.
This means that if you own just 1 share of Realty Income stock, every month you are paid $0.226.
This is the definition of passive income. And this is why it’s extremely easy to start earning passive income through dividend investing.
How much does it cost?
As of the close of business today, 1 share of Realty Income costs $72.28 per share. I was fortunate enough to buy this back when it cost $60 per share.
That means if you buy 1 share of Realty Income right now, you will earn at least $0.226 per month, every month. Additionally, Realty Income has been increasing their payouts every year as you can see in the Nasdaq history table.
At this rate, you will earn your money back in less than 300 months.
This is one of the strategies of how the rich continue to get richer.
If a rich person decided to invest $100,000 into this stock and purchased 1,383 shares of Realty Income at a price of $72.28 per share, they will earn $312.67 every month in passive income dividend payments.
With the $312.67, you can buy even more shares of stock and continue to increase your dividend investments, and thus passive income.
This is why I prefer dividend investing for passive income
When I say dividend investing is the fastest way to start earning passive income, I mean it. All you need to do is a computer. Log into your brokerage website, buy some stock. And then you’ll start earning dividends.
A lot of people might do dividend investing in more prominent companies such as Coca-Cola. They currently only cost $46.47 per share and pay $0.40 per share every quarter.
You can go even cheaper and do your dividend investing in REITs such as GAIN or APLE. GAIN pays $0.068 per share every month and only costs $12.09 per share. APLE pays $0.10 per share every month and costs $16.73 per share.
The poor man can start off very small and grow into a large tree over time. Be mindful that this is not a get-rich quick strategy. This is a wealth building strategy that happens over time.
A wise man once said “The best time to plant a tree was 20 years ago. The second best time is today.”
Start planting today so that one day it will grow into ginormous tree.
How Do I Get Started With Dividend Investing?
First thing you’ll want to do is open up a brokerage account if you don’t have one already.
Then I would select dividend stocks that are on the S&P Aristocrats Index (SDY) or on the Vanguard Dividend Growth Fund (VDADX). These are solid companies that have a history of raising their dividend payments throughout the year.
Alternatively, you can just purchase the fund itself. Simply log into your brokerage account and purchase SDY or VDADX.
Nice! How can I start with divided income?
Fastest way is to open up a brokerage account if you don’t already have one and start buying shares from companies you think are strong and sustainable. Such as Coca-Cola or McDonalds.
Thank you for making this subject so easy to understand. Your examples were easy to follow even for me, with no real experience in investing. I’m off to go check out stocks and companies!
Passive dividend investing is a no brainer and you have made it easy with your writing and blog. I like the examples you have taken and shown how when you buy a stock it will be repaid in a certain amount of time. Thanks for doing this and very interesting blog
I’m in an investment club, and we always reinvest our dividends. You will end up with fractions of shares, but that’s okay. Coca-Cola, Disney, and John Deere are some of the companies that we own stock in that pay dividends.
I have limited exposure to stocks but I have invested a lot through mutual funds. Your articles are real eye openers for anyone wanting to learn more, including me.
I was never big into investing and wish I had been at an earlier age. This article was very helpful in explaining dividend investing.
Wow I know absolutely nothing about investing but I feel like I did learn something from this post!
I love shares and you have just given me a piece of information that I had no idea about. http://www.thecozyme.com
Thanks for the post! These are really good tips and a really simplified version of a complication subject!
I appreciate the clear-cut simplicity of this post. I want to show it to my teenager so he starts to learn how investing and the stock market works. Thanks! –Paige Bainbridge (paigebainbridge.com)
You explain everything in such a great way, very easy to understand for a beginner.
IM SO GLAD I LEARNED something new through this post 🙂
Thanks for explaining this simply. It always seems complicated and makes me avoid even thinking about it, so your post has helped me to understand it better.
I wasnt aware that it is called dividend investing. Got to learn so much about divident income from this post. ?
I don’t think I’ve ever heard of dividend investing before! Something I’ll have to look into.
Financial market information seems too technical and cumbersome for me. But your explanations here sure make it clear and understanding.
Thank you
I’m an investing novice and this was super helpful. Thank you so much for the tips!
I have always wondered about this. Thank you so much for this post. I am definitely going to look into it some more. You made it so clear and so understandable.
I am seeing the light on this, but I am still learning. This is a grand idea to make passive income. Making money while I do nothing is my dream come true. Thank you for sharing these tips. Kippi #kippiathome
I feel like you misled us a bit. When a company issues a dividend, the share price falls by an equal amount. Therefore, it’s not just money out of thin air… had dividends not been paid, the stock price would have been higher. In a sense, I would argue it’s “pay me now or pay me later.”
Oh no i completely agree. The stocks price drops the same amount as the dividend on the Ex-dividend date as the cash has now left the company’s balance sheets. That’s why I reiterate strong stable companies for dividend investment as they can continue to generate stable cash flows, since dividends are paid out from the cash flows statement.
I’m glad you agree, but it’s a critical point you left out of the post. It’s also confusing. I, myself, have struggled with making sense out of whether there is really any advantage to investing in dividend-paying stocks. If they pay a dividend then I get a check four times a year and less capital appreciation on the stock. If they don’t pay a dividend then I get no check and more capital appreciation. If I were going to reinvest the dividends then I’d probably prefer no dividend if I had to pay a commission to reinvest. If I were planning on quarterly cash flow from this investment, then I’d probably prefer the dividend because selling shares every quarter, which would be synthetically equivalent, might cost me a commission.
I appreciate the feedback. Perhaps I should’ve began this post with some context to set the framework for dividend investing. There was a comment on a previous post that asked about what dividend investing is about since it seemed confusing to the average person. Additionally, they asked about what the fastest way to earn passive income is (inside a vacuum I’m assuming since they did not mention any specifics). This post was written to answer that question: the fastest way to start earning $1 in passive income, regardless of any context or specifics. I probably should have linked back to one of my historical posts (https://www.financeoholic.com/dividends/not-buy-dividend-stocks/) to help paint a more comprehensive picture of how dividends work but I was worried about confusing people even more.
This sounds so complicated. lol. I heard Dividend Investing so many times but can’t seem to process what’s really needed. This is a very informative article that provides a lot of insight about this. In the near future, we do want to have a passive income like this.
I have always wanted to invest on stocks but was scared , thought it’s too risky. But divident is definitely a much safer way to passive income. Thanks for presenting this topic in such a somplified manner.
This is what I don’t like about your post, Nero. You seem to have people going away thinking dividend investing is different from stocks when it’s really the same exact thing. If dividends are easy then stocks should be easy too. If stocks are easy then dividends should be easy too. If this isn’t the case, then you came up a bit short on your presentation.