When it comes to passive income ideas, one that some people overlook is simply drip feeding spare money on a regular basis into dividend shares.
That is flexible and genuinely passive: you can let BP or Unilever, Microsoft or Nvidia do the work for you and simply collect the dividends.
Cheap to get started
Another advantage of this passive income plan is that it does not require much money to get started.
How much depends on an individual’s circumstances. But imagine someone put in £5 a day, more or less the price of a fancy coffee in some places. Then, imagine that it earns a dividend yield of 5%. That means that, for each £100 invested, it will hopefully earn £5 a year in passive income
Doing that for a decade, but initially reinvesting the dividends rather than taking them out as income, would lead to a portfolio worth just under £23k. At a 5% dividend yield, that could then earn £1,147of passive income annually. Not bad for £5 a day!
Turning an idea into a reality
I made some assumptions here. I used a compound annual growth rate of 5%. In reality, share price falls can eat into it, but share price rises can boost it – it is not all about dividends.
Five percent seems opportunity pass them by.
