10 Dividend Stocks For You to Start Earning Passive Income Today

For your convenience, here’s how this article is broken down so you can pick and choose what parts you want to read. 

1. What is a dividend, and how do you earn passive income from them?
2. What to look for in dividend paying stock? 
3. My top picks of dividend stocks (as of 2020)
4. Why invest in dividend stocks?

What is a dividend, and how can you earn passive income from them?

When a company earns revenue a portion of that revenue is used to pay off expenses (bills, loans, etc.). The remaining amount is profit, and from the profit a company can decide to pay a portion of it to everyone who owns shares in that company. 

That’s where you come in! When you buy a single share of a company you technically own a small, tiny percentage of that company, and this entitles you to a percentage of the profit if the company pays dividends. This means you will get either a quarterly (once every 4 months), or monthly payment. 

Not all companies pay dividends, and not all companies will pay the same percentage of their profits. For example, Amazon (AMZN) re-invest all of their profits back into their business and none of it is given back to the investors as a quarterly payment.

What to look for in a good dividend stock? 

The main things I look for in good dividend stock are:

The main things I look for in good dividend stock is 

1. A high dividend yield (this is how much the company will actually pay you)
2. A long history of dividend payments to their shareholders 
3. A good long term prospect for the company’s business model

My top picks of dividend stocks (as of 2020)

Company	Symbol	Yield
IBM	IBM	5.45%
AT&T	T	6.91%
Iron Mountain	IRM	9.46%
Verizon	VZ	4.49%
Exxon Mobil	XOM	7.89%
Bank of Nova Scotia	BNS	6.43%
Bank of Montreal	BOM	5.81%
S&P 500 Low Volatility High Dividend ETF	SPHD	5.26%

1. International Business Machines (IBM)

IBM has a dividend yield of 5.45% per year. This means for every $1000 you invest in IBM, they will pay you $54.50 a year ($4.51 a month). IBM has been around since 1924 and has been consistently paying dividends for decades. Also, this company is positioned well for the future to take advantage of the trends in cloud computing, artificial intelligence , the Internet of Things, and IT infrastructure and services. All this means that we probably won’t see a drastic change in IBM’s dividend payments

2. AT&T (T)

AT&T has a dividend yield of around 6.91%. This means for every $1000 you invest in AT&T, you will be paid $69.10 a year ($5.82 a month). AT&T has been in business for decades and has had a long history of paying out dividends. Also, everyone will still have cellular and internet services so it is highly likely AT&T will be around for the foreseeable future and continue to payout a high dividend. 

3. Iron Mountain (IRM)

IRM has a whopping dividend yield of 9.46% and is the highest yield on this list. For every $1000 you invest in this company, they will pay you $94.60 per year ($7.80 a month) for doing nothing. Iron mountain has been around since 1951 and has been paying dividends for over multiple decades. This company focuses on secure storage for business – think of medical records, sensitive documents, artifacts. The focus on physical documents had me worried because more and more documents, records, and information are transitioning from paper to digital. However, Iron Mountain has been investing more into digital data storage, cloud services, and data centers so they may be well positioned for the future digital world. 

4. Verizon (VZ)

Verizon has a dividend yield of 4.49%. For every $1000 you invest in this company they will pay you $44.90 a year ($3.74 a month). Just like AT&T, Verizon provides essential cellular and internet services. They have been around since 1983 and have been consistently paying out dividends. Also, Verizon is one of the largest players working on the next generation 5G networks which will help transition to a world where IoT (internet of things) devices are prevalent. Verizon is here to stay for the long term future so you can expect consistent dividends from them. 

5. Exxon Mobil (XOM)

As of writing this article (July 2020) Exxon Mobil has a dividend yield of 7.89%. For every $1000 you invest in Exxon Mobil, you will be paid $78.90 a year ($6.58 a month). Exxon Mobil has only been around since 1999, but it’s the largest descendant of John D. Rockefeller’s Standard Oil. As the world begins to shift towards more renewable energy in the forms of homes powered by solar and wind, and electric cars, the revenue of large oil companies may start to slide, but that may not be for another 30-50 years. Oil is still needed for a large range of industries from shipping to manufacturing, so you can expect consistent dividends for the foreseeable future.   

