When I read other financial blogs one of my favorite type of post to read is the breakdown of investment income. Watching other people’s passive income rise is my second favorite thing (the only thing better is watching my own passive income rise!)
This report includes income from dividends and my rental properties. However, it doesn’t (yet) include any of the income in tax-deferred accounts (401(k), IRAs, and Roth IRAs), as that income isn’t going to help me retire early. Although I don’t own any now, if I have other sources of passive income in the future (CDs, bonds, etc.) I’ll include them here as well.
Dividend Income
The equity portion of our portfolio is roughly 50% index funds and 50% individual stocks. The mutual funds are from when I started investing. I was much more interested in simplicity and a low time commitment so I could focus my time on my career. As my investing philosophy as evolved over the last few years I converted some of my index funds into individual stocks. However, I’ve owned the index funds long enough that selling them would generate a substantial tax burden. As a result, I’ve decided to hold the index funds and direct all new investment money to my stock portfolio.
Here’s how my portfolio did last month:
| Ticker | Name | August |
| AMP | Ameriprise Financial, Inc. | $178.91 |
| AAPL | Apple Inc. | $54.62 |
| DE | Deere & Company | $168.86 |
| KMI | Kinder Morgan Inc | $138.23 |
| OHI | Omega Healthcare Investors Inc | $559.64 |
| SBUX | Starbucks Corporation | $82.99 |
| Total | $1,183.25 |
Rental income
This category includes net income from the 4 rental properties that my wife and I own, plus 50% of the income from 4 rental properties that we own with my mom. We bought these properties in 2012 and 2013 because real estate prices were ridiculous low. I did the math and projected these would be cash cows, and so far that’s proven to be correct.
Note that this number is just the cash flow from the properties (rents minus all expenses, including management fees, mortgage, insurance, repairs, etc.) This number does not include appreciation of the properties or the decrease in the mortgage balance.
Total rental net income = $1,642.80
Total passive income
July, 2016 passive income = $2,826.05
Annualized passive income based on this month’s income = $ 33,912.60
The first and second month of each quarter are significantly lower than the third month in each quarter, as the third month in the quarter is when my index funds pay their dividends.
How did everybody else do with their passive income this month?
Nice dividend income! I had a good month for myself at $312.27. I also have a rental which nets about $555 each month. You’re definitely crushing it with passive income!
Thanks! We are going to see our income drop in the next few weeks since I’ve sold some holdings to raise cash. The market is pretty overvalued, so I’m waiting until I can find some better values.
No concerns about capital gains tax? I’m paying 30-40% on long term capital gains this year. 15% LT gains tax + 5% high AGI LT gains tax + 3.8% Medicare surtax + 9.3% CA state + AMT.
Why bother ever selling if you are already diversified? Will lose a lot of capital to taxes. You have to make huge trading gains in order to make it back.
I am concerned about capital gains, which is why I’ve only sold a few holdings (those with high debt or lower quality earnings). I’ve ended up selling about 5% of my total portfolio. Otherwise, the changes I’m making are to stop reinvesting income and grow my cash pile.
I’ve been considering using options to hedge against a general market downturn – I’ll probably post an article on that in the next week or so.
Awesome results for the month of August. I always love seeing other people note their dividend income. You have many solid payers in the mix for the month and one name that I do not really see among our fellow dividend growth bloggers, AMP. I might have to take a closer look at that name. Thanks for sharing.
DivHut – thanks for the kind words. I’ve made a few tweaks in the last few months to increase the quality of my holdings. These changes will reduce my dividend income slightly, but I believe these moves will set me up for better returns down the road.
AMP was spun off from American Express in 2005. They are a financial services company with a solid long term record (when they were part of AmEx), a low P/E, a solid dividend, and a very safe payout ratio of around 33%. I’m trying to increase my exposure to the financial sector, but with less direct bank exposure (at least for now). AMP fits the bill.
I’m very much looking forward to publishing the September investment income report, as the last month each quarter is usually 2-3x higher than the first 2 months of a quarter!