One of the easiest ways to earn some extra cash is to invest in companies that pay out their earnings in the form of dividends. I own a number of dividend shares and all I have to do is collect that cash they distribute.
In my view, there’s never a bad time to start building passive income streams. And I could get started today with just £100 if I invested in the right companies.
Federal Realty Investment Trust
Top of my list of stocks to buy is Federal Realty Investment Trust (NYSE:FRT). The company is a real estate investment trust (REIT) that makes its money by renting out retail properties.
With this type of company, it’s important to consider the effects of e-commerce on the industry. As more and more people shop online, demand for retail properties is likely to decline.
I think that Federal Realty is reasonably well protected from this threat, though. Its properties are mostly focused in areas that are close to city centres and are therefore likely to be desirable even if demand in general subsides a bit.
At today’s prices, the stock has a dividend yield of just over 3%. So a £100 investment would pay me around £3 per year in passive income.
That doesn’t sound like a lot, but I could grow it over time. If I continued to invest £100 per month in the stock as well as reinvesting my dividends, I could be receiving around £1,700 per year after 30 years.
Southern Copper
I’d also look at buying shares in Southern Copper (NYSE:SCCO). The company makes its money by owning and operating copper mines across South America.
Southern Copper is a very different type of investment to Federal Realty Investment Trust. As a commodities stock, the business is likely to be much more volatile.
The company’s profits are likely to fluctuate as the price of copper rises and falls. That means that I expect the dividend that the company pays out to be volatile.
This means that there’s a risk of sharp declines in the company’s share price. But I think that this could be a great investment despite the risks.
In my view, demand for copper is likely to increase over time. An important part of this is the move to renewable energy and electric cars.
If I’m right about that, then Southern Copper stands to be a major beneficiary. With some of the lowest costs in the industry, it could make some serious profits, which would benefit me as a shareholder.
Building passive income
If I were to invest £100 into Federal Realty and Southern Copper today I could start generating passive income straight away. Even if the amount that I generate at the start isn’t huge, it’s important to focus on the trajectory that I’m on.
By reinvesting my dividends back into the businesses, I could increase this over time. But the sooner I get started, the more opportunity I have to compound my returns.
