2 passive income ideas I’d use with £500

With £500 to invest, our writer shares two passive income ideas he would consider using to try and boost his earnings without increasing his workload.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Hand holding pound notes

Image source: Getty Images.

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.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

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.


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.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

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.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Social media and digital online concept, woman using smartphone
Investing Articles

Will Lloyds shares recover in 2022?

Lloyds shares have struggled this year and the looming recession won't help. But I'd still buy them today.

Read more »

Two hands holding champagne glasses toasting each other with Paris in the background
Investing Articles

Can the stock market make me rich even now?

Here are three ways I'm coping with the stock market's recent bout of weakness and aiming to build wealth in…

Read more »

Cogs turning against each other
Investing Articles

3 top investment trusts to buy right now

Investment trusts offer a wide range of options for investors. And in troubled times, they provide some safety through diversification…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Why hasn’t the FTSE 100 crashed in 2022?

The catastrophic events of 2022 have left investors around the globe fearing the worst for stock markets. And some have…

Read more »

Trader on video call from his home office
Investing Articles

2 inflation-resistant FTSE 100 stocks to buy today

Soaring inflation could dent my returns if I don't take care. Here are two top inflation-resistant FTSE 100 stocks I'd…

Read more »

Tabletop model of a bear sat on desk in front of monitors showing stock charts
Investing Articles

Why a bear market is an investor’s best friend

A bear market can certainly be scary. But any investor tempted to sell might benefit by looking at Warren Buffett's…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The Rolls-Royce share price could be stuck below £1 for a while. Should I buy?

The Rolls-Royce share price has been trading at penny stock levels since April. Could the stock be a bargain at…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m aiming to make £45,000 in passive income with UK shares and never work again!

Investing regularly in UK shares can generate a substantial passive income over the long run. Zaven Boyrazian demonstrates how.

Read more »