How to generate passive income from dividends?

There are two ways in which you can make money from investing in the stocks of a company.

The most common is when stock prices rise, you sell it and make a profit on it. In this article you will discover that there is another way to invest, which is dividend investing.

If you want to make money from dividend investing, you must find companies whose dividends are likely to increase year after year. Dividend investments can be an effective way to generate regular income or passive income.

Dividend investing can be a reliable source of income for most people who have adequate knowledge of stocks and know how to invest in them.

What is Dividend-

Dividend basically means distributing a portion of profit to the shareholders. A company who is making profit has 2 options, either it can distribute some portion of profit as a dividend to its shareholders or can use the entire profit for its business purposes.

Suppose a company made a profit of Rs 100 crores and decides to pay Rs 5 dividend per share and if you are hoding 2000 shares of the company then you will get 2000 x 5 = Rs 10000 as a dividend.

How passive income is generated from dividend investing?

Dividends are basically a passive form of income that is received by owning a company's share. A company that declares dividends distributes a portion or all of its profit to shareholders. You need to be a shareholder of any profitable company.For generating income from dividends, you will have to choose those stocks who have been regular and consistent in terms of declaring dividends every year.And for that you need stock market basics knowledge and for that you need a stock market course for beginners.

How are dividends taxed?

When dividends are declared, the company deducts 10% TDS and after deducting it the remaining amount will be added to your tax slab considering as other income.Then we need to pay taxes based on our income tax bracket.

How to pick dividend stocks?

Your research plays an important role when you are selecting stocks which gives high dividends.You need to analyse their fundamentals and how strong their management is.

Their balance sheet to check they are profitable or not and their dividend history.

After all this research you can select the best stocks which will help you to generate passive income from dividends.

Most of the people have questions regarding why you should invest early and what benefits it will provide so the simple answer is by investing early you can enjoy the magic of compounding and if you will get splits and bonuses it will directly affect your dividend income.

My name is Anubhav and i write articles on multiple topics. Thanks for showing support.