💸 Is Dividend Income Truly Passive?
Or Are We Fooling Ourselves?
There are a lot of things I love about dividend investing.
It’s beaten the market over time.
It’s less volatile, so I sleep better at night.
And it gives me flexibility - I can reinvest, save, or spend the cash.
But my favorite part?
The passive income.
Some people argue dividend investing isn’t “truly passive.”
And sure, if we’re being strict, they’re right.
But if you know a way to make money with zero effort, I’m all ears.
Yes, you need to do some work up front - researching companies, understanding the risks.
But once you own quality businesses that raise their dividends year after year, the upkeep is minimal.
Look at the Dividend Aristocrats.
They’ve outperformed the S&P 500 over the long run.
They’ve had smaller drawdowns.
And they’ve grown their dividends at nearly 10% per year for the past decade.
How?
The businesses do the work.
I came across a great quote in the Nomad Partnership letters by Nick Sleep:
“Even though it may be tempting to flatter oneself, it is the businesses we invest in that do almost all the heavy lifting in the wealth creating process.”
Exactly.
Strong, profitable businesses create wealth.
They earn more than they need
They reinvest some of that cash to grow
And they send the rest back to shareholders as dividends
That doesn’t happen by accident.
It takes smart leadership and a durable business model.
Only great companies can keep this up for decades.
The dividend history is proof of the business quality.
So yes, dividend investing takes some effort at the start.
But after that?
The businesses carry the load.
I love investing. It’s fun, challenging, and rewarding.
But I also love mountain biking.
Reading.
Spending time with my family.
And while I do those things, my dividend stocks keep paying me.
And those dividends keep growing:
If that’s not passive income, I don’t know what is.
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data