There are so many ways to start making passive income that it can be hard to know where to begin. Some methods require an upfront investment, others only demand time, and a few need both time and money. It can take a while for time-based passive income sources to pay off. However, many financial investments can start making you passive income almost immediately.

One effortless way to start making $100 in annual passive income is to invest in Realty Income (O 1.20%). Here's a closer look at why it's such an easy way to start collecting passive income.

A passive income powerhouse

Realty Income is a real estate investment trust (REIT). Congress created REITs in 1960 to allow anyone to invest in income-producing real estate. These entities must distribute at least 90% of their taxable income to shareholders via dividend payments to maintain their tax-advantaged status with the IRS. Because of that, REITs are usually excellent ways to generate passive income. 

Realty Income stands out in the REIT sector for the dependability of its dividend. It has made 624 consecutive monthly dividend payments throughout its 53-year operating history. Furthermore, the REIT has increased its payout 116 times since its public listing in 1994. More than 25 years of consistent dividend growth qualifies Realty Income as a Dividend Aristocrat, one of only three REITs in that elite class. 

The company currently pays $0.2475 per share each month, or $2.97 per share annualized. That means investors must own 34 shares to make at least $100 in annual income. It would cost about $2,300 at the recent share price of around $67.50. If you want more passive income, invest more money to buy additional shares.

That annual income stream will likely grow in the coming years. Over the last decade, Realty Income has increased its dividend by 70%. That has enabled investors to generate enough passive income during the previous 10 years to cover 77% of their original investment.

What makes Realty Income such a great passive income stock?

Realty Income owns a diversified portfolio of income-generating real estate. The company holds over 11,200 properties leased to more than 1,000 tenants in 70 industries across the U.S. and Europe. It focuses on owning properties net leased to tenants in highly resilient sectors. The net lease structure makes the tenant responsible for covering building insurance, maintenance, and real estate taxes, enabling Realty Income to generate predictable rental income.

Meanwhile, its focus on leasing buildings to tenants in durable industries helps reduce the risk that they won't be able to pay rent when market conditions deteriorate. That provides the company with very stable rental income to support its dividend.

The company also has an elite financial profile. Realty Income only pays out 75% of its cash flow to support its dividend (while still meeting the IRS's 90% net income payout standard), enabling it to retain money to expand its portfolio. It has one of the strongest credit profiles in the REIT sector. These factors give it the financial flexibility to steadily acquire more income-producing real estate. Realty Income expects to purchase over $5 billion of properties in 2022 to further support its dividend. 

The company sees enormous future growth potential. It estimates that there's $12 trillion of owner-occupied real estate in its core global markets, providing it with many future acquisition opportunities. Future deals should make its dividend even stronger by continuing to expand and diversify its income stream.

The easiest way to start making passive income

Realty Income built a diversified portfolio of income-producing properties to support its monthly dividend. Meanwhile, its fortress-like financial profile allows it to continue expanding its portfolio of income-producing properties so that it can keep paying out more money to investors each year. That makes the REIT stand out as one of the best places for beginners to start collecting passive income.