6. The Bank of Nova Scotia (BNS)

The Bank of Nova Scotia is traded on the NYSE, so even if you live in the U.S you can still purchase shares of this company. BNS has a dividend yield of 6.43 % and for every $1000 you invest, you will be paid $64.30 a year ($5.35 a month). The Bank of Nova Scotia has been around since 1832 and has been paying dividends for over 200 years. Banks are an essential business so you can expect consistent dividends for years to come. 

7. The Bank of Montreal (BMO)

The Bank of Montreal has a dividend yield of 5.81%, slightly lower than the Bank of Nova Scotia. For every $1000 you invest, you will be paid $58.10 a year ($4.85 a month). This bank has also been around for over 200 years and has been paying out dividends consistently. 

8. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)

If you are short on time and don’t want the hassle of picking individual stocks to buy, there are ETFs and Mutual Funds that combine together many stocks into one. SPHD is an ETF that contains 50 stocks – several are on this list (IBM, T, IRM, VZ, XOM). The combined ETF has a dividend yield of about 5.26% after you factor in the fund fees. Again, this means for every $1000 invested you will be paid $52.60 a year ($4.38 a month). Unlike the other stocks in this list, which pay out dividends every 4 months, SPHD will pay out the dividends to you every month. The benefit of this fund is that it diversifies your investment across 50 high dividend companies. This prevents you from putting all your eggs in one basket, but at the same time, you won’t have as high of a return compared to if you just invested in AT&T.

Why invest in dividend stocks instead of other passive income sources? 

Let’s start with the drawbacks of earning dividends.

Cons

Dividends are by no means the fastest route to earning enough passive income to match your current monthly salary. If you expect to cover your current salary with dividend income, you will either need to invest a lot of money, or wait a really, really  long time (see chart below). 

Let’s say your monthly salary was $5000 a month. If all of your investments earned an average dividend yield of, let’s say 6%, then you would need to have an investment of $1 million to match your salary. Seems like a lot of money to invest just to generate $5000 a month. 

Another drawback of dividend yielding stocks and companies is that they have relatively low growth. For comparison, the average year to date return of the tech sector, as of 2020, has been something around 30-40%. If you are young, this is definitely a faster way to grow your money; however, you won’t be paid monthly by most of these tech companies. 

Pros

So why invest in dividend yielding companies or stocks? When you get paid a dividend you are essentially getting paid for doing nothing! Your money is working for you, and you can sit back and reap the rewards. Unlike other forms of passive income, you don’t need to put in any work. That means you don’t need to advertise, you don’t need to manage rental properties or deal with tenants, you don’t need to make Youtube videos or create Instagram posts, you don’t need to write a blog or promote a product. You can literally sit on a beach doing nothing, and your investments will generate a quarterly or monthly dividend for you. Passive income in the form of dividends makes up for what it lacks in speed with the low effort you need to put in. 

You may want to start a side business to generate passive income quickly, but sooner or later you will want to have something slow and steady that I can count on later in life when you no longer have the time to actively put work into your side business. That’s when you would want to invest in dividend yielding stocks. 

Age	Investment	Yearly Contribution	Yield per Year	Monthly	Dividend Yield
20	$1,000	$1,000	0	$0.00	5.50%
30	$14,583		$708	$59.01
40	$37,786		$1,918	$159.81
50	$77,419		$3,984	$332.00
60	$145,119		$7,513	$626.11

Age	Investment	Yearly Contribution	Yield per Year	Monthly	Dividend Yield
20	$1,000	$10,000	0	$0.00	5.50%
30	$130,462		$6,280	$523.33
40	$351,601		$17,809	$1,484.05
50	$729,339		$37,501	$3,125.09
60	$1,374,569		$71,139	$5,928.22