S4 E10 : PASSIVE INCOME FROM STOCKS : DIVIDENTS, COVERED CALLS, ETC.

🧠 What is Passive Income?

Passive income is money you earn without working actively.
Like rent from property, royalty from a book, or...

💡 Income from stocks — without selling them.

Yes, your stocks can pay you regularly, just for holding them.
Let’s see how 👇

🪙 1. Dividends: The Sweet Bonus

When a company makes profit, it sometimes shares it with shareholders.
That’s called a dividend.

Example:

You own 100 shares of Tata Steel, and they declare ₹20 per share dividend.

➡️ You get ₹2,000 directly in your bank.

💡 Dividends are like a company saying:
“Thanks for trusting us. Here’s your share of the profit.”

Not all companies give dividends.
Companies like ITC, Coal India, Infosys, HDFC Bank are known for steady dividend payouts.

📥 2. Dividend Yield: Like Interest Rate for Stocks

If a stock is ₹200, and it gives ₹10 as dividend in a year,
its dividend yield is:

(10 ÷ 200) × 100 = 5%

That’s like earning 5% per year, without selling.

Some investors pick stocks only for dividend income, like pensioners.

 

💼 3. Covered Calls (Advanced)

If you already hold 100 shares of a stock, you can rent them using options.
This is called Covered Call strategy.

You write a Call Option, collect a small premium, and keep your stock.

💡 Think of it like giving your stocks on lease.
You earn from rent (option premium), and still own the house (stock).

⚠️ Needs experience, and works better with large-cap stable stocks.
Start small, learn options first.

🏠 4. REITs & INVITs: Stock Market Real Estate

REITs = Real Estate Investment Trusts
INVITs = Infrastructure Investment Trusts

These are like rent-yielding properties listed on stock exchange.

You invest, and earn regular payouts, just like rental income.

Examples:

  1. Embassy REIT

  2. PowerGrid InvIT

They give quarterly or half-yearly payouts, like a salary.

📊 5. Dividend Mutual Funds / ETFs

You can also invest in mutual funds or ETFs that focus on dividend-paying companies.

Example:

  1. ICICI Prudential Dividend Yield Fund

  2. Nippon Dividend Opportunities Fund

No need to pick individual stocks — the fund manager does it for you.

Summary – Passive Income from Stocks

🪙 Dividends: Profit shared by the company — directly credited to your account.

📈 Dividend Yield: Percentage return based on stock price — similar to a fixed deposit.

🛡️ Covered Calls: Earn rental-like income by selling options on stocks you hold.

🏠 REITs & INVITs: Get regular income from real estate or infrastructure investments.

📦 Dividend Funds: Easiest way to earn passive income through mutual funds focused on dividends.

✅ Final Thought

You don’t always need to buy and sell to make money in stock market.
You can also sit tight and get paid.

Passive income gives you freedom + peace of mind.

Perfect for:

  1. Retired people

  2. Part-time investors

  3. Those building a side income stream