New to investing? Here’s how to find passive income opportunities

There’s a lot of different information for new investors concerning passive income. But is earning significant money while you sleep – literally doing nothing – actually a realistic ambition?

I think it is, but there are some important rules to follow. And the biggest one is to have realistic expectations about what can be achieved and how. 

Dividend growth

The stock market’s a great place for passive income investors. When things go well, the amount of cash that businesses return their earnings to shareholders as dividends goes up. 

That means investors can find that they don’t just get money for doing nothing. They can be in a position where their income stream actually increases while they just sit and watch.

This doesn’t happen with owning bonds. Returns from bonds are generally more stable and less likely to fall, but it’s also guaranteed that they won’t go up in the future. 

The trouble is, inflation means this is almost certain to involve going backwards in real terms. But while dividends aren’t guaranteed, shares give investors a chance at moving forwards.

High yields

Fluctuating share prices mean that not all stocks come with the same dividend yield. Taylor Wimpey shares currently have a 9% yield, while National Grid stock yields just 4%.

On the face of it, that means an investment in Taylor Wimpey should generate twice as much passive income as an investment in National Grid. But things aren’t so simple. 

Taylor Wimpey’s dividend looks much riskier. The firm’s currently paying out more to investors than it’s making in net income and this isn’t going to be sustainable indefinitely. 

By contrast, National Grid’s about to enter into a more favourable regulatory environment where its profits should go up. So the lower dividend looks less risky in the near future.

A balancing act

As with so many things, the key with dividend shares is to find a balance. Some sort of risk is inevitable, but investors need to make sure the potential returns are high enough to be worth it.

Primary Health Properties (LSE:PHP) is a company that makes money by leasing GP surgeries. Its largest tenant is the NHS, which means high occupancy levels and low risk of unpaid rent.

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On top of this, the firm just merged with its main competitor, significantly reducing competition in the industry. That should give it long-term power when it comes to renegotiating leases.

There’s a 7% dividend yield on offer right now, which is pretty high. And I think it’s a good stock to consider for investors setting out on a passive income journey. 

Taking things slowly

The big risk with Primary Health Properties is the possibility of a change in government policy affecting demand for GP surgeries. That’s something to take seriously. 

The firm’s average lease though, doesn’t expire for another 10 years. So investors who buy today have a decent chance of getting their money back in dividends before any change can take effect. 

There’s more to earning passive income in the stock market than just comparing dividend yields. But there could be real rewards on offer for investors who are willing to look for opportunities.

The post New to investing? Here’s how to find passive income opportunities appeared first on The Motley Fool UK.

More reading

• With a P/E ratio of 12 and an 8.55% dividend yield, are Taylor Wimpey shares a no-brainer?
• Starting 2026 with £20k? Here’s how to try and turn that into a second income
• Buying £1,750 of these dividend shares could unlock a triple-digit passive income for life
• A once-in-a-decade chance to buy these UK income shares cheap?
• Prediction: analysts see a 7% dividend yield from this brilliant passive income share

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended National Grid Plc and Primary Health Properties Plc. 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.

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