Stocks

2 passive income ideas I’d use with £500 – The Motley Fool UK

I have been thinking about what passive income ideas I can use in 2022 and beyond. One source of unearned income I like is investing in dividend shares. I can sit back and hopefully watch the dividends pile up. With a modest sum to invest, I would only expect a fairly low amount of income in return. But that is better than nothing – for doing almost nothing.

British American Tobacco

Many investors shun tobacco stocks for ethical reasons. But as someone willing to buy them, I think such stocks can offer attractive returns.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

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A case in point is London-based giant British American Tobacco (LSE: BATS). The company owns brands such as Lucky Strikes and operates worldwide. Its portfolio of premium brands gives it pricing power. That can help sustain profit margins in a time of high inflation.

One risk to the company is declining rates of cigarette smoking in many markets. That could bring revenues and profits down in the long term. BATS has been developing alternative revenue streams, for example building its line of next generation products in areas such as vaping. That could help to replace disappearing cigarette sales, although for now at least the profit margins are lower.

Despite the challenges, BATS continues to be highly cash generative. It pays four dividends a year, and has raised the payout annually for over two decades. At the moment the shares yield 7.3%. That means if I invested £250 in BATS shares today, I would hopefully receive just over £18 of passive income in the coming year alone.

M&G

My second choice would be asset manager M&G (LSE: MNG).

The company specialises in investment management. I like that as a business area because it can be very lucrative. The large sums involved mean that even a modest commission for the company can be a sizeable amount of money in absolute terms. M&G’s established brand name and reputation are a competitive advantage which can help it win new clients.

The company is committed to maintaining or increasing its dividend, although like all dividends there is no guarantee in practice that that will happen. Currently, the shares yield 8.6%. So if I invested £250 into M&G shares today, I would hopefully receive a little over £21 in passive income across the following 12 months.

There are risks with a company like M&G. For example, turbulence in stock markets can affect investment returns. That may lead to clients placing their business elsewhere, reducing M&G’s revenue and profit.

Putting my passive income ideas into action

The thing about passive income ideas is that they will not generate any money at all if they remain only as ideas. To start making money, they need to be put into action.

I already own British American Tobacco shares and am happily receiving regular passive income from them. I would gladly invest another £250 in BATS shares today. I would also consider buying M&G for my portfolio to further boost my income streams, even if only in a modest way to begin with.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

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Click here to claim your free copy of this special investing report now!


Christopher Ruane owns shares in British American Tobacco. The Motley Fool UK has recommended British American Tobacco. 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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