Why dividends are my favorite passive income



Actually, the "What Is A Dividend" article covers this in depth...but I really must say, dividends are truly my best, favorite and recommended form of passive income.

I'll give you a list of pros and cons.

pros of dividends

  1. "Most passive" form of passive income - when dividend companies pay out dividends, the dividends are usually wired either to your bank account, your brokerage account or mailed to you as cheque. In Singapore, it's wired directly to my account, and it's always wonderful to find additional money in my account =D

  2. Traditional, tested, organized - usually all you need is a bank account, a brokerage account and maybe an approved regulatory account (in Singapore it's having a CDP account with SGX) - and you can start investing in dividend stocks and waiting for dividends (which is very, very different compared to cryptocurrency investing that is so highly fragmented and speculative). The companies that have been paying dividends tends to have been around for years if not decades.

  3. Liquid and quick - if I want to "liquidate" my stocks to get cash, it is so easy - just a call/SMS to my broker, and it's done, or I can do it myself, and the money is wired to my bank account in just a couple of days. Cryptocurrency is so much more difficult, tedious and fragmented.

  4. Physical companies - companies that pay out dividends traditionally are physical, real world companies that serve a physical need. An example would be Coca-Cola, which sells real cola to people all over the world. Or Pepsi. Or a REIT (real estate investment trust) that deals with property rental. You can go to their HQ, meet their team, listen to AGMs, see the documents etc.

cons of dividend stock investing

  1. You need money - to have a sizable dividend payout, you need to have a sizable investment amount. 10% of $1 is 10 cents. For you to retire on your dividends, it'd depend on how much you need a month, translate that to amount of dividend stocks value and their dividend yields.

  2. You need time - assuming you are young, and you have to slowly earn, save and invest your savings over long time to have the compounding effect to kick in. Unless you have a large pot of gold, but still, you'll need time to research and study

  3. The dividends are small, 3-10% - this is linked back to item 2, because the dividends of stable companies tend to be small, between 3-8% is more realistic, unless your entrypoint is spectacular.

  4. Companies can go bust - every company has risks (even if they had been around for 10-20 years), and that's why you need to spend some time to understand the fundamentals of any company, before you invest into them.

Tip of the day: index investing

If you want an easy approach to investing without having to research the companies to invest into, then I recommend you invest into index stocks. This is also advised by Warren Buffett, because index investing is so simple, and index funds, once normalized, has only gone up through the years...ON TOP of dividend payouts and multiple depressions.

Downside to index fund investing is that the dividend yield tends to be very, very low. Singapore's STI ETF dividend yield is about 2.6%.

But it is very, very, very safe and very defensive.

It'd depend on your investing philosophy, approach, how hands-off/optimized you want your investment to be etc. If you are a very, very busy person and/or want 100% safe - then go with index investing.

Where to next?

  1. Back to NigelChua Home Page

  2. Contact me by email at (even just to say hi) nigel@nigelchua.com

  3. See the latest articles and updates at the blog

  4. Check out all the resources and tools I use

  5. See my top two resources below: Wealthy Affiliate (left) and Solo Build It (right) - both have very specific strengths and functions

Wealthy affiliate: #1 to learn how to build profitable wordpress online businesses

Wealthy Affiliate is my recommended for WordPress online businesses.

I've been a premium member of Wealthy Affiliate since 2015 and there are a number of pros to be with them, which you can read at my Wealthy Affiliate review here.

One of my favorite points of WA is that they have a try-before-you-buy forever-free membership which you can sign up here for free. No credit card needed.

solo build it (sbi): #1 for offline businesses local search engine ranking, traffic and lead generation

Solo Build It (SBI) is my #1 tool for local search engine optimization (SEO) domination as well for online marketing which I've been using since 2010 personally for multiple projects.

Read why I chose Solo Build It...

...and more importantly, why I still stay with Solo Build It (SBI) till today and use them exclusively for all my SEO, traffic and e-lead generation.


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Name: Wealthy Affiliate

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I've been a premium Wealthy Affiliate member since 2015, read my Wealthy Affiliate Review here.

I recommend them if you want to learn how to make money online.

Better still, you can try Wealthy Affiliate for free here.



Solo Build it (SBI)

Solo Build It!

Solo Build It is my #1 tool for local search engine optimization (SEO) domination as well for online marketing which I've been using since 2010 personally for multiple projects.

Read why I chose Solo Build It...and more importantly, why I still stay with Solo Build It (SBI) till today and use them exclusively for all my SEO, traffic and e-lead generation.



GetResponse Email Marketing

Building a relationship with your audience, customers and readers are highly important for any offline and online business, and I recommend GetResponse for their services, great price, ease-of-use.

Try GetResponse today (1st month free)

Bonus: learn how to use an email autoresponder



Google Suite

Google Suite (GSuite) is THE recommended Google tools for email, calendar, documents, sheets - for productivity  and communication.

GSuite/GMail one month free trial available here.



Shopify

Shopify has made it very easy to start an ecommerce business, solving most of the tech and logistical barriers and even has product suppliers with Oberlo!

Try Shopify today

Books I'm Reading

Holy Bible

Tribe Of Mentors

Seneca Letters From A Stoic

Seneca On The Shortness Of Life

See my full book/read list here.

Blogs I Follow

Tim Ferriss

Pat Flynn

Tony Robbins

Ramit Sethi

Richard Branson