Investing in dividend stocks is just one way of earning a second income. There are all kinds of jobs you can do and businesses you can set up to make extra cash on top of a regular salary.
Some of these can be really interesting opportunities. But in terms of requiring minimum work for maximum return, it’s hard to beat the income generated by strong FTSE 100 companies.
Pokémon cards
The other day, a friend of mine showed me an app called Whatnot. As far as I can tell, it’s full of people selling Pokémon cards – and making a very nice income by doing so.
What I saw was a super-high-speed (literally 10 seconds) auction where people sell individual cards and unopened packs. And the amount they were pulling in was pretty spectacular.
It looks kind of fun and really easy and I can’t deny that I didn’t think of trying to do it myself. But there are a few things that are putting me off setting up my own operation. One is that it looks very competitive. And another is that all the buying, selling, packaging, and shipping looks like it would take a lot of time and money to turn it into something significant.
Passive income
Investing in the stock market, by contrast, takes much less effort. Investors do need to think carefully about which shares to buy, but once they’ve done this, all that’s left to do is… watch.
Compared to the work involved with running a Pokémon card operation, that’s a big help. It means investors can go and work on some other way of making money in the meantime. Or not.
Equally important is that the cost of investing has come down significantly. Investing £100 wasn’t really a viable strategy when it meant paying 10% of that in costs. That however has changed. With trading fees now minimal on most platforms and virtually zero on some, the amount of cash it takes to start investing is much lower than it once was.
Dividends
Pokémon is an amazing franchise – some cards sell for up to £500,000. But so is Warhammer, which is owned by Games Workshop (LSE:GAW) – my largest FTSE 100 investment.
The firm manufactures miniatures that it sells in its stores, online and through third parties. This doesn’t usually mean high margins, but strong intellectual property makes a difference.
Operating margins for 2025 were above 40%, which is very high. And with most of its costs fixed, these might expand further if sales keep growing.
Meanwhile, there’s another huge advantage. Low capital requirements mean the firm can return the vast majority of the cash it generates to shareholders as dividends. That makes it incredibly attractive for both growth and dividends.
Collecting a second income
Games Workshop’s high margins means its merchandise isn’t cheap. And this can be a risk when consumer spending comes under pressure, which is the case in the US right now.
That’s where the firm’s targeting major growth over the next few years, so it’s something investors need to keep in mind. But from a long-term perspective, the business looks really strong.
There’s good money in collectibles, especially from franchises like Pokémon or Warhammer. But in my case, I think there’s a more attractive opportunity in the shares than the products.
