With summer weather appearing more often and pubs no longer mothballed, it is tempting to round off the day with a glass of something refreshing. Whether it’s an ale, chardonnay, or a fresh fruit juice, this small daily indulgence can feel rewarding. But for the price of a daily tipple, I think some passive income ideas could generate extra money for me – without having to work for it.
Here are a few such passive income ideas I could use with around £5 a day.
One of my favourite passive income ideas is to invest some money into shares with a high yield. The dividend payouts can soon add up.
For example, if I put £5 a day into British American Tobacco shares, I’d be investing roughly £150 a month. With its current yield of 7.8%, that means that after a year of investing each day, I’d be looking at a prospective passive income stream of around £140 each year from my initial outlay.
With its wide portfolio of brands and global geographic exposure, BAT allows me to benefit from the profitable tobacco industry. One risk is declining usage in some markets. However, just today the company announced that it remains on target to meet its revenue and profit targets for this year.
Dividends are never guaranteed and one of my key risk management principles is diversification, so I would look for other passive income ideas I could use alongside BAT.
Strong dividend growth
One such name is Judges Scientific. The company specialises in the manufacture of high precision scientific instrumentation for users such as labs and research institutes.
With a yield of just 1%, this company offers far less passive income than an equal investment in BAT. So why would I also consider Judges for my list of passive income ideas? The reason is its history of strong dividend growth. It has doubled its ordinary dividends over the past five years. Even in the midst of the pandemic last year, it boosted its ordinary dividends by 10%.
It also sometimes pays special dividends, for example declaring a £2 special dividend in 2019.
I think the company can continue to grow profits and sustain a growing dividend. Its customers need accuracy from their instruments, so are willing to pay a premium price for quality. With revenue of just £80m, I see lots of potential growth for the company.
However, the pandemic led some labs to close, which damaged sales somewhat. That could happen again. Other risks include increased competition from other suppliers damaging profit margins.
Passive income ideas without the work
Another approach I’d consider would be to think about possible passive income streams, then see whether a listed company already uses that idea.
For example, a popular passive income source is selling items online. But I don’t think I can compete with the experts when it comes to this. Retailer Morrisons sells online including through Amazon. It yields 4.1%. Rather than trying to set up my own online shop, I could simply drip feed my daily beer money into Morrisons shares.
One risk with Morrisons is reduced profit margins due to a very competitive marketplace. For example, the rise of discounters like B&M has increased pricing pressure.
We think that when a company’s CEO owns 12.1% of its stock, that’s usually a very good sign.
But with this opportunity it could get even better.
Still only 55 years old, he sees the chance for a new “Uber-style” technology.
And this is not a tiny tech startup full of empty promises.
This extraordinary company is already one of the largest in its industry.
Last year, revenues hit a whopping £1.132 billion.
The board recently announced a 10% dividend hike.
And it has been a superb Motley Fool income pick for 9 years running!
But even so, we believe there could still be huge upside ahead.
Clearly, this company’s founder and CEO agrees.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. christopherruane owns shares of British American Tobacco. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Judges Scientific and Morrisons and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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.