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.