Passive income comes in many forms. Each and everyone of them has it’s own risks, methods, and rewards. One such method, one that most people will be familiar with is Dividends. Usually coming in the form of stocks that pay dividends. While many stocks pay a dividend yield of 2-10%, there are some that pay up to 18%.

With only a minimal investment, you can create a income stream that matches or exceeds many of the High Yield savings accounts that many personal finance blogs tout. Obviously, the risk is higher that your money will disappear. But it has also been shown that stocks that pay dividends are less likely to drastically change.

If you don't need the income directly and simply want your money to go to work for you, consider a DRIP account. A DRIP account takes that passive income in the form of dividends and re-invests them in the stock. Each time you reinvest, you end up with more shares of the stock. More shares of the stock mean more dividends.

As an example, let's say you purchase $1000 of a $20 stock. You have 50 shares of the stock. The stock pays a 5% yield. Each year, the company pays you $1 per share. That's $50 the first time the dividend is paid. Reinvested, you would get 2.5 more shares. Next time the dividend is paid, you receive dividends on 52.5 shares. You receive $52.5 dollars in dividends. You’ll purchase 2.625 shares. And so on. You can see how it would quickly compound and build.

Of course, fluctuations in the price of the stock can drastically change how many shares you buy at each reinvestment. But, over the long term, you’re also taking advantage of dollar cost averaging. Some times you'll buy lower, and others you'll buy higher. Overall, it averages out to a median price.

Whether you participate in a DRIP or not, you can see how investing in dividend paying stocks can create passive income. If you keep the stock for the long term, it really has little to no maintenance.

What is a Drip you ask? Drip is an acronym that stands for "(D)ividend (R)e(I)nvestment (P)lan". And in some cases, a Drip is one of the best ways to invest in any dividend paying stock. If you buy a dividend paying stock, and you should, you immediately begin seeing returns in the form of income.

When you participate in a DRIP account, those dividend incomes are automatically reinvested into shares of that stock. Each dividend buys you an increment of a share. As the years pass, those shares that you bought with the dividends begin earning shares of their own. You begin earning money on the money you already earned. Win-Win. Many DRIP accounts can be started for as little as $250 initial investment and usually have little to no fees. Information about a companies individual drip account set up can usually be found in the companies “investor relations” section of their website.