I always love reading blogs about other investors’ investment income. Watching other people’s investment income rise is my second favorite thing (the only thing better is watching my investment income rise!)
I always look forward to the last month of the quarter, as our dividend income is usually as much as the first two months of the quarter combined.
This report includes income from dividends, mutual funds, and rental properties.
Here is our investment income for March:
Every month I’ve been tweaking (and hopefully improving) the format of my income report. Please let me know if you have any suggestions on how I can make it even better.
Dividend & Interest Income
Our dividend and interest income came from a well diversified number of sources in March. Our single largest source ($2,507.10) was the S&P500 index that my 401k is invested in. Next up is $1,409.21 in income from our CA muni bond fund (which I’ve since sold). After that we received our quarterly income from our mutual funds ($2,333.67 total). The three largest payment from individual stocks were from Johnson & Johnson, Target, and Chevron.
Total dividend income was $9,452.21. Our dividends were 134.96% of our monthly investment income. Yes, having our dividends be more than 100% of the total can mean only one thing – our rental income was negative for the month.
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. This number does not include appreciation of the properties or the decrease in the mortgage balance (those numbers show up in the net worth report).
However, this income is net of all mortgage, tax, and insurance payments. That is, this is a true cash flow report for our rental properties.
This was a bad, bad month for the rental properties. One unit is vacant and needed fairly significant repairs/upgrades before it could be rented out again. The hope is to make the investment now and get the unit fully rented by the end of April. This means that April is likely to be pretty poor, but hopefully May will be back on track.
Rental income was ($2,448.36), which was -34.96% of our monthly income.
Total investment income this month
Total (dividend + rental) income = $7,003.85
Our total income for March, 2017 was $9,156.87. This means our investment income for March was down almost 24% from March of last year. Just looking at dividends paints a much happier picture. Our dividend income for March, 2018 was $9,454.21, and our dividend income for March, 2017 was $7,554.65 – our dividend income was up 25% year-over-year.
This is why I prefer dividend income to rental income. First, it’s truly passive. Second, you can never lose money in dividends. That is, the worst case scenario for dividends is that they get cut to zero and you have no income. The worst case scenario for real estate is potentially unlimited losses.
Trailing 12-month investment income
Here’s what our trailing 12-month income looks like. Since I only started tracking these numbers in Sept, 2016, I only have actual 12-month totals starting in August, 2017. I’ve annualized numbers before that date (that is, if I had 6-months of income data then I would double it to get a projected 12-month number). In 2016 I only had a few months of data to work with, so small fluctuations would cause my projected 12-month number to jump around. I think this number will start to stabilize now that I have 12 full months of data to use in the calculations. And, in fact, if you look at the graph from August, 2017 to March, 2018 you see a much smoother line that slowly trends up (with a dip this month).
Investment income over the last 12 months = $63,312.42. Note that this is our actual income over the last 12 months, not a projection. I would expect our income over the next 12 months to be higher as new investments are made, dividends and rents are raised, etc. Just putting our cash reserves of $750,000 to work should result in another $22,500/year of income (assuming a 3% dividend).
Our goal is eventually have $120k/year in investment income, so we are 52.7% of the way there! Unfortunately, this number is down from the previous month (which makes sense, since March, 2018 was lower than March, 2017).
Recap
March 2018 was a disappointing month. Our dividend income was good but our rental income was negative. Hopefully we can get the unit rented out ASAP so we can start getting rental income from that unit again soon.
I’m really, really hoping we will see a serious market correction soon, as I’d love to put some of our cash to work. Absent a market correction I’m also investigating some foreign investments – valuations overseas are significantly more reasonable that valuations in the US market.
How did everybody else do with their investment income this month?
Are there any investments out there trading at reasonable valuations that I should be looking at?
You’ve got some great passive income there, even if you had a few challenge with the rental. Hope you get it sorted and back to cashflowing soon!
Thanks – hopefully the rental properties will be back on track in May.
Interesting reading. Unfortunately the US market isn’t the best out there from a dividends perspective for us non-Americans to invest in due to the withholding tax on dividends.
When you say that “This is why I prefer dividend income to rental income. First, it’s truly passive. Second, you can never lose money in dividends. That is, the worst case scenario for dividends is that they get cut to zero and you have no income. The worst case scenario for real estate is potentially unlimited losses.”. Definitely agree that dividend income is a great, passive (in a make money in your sleep kind of a way) source of income. But I’d have thought that the worst case scenario for a dividend investment is that the company goes bust / ceases to exist – in such a case your dividend goes to zero and your chances of receiving a dividend from that investment in future is also zero.
One other benefit of dividends vs. real estate is that it takes far less money upfront to play the dividend game. Whereas getting into real estate generally requires a fair amount of money when starting out.
HH
Good point – any investment has the risk of ultimately becoming worthless. However, the worst case scenario for a stock is that you lose your entire investment. The worst case scenario for a real estate investment is that you can lose substantially more than you purchased the property for (and the fact that leverage is so common in real estate makes the chances of total loss much higher in real estate).
My research shows that international companies are trading at much more attractive valuations right now than US companies. Have you found any interesting international dividend paying stocks that you could turn us on to?
Wow that’s an astonishing month, kudos.
I’m a bit torn on rental vs dividend income. True that dividend income is totally passive and the losses are finite, but there’s a part of me that likes rental because you have “a thing”. Not an abstract fraction of a company, but an actual physical object. The upkeep is more work, and the leverage can work both for and against you.
I always think of stock investment as having “a thing” as well. When I pull out my Visa credit card to pay for something, I know that I own a part (albeit a very, very, VERY small part) of the company that handles the transaction. It’s not as concrete as actually owning all of something, but then again, I don’t own all of my rental properties. In fact, I don’t even own half of any of our rental properties. The bank owns most of the property. Of course, I own all of the benefits of the property (rental income, appreciation, etc.)
I’ve always said that the biggest benefit of rental properties is the leverage. If we had something similar with stocks (where you could put down 20% of the cost of an investment and pay it back over 30 years with no chance that the loan could be called early) then I could get a lot wealthier a lot faster.
Not to mention a 1031-like exchange for stocks, or a 500k tax free gain on stock. Now wouldn’t that be sweet? Our tax code creators had a strong preference for real estate investments.
Just found your blog and happy that I did. I’m curious why you sold your Vanguard CA muni bond fund? I thought that was a great idea instead of the high yield savings account I’m currently using waiting for better buying opportunities.
I decided to get out of the CA muni bond because with interest rates rising I was losing more in principal each month than I was making in interest. I realized that I really want CASH available to go shopping when better opportunities present themselves. Although liquid and easily convertible to cash, bonds are not cash. They can and do fluctuate in value.