Building a second income may consist of self -performance – or passively using other people’s work.

In practice, this can mean earning money by having dividend shares in proven companies with a blue chip such as TescoIN AppleOr Coca-Cola.

Here’s how this approach can be used to direct a second income of an average of 8,794 GBP per year.

Dividend shares can be lucrative sources of income

When the company generates more cash than it needs, it can do various things with it. Some companies save this on a rainy day, while others invest in business development. Some pay dividends.

Dividends are never guaranteed. Indeed, this is one of the reasons why an experienced investor differentiates his portfolio in many different actions.

But dividends can be lucrative. For example, take part with a capacity of 5% dividend. Someone who buys it, hopefully earns 5% of their initial investments in dividends every year. They will continue to owners of actions that may enhance or fall during ownership.

The exploit of dividends to build income streams

Having a diverse portfolio of dividend actions can therefore be one of the ways for someone to try to build a second income.

Starting from a lump sum to invest, income can potentially start sailing within a few months or even weeks. But even without a lump sum such a plan can still work, if someone drips regularly, he feeds money.

For example, postponing 100 pounds a week would give an investment person in the amount of over 5000 pounds a year. 5% profitability would already be 260 GBP per year.

But there is much more potential.

A connection £ 5,200 per year at 5% for 20 years would give the investor a portfolio worth almost worth 176 000 £. With 5% of dividend profitability, it would generate a annual second income of almost $ 800.

Starting work

To do this, the investor needs a way to save these regular contributions and then exploit them to buy shares. It can be, for example, an account, ISA actions and shares or an application for action.

One share, I think that investors should consider their second income potential, there is an insurer Phoenix group (LSE: PHNX).

Unlike a guy FTSE 100 Insurers, Phoenix is not the name of the household. However, it works under known brands, such as standard life.

It has a progressive dividend policy, which means that it aims to enhance dividend to action annually. Not only that, but its current dividend performance north of 7% is already greater than twice the average FTSE 100.

Phoenix has many strengths, from millions of customers to a proven model that has a significant potential for making cash.

But, like any business, Phoenix is also in the face of risk. For example, it has a immense mortgage – if the weakening economy has led to a decrease in real estate prices, it may mean that the assumptions of the valuation in the mortgage book no longer persist, gaining profits.

It seems to me that in the long run Phoenix can still be a significant dividend payer.