One of the best forms of passive income that a person can get involved in through dividend investing. Many corporations will pay annual dividends to their shareholders. Essentially what you are gaining is a small share of the company's yearly or monthly profits as a reward for holding the stock. This of course can be either offset by the stock’s losses or even further amplified by the stock’s growth.
For example, if you owned a share of a stock that is worth $1000 and pays a 2% annual dividend per share, you would receive $20 a year from this dividend payment. Many stocks will pay fractions of this payment after every month or every quarter, so you do not necessarily have to wait until the end of the year to receive any kind of reward.
Although these gains hardly seem significant, they can make a huge difference if you stick with the plan and accumulate large amounts of money into dividend stocks over time. One option that many companies will give you is to immediately reinvest your dividend payment into the stock itself, which will help grow your amount for the following year
There are also some dividend stocks that pay up to 7 or 8% annually, which is actually quite significant. However, I would caution you to be careful and do your research on dividend stocks that offer this much, as sometimes these are newer and more volatile stocks in which the losses of the stock itself can match your dividend gains.
It’s advised not buying a stock solely because of its dividend, and doing the research on the stock itself. You still want to make smart investments in the market and not just rely on the dividend to eventually become part-time income for you when the stock itself may crash.
In general, dividend stocks are a great investment. There are some index funds that pay around 1% annually that are almost certain gains if we look at historical trends.
This shows us that you can take more aggressive and more conservative approaches to dividend investing overall. If you do your research and commit yourself to invest over the long term, you may be able to one day reap some amazing rewards in what is truly passive income.