For my next topic I wanted to stay with investing because it is a subject that I am very interested in at the moment. I’ve been doing lots of research on different techniques and one that I stumbled upon is called dividend investing. This technique has become one of my favorites because of its long term potential to rack in passive income, which is money that you make every month without having to do any work.

Let’s start by looking at what exactly a dividend is, simply put, it is a payment that companies will pay you just for buying and holding their stock. The reason some companies do this is because they have so much left over money that they don’t know what to do with, so they will pay their share holders a small percentage of profits as a reward. The percent they pay you is usually a very small percentage each stock you hold. For example, lets say you buy one apple stock at around $120, (about what apple sells for as of this writing.) Apple pays dividends quarterly, meaning that they will pay you 4 times every year for holding there stock. For every share of apple you own, they will pay you about 21 cents, or about 82 cents per year.

I know what you are thinking, 82 cents isn’t very much money, in fact, for most people, it wouldn’t even be worth picking up off the ground. Dividend investing however has great potential due to the snow ball effect, it may take years of investing and hundreds of thousands of dollars to make a good amount of money from your dividends, however the more money you invest, the bigger your snowball gets, and as it keeps growing it’ll start growing faster and faster. Once you get to this point it is entirely possible to retire and live the rest of your life only off of your dividends. Obviously it takes a long time to build your portfolio to that level but it is possible for the everyday working person.

It’s also important to note that every company deals with dividends differently, some companies offer higher dividend payments than others, usually a good bench mark for dividend yields is anywhere from 2 – 8%, some are even higher then this, but do research before buying into high paying dividends. In most cases, if the dividend payments are too high then the company probably isn’t making much money, and when you invest, you want to invest into successful companies that will minimize your risk.

Dividends also pay out differently, most companies pay their dividends quarterly, however some also pay out monthly, semi-annually, and even annually. I could go on and on about dividends but I don’t want this to get to long so I’ll end by leaving a link to one of my favorite YouTubers Andrei Jihk, who goes into more details about how he quit his job through dividend investing.