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5 passive income stocks
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Microsoft, the company that didn't only completely recover from the recent stock market crash
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but is hitting a record high, with a valuation of 1.5 trillion dollars, it seems like it
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will be one first companies to cross 2 trillion dollar valuation.
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But how much your money would worth if you have invested just 1000 dollars in Microsoft
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IPO. As of 2018, your thousand dollars would have
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turned to 1.6 million dollars, and in the last two years, the stock price more than
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doubled, so you would have earned much more than that.
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When you think about passive income, you probably imagine real estate and that type of income
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but the stock market isn't just about the price of the stock but also a a way to earn
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passive income.
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When you buy a stock, you are literally becoming an owner of that company. One stock isn't
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going to give that much influence over the company, but nevertheless, the company is
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obligated to share with you some of its profits. And that is called a dividend.
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Some companies pay a lot of dividends; others are not that much.
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In the case of Microsoft, its 2.04 dollars per share or a little over 1.08 percent.
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If that doesn't seem like a lot of money, let me tell you that some companies don't
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pay anything like amazon or Facebook.
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Over many decades, Microsoft has proved itself to be one of the best investments ever. Its
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revenue has been increasing consequently every year with 125 billion dollars just last year.
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It is sitting on a cash pile of 136 billion dollars with no signs of slowing down.
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The company is founded based on innovation. Despite the success of Mac, it's still widely
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dominating the computer market with Windows being almost on every computer. It even began
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producing its hardware in recent years.
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If you know anything about Amazon, you know that the backbone of its success is amazon
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web services, where amazon provides on-demand cloud computing platforms and its controlling
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1/3 of the market. But do you know who is the second biggest player in that market,
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Yep, you guessed it right, its Microsoft. Although dividend yield isn't hight at Microsoft,
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it is still here, and the company is growing at an unprecedented speed. I won't surprise
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if it hits a 2 trillion dollar valuation in the next 2 to 3 years.
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So if you want a super-safe investment that's growing tremendously and pays constant dividends,
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you should be looking at Microsoft.
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2. The second on our list is, Johnson & Johnson
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You are definitely familiar with this company, in fact, it's one of the oldest companies
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out there. It's a huge medical business with multiple companies under its wing. Its products
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are on the shelves of every country all around the world.
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The stock price hasn't been growing as some of the tech companies out there but its the
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king of dividends. For over 57 years in a row now, it has been
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increasing its dividends and has been one of the safest investments you could make.
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Annually, they pay a dividend of 4.04 dollars per stock, which is a dividend yield of 2.75
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percent. That's more than what some of the largest corporations pay.
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I know that some of you aren't impressed because that barely beats inflation. However, you
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have to consider that the safer the investment, the lower the returns are. Its also working
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on creating a vaccine for the current pandemic, if it succeeds, its stock price might soar
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as well. In the case of Johnson & Johnson, historically
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speaking, for six decades, it hasn't just been paying dividends but kept increasing
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them, so if you are leaning on investing long term, Johnson and Johnson might be one of
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the safest passive income stocks.
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3. The third on our list is also a tech company.
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It's a company that manufactures your favorite smartphone, yes I am talking Apple.
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This company doesn't need an introduction, you probably know a lot about it. But let's
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take a look at its dividend yield. Currently, its a little lower than 1 percent (0.98) or
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3.28 dollars per stock as of may 2020. Don't be scared by the fact that it has such
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a low dividend yield. The problem is that the stock price has been
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increasing so fast that you have to take a look at the context.
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For the last decade, Apple had a 2 percent yield, sometimes it was higher, other times,
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it was lower, but it was around 2 percent. And the company is in such great shape that,
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even after losing around 30 percent of its value due to the pandemic, its back and is
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hitting a new record high. Since the invention of the iPhone, the company's
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revenue kept increasing year after year. Even though the smartphone industry has stopped
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growing in recent years since it has reached its limits, the company still managed to keep
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its revenue at 260 billion dollars last year. The company is focused now on taking over
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the budget phone sector with the introduction of iPhone SE. Of course, a 400 dollar is still
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expensive, but Apple holds a brand name that people around the world value and are ready
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to pay the extra, even if its a budget phone.
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The pandemic illustrated to us that its one of the safest companies in the world, and
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nothing would stop it from growing. Even though it might be paying a dividend
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of just 2 percent, you can be confident that on the other side, the stock price is also
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increasing, making you wealthier.
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4. The next on our list is lowe.
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An American retail company specializing in home improvement. The company operates a chain
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of retail stores in the United States and Canada. As of November 2018, Lowe and its
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related businesses operate 2,015 home improvement and hardware stores in North America. It's
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the second-largest chain in the U.S. Founded in 1921, it has been growing since
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then. If you take a look at the stock price, you realize that in the last 5 years, the
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stock price has doubled. Although it suffered tremendously due to the pandemic, like the
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companies we mentioned previously, it recovered quickly. It was one of the companies that
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suffered the most by losing half of its value overnight.
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Currently, its dividend yield is 1.68 percent or 2.2 dollars per share, which is not bad
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for such a stable and safe investment.
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These companies might not seem to have a high rate of return. However, you have to consider
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the fact that first of all, they are safe compare to the rest of the market, but more
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importantly, their stock is also growing. For instance, lowes stock in the last 12 months
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increased by 30 percent. It was also paying a dividend, so you are benefiting from the
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rise of the stock and also having a passive income flowing into your account.
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On top of that, you are confident that your invemsnets aren't going anywhere since its
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a strong comapny, and the current pandemic is the proof.
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5. And finally The Home Depot.
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the largest home improvement retailer in the United States, supplying tools, construction
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products, and services. It operates many big-box format stores across the United States and
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its territories of Guam, and the U.S. Virgin Islands; all ten provinces of Canada; and
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the 31 states and Federal District of Mexico. Compare to rival Lowe it pays a higher dividend
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of 6 dollars or 2.34 percent. In the last 5 years, the stock price has increased from
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110 dollars to 254 dollars when writing this script.
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With strong financial statements and 110 billion dollars in revenue last year, the company
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is looking forward to taking advantage of the digital world. The company has been investing
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in digital channels with the One Home Depot initiative it announced in December 2017.
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The dividends of these five companies might not seem impressive, but when we are talking
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about passive income, you want something safe, something you don't have to look after every
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single day. There many companies that provide much higher dividend yield, but the stock
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price can crush overnight, and those high dividends won't make up for the losses of
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the stock price.
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That's why this list is made up of the safest companies in the market that pay some dividends
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and are growing over time.
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When you buy a stock, it doesn't bring you any tangible value. You just hold it and wait
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for someone else to offer you a higher price for it, and when you make the sale, then only
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you profit or lose.
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However, I want to point out that just because one company pays a dividend doesn't make it
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a better investment than other companies. If the company would not pay dividends and
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reinvest that cash back into the company to grow faster, maybe that is a better option.
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Amazon is a perfect example of that. Until today, The company hasn't paid a dime in dividends.
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Even after three stock splits, the Amazon stock price is 2647 dollars.
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Investors clearly made a much bigger return on the stock price than if they would have
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received dividends.