When most of us think of "getting paid," what we actually have in mind is generating an income directly through our own efforts: showing up for work and getting a paycheck from our employer. This is, not unsurprisingly, what falls into the category of "active" income. The difficulty, of course, is that to increase our income we have to work harder, work longer hours, find a higher-paying job, or take on a second (or even third!) job.

But there is an alternative. There are ways to increase personal or family income that involve someone else doing the actual work, usually by making some sort of an investment or commitment of finances, and getting a payout in exchange for the use of your money. We call this type of income, and where you are not directly involved in the business decisions or labor, "passive" income. (There are, in fact, other types of passive income, such as income generated through renting real estate, payment of royalties, and the like. For a fuller discussion on this topic you can read this in-depth article.)

Stocks and Dividends

Simply put, a share of stock is a way of purchasing a small ownership stake in a company. In exchange for your money (used to purchase the stock), the company grants you so many "shares" of ownership in that firm. Purchase enough shares and you will have a controlling interest in that company!

As the company you own shares in grows and becomes more valuable, the value of your purchased stock shares will grow as well, and this is certainly a form of passive income in and of itself. There are well-known and well-run companies (like Google, Amazon, and Apple) whose stock shares have increased in value many times over.

But there is another way to get "paid," and that is through receiving dividend payments, often via a share dealing account. Stock dividends are a "bonus" that a company issues (by approval of their board of directors), usually on a quarterly basis, to those who own stock in the company.

Dividends are usually paid in one of two ways: direct cash payouts and payment-in-kind of additional shares of stock in the company. The amount you will receive will depend on the number of shares of stock you own. The more shares you own, the higher your dividend payout will be. Either form of dividend payment (cash to you or additional stock shares) generates additional passive income for you. (And your dollars can positively impact communities where these companies reside - just Google up Opportunity Zone investing for more information on that.) An excellent essay that discusses all aspects of dividend investing can be found here.

Don't Gamble Trying to Pick a Winner

The crux of the issue, though, is this: if you are interested in boosting your income through dividends you need to pick stocks that are "winners" in generating high dividend payouts to investors. But what if you are not that familiar with the markets? Trying to make your own decisions, in that case, can be problematic. In this case, you can investigate firms that will help you to invest in high dividend stocks. The important takeaway here is that there is no need to gamble or speculate. If you are a beginner or just don't have time to follow the stock market, help is available if you need it.

Some Concluding Thoughts

One important thing to keep in mind about stock dividends is that the payout on them is not guaranteed. Companies may choose not to pay dividends during a calendar quarter, or they may choose to pay other types of investors first, such as bondholders or those holding preferred rather than common shares of stock. This risk can be counterbalanced by buying shares in a number of companies so that, if a company decides not to issue a dividend, other companies in your portfolio will (and some may even increase their dividend, which will also help you to make up for any lost dividend payments).

Finally, if you are a younger investor, give serious consideration to reinvesting your dividends instead of cashing them out. This will grow the overall value of your portfolio over the years when you do not need to use those funds.

Whatever options you ultimately decide on, if properly executed a substantial passive income can be generated by wisely investing in high dividend stocks.