Do you want to build a second income stream and earn money while you sleep? Of course you do. That’s why I’m going to explain how I plan to create a second income stream using high-dividend stocks and low-cost tracker funds.
The power dividends
There are many different strategies you can use to create a second income. Everything from operating an online store to writing a book and buy-to-let investing. All of these have their benefits and drawbacks, but I believe the best way is to buy shares in blue-chip stocks.
By investing in businesses that are already established and have a leading position in their respective markets, you don’t have to do any extra work. You can just sit back and let the money roll in. What’s more, by investing in a basket of blue-chip stocks, you can build a well-diversified portfolio pretty quickly. And you don’t have to worry about things such as whether or not your business will be able to survive in the event of a no-deal Brexit.
Start investing
You only need a few hundred pounds to start investing, which means you could be generating a second income in just a few days if you already have the money saved. Stocks usually distribute dividends twice a year, one sizeable final dividend payment and an interim distribution, although some companies do pay out quarterly. Some funds pay out a monthly distribution to shareholders as well.
And if you do have that amount to start investing today, I highly recommend buying the FTSE 100 index as a starting point as I firmly believe that this is one of the best dividend investments in the world.
With a dividend yield of 4.3% at the time of writing, the index will give you an instantly diversified dividend portfolio at the click of a button. If you are willing to do a bit more research, there are companies in the index that currently support dividend yields of 6% or more.
Dividend champion
Take FTSE 100 dividend stalwart British American Tobacco for example. At the time of writing, this dividend champion supports a dividend yield of 7%, implying that if you buy the stock today, for every £100 invested, you could see £7 a year of income.
If that’s not enough for you, Persimmon, another FTSE 100 dividend champion, currently supports a dividend yield of 10.5%, implying that for every £1,000 invested in this home builder, you could see £105 a year in extra income.
These are just two examples, but I think they clearly show how easy it is to build a second income stream with dividend stocks.
So, what are you waiting for? If you have a few hundred pounds saved and want to build yourself a second income stream, it makes a lot of sense to go out into the market and buy a portfolio of high-yield, blue-chip income stocks.