5 passive income stocks
Microsoft, the company that didn't only completely
recover from the recent stock market crash
but is hitting a record high, with a valuation
of 1.5 trillion dollars, it seems like it
will be one first companies to cross 2 trillion
dollar valuation.
But how much your money would worth if you
have invested just 1000 dollars in Microsoft
IPO.
As of 2018, your thousand dollars would have
turned to 1.6 million dollars, and in the
last two years, the stock price more than
doubled, so you would have earned much more
than that.
When you think about passive income, you probably
imagine real estate and that type of income
but the stock market isn't just about the
price of the stock but also a a way to earn
passive income.
When you buy a stock, you are literally becoming
an owner of that company. One stock isn't
going to give that much influence over the
company, but nevertheless, the company is
obligated to share with you some of its profits.
And that is called a dividend.
Some companies pay a lot of dividends; others
are not that much.
In the case of Microsoft, its 2.04 dollars
per share or a little over 1.08 percent.
If that doesn't seem like a lot of money,
let me tell you that some companies don't
pay anything like amazon or Facebook.
Over many decades, Microsoft has proved itself
to be one of the best investments ever. Its
revenue has been increasing consequently every
year with 125 billion dollars just last year.
It is sitting on a cash pile of 136 billion
dollars with no signs of slowing down.
The company is founded based on innovation.
Despite the success of Mac, it's still widely
dominating the computer market with Windows
being almost on every computer. It even began
producing its hardware in recent years.
If you know anything about Amazon, you know
that the backbone of its success is amazon
web services, where amazon provides on-demand
cloud computing platforms and its controlling
1/3 of the market. But do you know who is
the second biggest player in that market,
Yep, you guessed it right, its Microsoft.
Although dividend yield isn't hight at Microsoft,
it is still here, and the company is growing
at an unprecedented speed. I won't surprise
if it hits a 2 trillion dollar valuation in
the next 2 to 3 years.
So if you want a super-safe investment that's
growing tremendously and pays constant dividends,
you should be looking at Microsoft.
2. The second on our list is, Johnson & Johnson
You are definitely familiar with this company,
in fact, it's one of the oldest companies
out there. It's a huge medical business with
multiple companies under its wing. Its products
are on the shelves of every country all around
the world.
The stock price hasn't been growing as some
of the tech companies out there but its the
king of dividends.
For over 57 years in a row now, it has been
increasing its dividends and has been one
of the safest investments you could make.
Annually, they pay a dividend of 4.04 dollars
per stock, which is a dividend yield of 2.75
percent. That's more than what some of the
largest corporations pay.
I know that some of you aren't impressed because
that barely beats inflation. However, you
have to consider that the safer the investment,
the lower the returns are. Its also working
on creating a vaccine for the current pandemic,
if it succeeds, its stock price might soar
as well.
In the case of Johnson & Johnson, historically
speaking, for six decades, it hasn't just
been paying dividends but kept increasing
them, so if you are leaning on investing long
term, Johnson and Johnson might be one of
the safest passive income stocks.
3. The third on our list is also a tech company.
It's a company that manufactures your favorite
smartphone, yes I am talking Apple.
This company doesn't need an introduction,
you probably know a lot about it. But let's
take a look at its dividend yield. Currently,
its a little lower than 1 percent (0.98) or
3.28 dollars per stock as of may 2020.
Don't be scared by the fact that it has such
a low dividend yield.
The problem is that the stock price has been
increasing so fast that you have to take a
look at the context.
For the last decade, Apple had a 2 percent
yield, sometimes it was higher, other times,
it was lower, but it was around 2 percent.
And the company is in such great shape that,
even after losing around 30 percent of its
value due to the pandemic, its back and is
hitting a new record high.
Since the invention of the iPhone, the company's
revenue kept increasing year after year.
Even though the smartphone industry has stopped
growing in recent years since it has reached
its limits, the company still managed to keep
its revenue at 260 billion dollars last year.
The company is focused now on taking over
the budget phone sector with the introduction
of iPhone SE. Of course, a 400 dollar is still
expensive, but Apple holds a brand name that
people around the world value and are ready
to pay the extra, even if its a budget phone.
The pandemic illustrated to us that its one
of the safest companies in the world, and
nothing would stop it from growing.
Even though it might be paying a dividend
of just 2 percent, you can be confident that
on the other side, the stock price is also
increasing, making you wealthier.
4. The next on our list is lowe.
An American retail company specializing in
home improvement. The company operates a chain
of retail stores in the United States and
Canada. As of November 2018, Lowe and its
related businesses operate 2,015 home improvement
and hardware stores in North America. It's
the second-largest chain in the U.S.
Founded in 1921, it has been growing since
then. If you take a look at the stock price,
you realize that in the last 5 years, the
stock price has doubled. Although it suffered
tremendously due to the pandemic, like the
companies we mentioned previously, it recovered
quickly. It was one of the companies that
suffered the most by losing half of its value
overnight.
Currently, its dividend yield is 1.68 percent
or 2.2 dollars per share, which is not bad
for such a stable and safe investment.
These companies might not seem to have a high
rate of return. However, you have to consider
the fact that first of all, they are safe
compare to the rest of the market, but more
importantly, their stock is also growing.
For instance, lowes stock in the last 12 months
increased by 30 percent. It was also paying
a dividend, so you are benefiting from the
rise of the stock and also having a passive
income flowing into your account.
On top of that, you are confident that your
invemsnets aren't going anywhere since its
a strong comapny, and the current pandemic
is the proof.
5. And finally The Home Depot.
the largest home improvement retailer in the
United States, supplying tools, construction
products, and services. It operates many big-box
format stores across the United States and
its territories of Guam, and the U.S. Virgin
Islands; all ten provinces of Canada; and
the 31 states and Federal District of Mexico.
Compare to rival Lowe it pays a higher dividend
of 6 dollars or 2.34 percent. In the last
5 years, the stock price has increased from
110 dollars to 254 dollars when writing this
script.
With strong financial statements and 110 billion
dollars in revenue last year, the company
is looking forward to taking advantage of
the digital world. The company has been investing
in digital channels with the One Home Depot
initiative it announced in December 2017.
The dividends of these five companies might
not seem impressive, but when we are talking
about passive income, you want something safe,
something you don't have to look after every
single day. There many companies that provide
much higher dividend yield, but the stock
price can crush overnight, and those high
dividends won't make up for the losses of
the stock price.
That's why this list is made up of the safest
companies in the market that pay some dividends
and are growing over time.
When you buy a stock, it doesn't bring you
any tangible value. You just hold it and wait
for someone else to offer you a higher price
for it, and when you make the sale, then only
you profit or lose.
However, I want to point out that just because
one company pays a dividend doesn't make it
a better investment than other companies.
If the company would not pay dividends and
reinvest that cash back into the company to
grow faster, maybe that is a better option.
Amazon is a perfect example of that. Until
today, The company hasn't paid a dime in dividends.
Even after three stock splits, the Amazon
stock price is 2647 dollars.
Investors clearly made a much bigger return
on the stock price than if they would have
received dividends.
