While the theory of passive income is straightforward, in practice some ideas sound complicated to me. That is why my favourite is investing in companies with proven business models that I expect to pay regular cash dividends to shareholders. Doing that, I can put some money in (how much is up to me), put my feet up, and hopefully let the income flow.
Why I like this idea When it comes to passive income, I like this idea for a few reasons. I can match it to my own available funds, even if I have a fairly small amount of money to invest. I am investing in proven businesses, not unproven concepts.
On top of that, a large established company can do things that are simply out of my capability if I tried to do them myself. Instead of struggling to set up an online business selling t-shirts, I could simply buy into a giant like or that can achieve economies of scale I never would on my own. Putting the idea into practice In fact, I own shares in JD Sports but in that case I am more focussed on the sports retailer’s growth story than its passive income prospects.
Growth-focussed companies often plough earnings into fuelling growth, while more mature businesses may decide to pay more out to shareholders instead. So, for example, although JD Sports does pay a dividend, its current yield is 0.9%.
That means that for every £100 I invest today, I will hopefully earn 90p a year in passive income. By contrast, the dividend yield of asset manager ( ) is at 9.9%.
When hunting for passive .
