5 PASSIVE INCOME IDEAS I’M ALREADY USING

Passive income does not have to be about fanciful marketing schemes and setting up websites.

One such income idea people have been using since before anyone walking the planet today was even born continues to generate tens of billions of pounds annually for people who do not work for that money.

It is buying shares that hopefully can pay dividends in future.

Here is a handful of dividend-generating investment ideas I have put to work to boost my passive income streams.

Tobacco

Smoking is an unhealthy habit that has declined dramatically in many markets. But it is still big business, with billions of cigarettes a week being sold in markets around the world. Production costs are low but high selling prices can offer juicy profit margins.

The sector has some very attractive dividends at the moment, although declining cigarette sales pose a risk to their continuation.

I currently own British American Tobacco and its US peer Altria.

Telecoms

Huge target markets and frequent service use can mean telecom companies generate large cash flows. But some of that cash needs to go to things like building and maintaining networks, which can eat into profits.

But I still like the dividend potential of this sector and own Airtel Africa shares.

I have also recently been sufficiently tempted by the double-digit yield at Vodafone to buy some shares.

Financial services

When it comes to things like pensions and asset management, the total sums of money involved can be vast. That is why financial services can be a very lucrative sector as even relatively small fees in percentage terms can stack up.

With markets wobbly, I see a risk that customer inflows could fall for some such firms, hurting profits. But I continue to own M&G and Legal & General.

Both have strong passive income potential, in my view, thanks to powerful brands and extensive customer bases.

Media

The media landscape has evolved dramatically in recent decades and I expect that to continue.

However, I expect advertising will continue to be big business. Broadcaster ITV is an example of a media company that continues to generate large profits from traditional channels while also building its digital footprint to offset the risk of declining TV advert sales.

Niche manufacturers

When a company produces commodities, it often lacks pricing power. But if it can manufacture a product that sets it apart from rivals that can help it make attractive profit margins.

An example is the sort of patented polymer technology produced by Victrex. The industrial company sells to safety-conscious clients like airlines and car manufacturers, who are willing to pay a premium for the right product quality.

Passive income streams

I am currently using all five of the above investment ideas, by owning the shares I mentioned.

That means I can earn some welcome passive income, as some of the companies currently offer high yields. But it also means I have diversified my portfolio, so if one company cuts or cancels its dividend, the negative impact on my overall income would be reduced.

The post 5 passive income ideas I’m already using appeared first on The Motley Fool UK.

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C Ruane has positions in Airtel Africa Plc, British American Tobacco P.l.c., ITV, Legal & General Group Plc, M&g Plc, and Victrex Plc. The Motley Fool UK has recommended Airtel Africa Plc, British American Tobacco P.l.c., ITV, M&g Plc, Victrex Plc, and Vodafone Group Public. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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