Investment income – July, 2017

I always love reading blogs about other investors’ investment income. Watching other people’s passive income rise is my second favorite thing (the only thing better is watching our passive income rise!)

This report includes income from dividends, bonds, mutual funds, and rental properties.

Here is the breakdown for July:

 

 

Dividends
Altria Group Inc$363.36
The Coca-Cola Co$155.39
Deere & Company$168.86
Disney$10.14
Dr. Pepper Snapple$9.28
Illinois Tool Works Inc.$128.99
Medtronic$157.99
Nike Inc$142.97
Philip Morris International Inc.$268.50
Money Market$157.99
Vanguard California Muni fund$15.67
Total$1,579.14
Rental Properties
4 properties owned 50%-$550.04
4 properties owned 100%-$1,238.69
Total-$1,788.73
Totals
Total passive income-$209.59
Average monthly income over last 11 months$4,857.79
Annualized passive income based on last 11 months$58,293.47

 

This was a poor month for our passive income. Our dividend income was relatively low and our rental properties experienced a perfect storm, with multiple properties being hit with repair bills at the same time.

Dividend & Interest Income

The first month of a quarter is what I like to call the “sin month”. We have profits from tobacco (Altria & Philip Morris), and junk food/sugared drinks (Coke & Pepsi). However, I like to tell myself that the income from Medtronic (medical), Nike (fitness), and John Deere (food) somewhat counterbalance the sin stock income.

We also got a bit of income from our money market and the Vanguard California Municipal Bond fund. I’m interested in the latter because, given our high income this year, we’ll be paying 23.8% tax on our dividends for this year. At this tax rate it makes sense to try to maximize tax-free income.

Total dividends received were $1,579.14. 

 

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).

This was an absolutely TERRIBLE month for the rental properties. The units are all rented and all tenants paid on time, but 3 of the units had issues that required repairs. On top of that, in one of the properties we are replacing the worn-out carpet with tile, so part of that expense was due in July. The upside is that the tile replacement should result in lower long-term maintenance costs – carpet wears out every 7-10 years but tile should last 20+ years.

Total rental income was ($1,788.73). Yes, that’s right – we ended up being cash-flow negative on our properties this month. We’ve been negative on individual properties before, but this is only the second time our total real-estate portfolio was in the red for the month.

Total passive income this month

Total (dividend + rental) income = ($209.59)

This is definitely the first time we’ve been cash-flow negative across all our investments for an entire month.

Here’s what our monthly numbers have looked like since I started publishing them on my website:

As you can see, there’s a BIG jump during the last quarter of each month, as that’s where most of our dividend income comes in. As a result of this uneven income over the course of a quarter I’ve also started calculating our quarterly income. This smooths out the ups and downs throughout a quarter.

 

 

This is what I like to see – our income is increasing from quarter to quarter, even without much in the way of new investments in the last year or so. If and when we can finally find some compelling valuations in the market we’ll aggressively deploy our cash and hopefully see this number rise.

Annualized passive income based on last 11 months of income = $58,293.47

To compute this number I just take the last 11 months of income and project that for a full 12 months. This is not a prediction for the next 12 months, as it is backward looking rather than forward-looking. However, it’s a good metric to give me a rough idea of if we are on track to achieve our saving/investing/income goals for the year.

I use 11 months because that’s how long I’ve been tracking and posting my monthly investment income. Starting in August, 2017 I’ll be able to calculate and post my trailing 12-month income.

We are around 50% of our way to the goal of $120,000/year in passive income. My hope is that if/when valuations finally improve we’ll be able to deploy our cash into investment that will massively improve our investment income.

 

How did everybody else do with their passive income this month?

6 thoughts on “Investment income – July, 2017

  1. Your dividends rock for a typical off month. That snowball will continue to roll where someday the dividend income will outpace repairs every month on the rentals. Good job keep it up

    1. I’m really looking forward to being able to deploy all this cash. It’s killing me to have it just sitting in my bank account doing nothing for me. Once that cash is deployed we should see a big jump in our investment income.

  2. Your dividend income is fantastic! Those are some great dividend stocks. My husband also is a big fan of Altria lol. Big dividends from the ‘sin’ stocks of Coca-Cola and Altria!

    That’s great that you are already at $60,000 in passive income, for a lot of people that’s enough for financial independence!

    1. Sin is IN! I’ve read many reasons for the outperformance of sin stocks (primarily tobacco and alcohol). The conclusions are almost always that enough people avoid investing in these stocks that it causes a distortion in the natural balance of the market. As such, you can buy these stocks for less than they would sell for if they had identical numbers but were in a different industry. Lower prices = higher returns.

      $60,000 IS great, and every time I put together one of my investment reports I always remind myself that even though I am only 1/2 way to our goal, we are already in a great place financially.

  3. Impressive net worth and growth this month.

    I read one of your other posts where your goal is to get to $120k passive income in retirement. I have the same goal, but am much further behind than you. With your high income, isn’t dividend income tax heavily (esp. in CA with the extra taxes kicking in at > $250k). Since you aren’t retired yet, wouldn’t it be better (tax-wise) to invest in growth stocks with low div or just index to total mkt? Or is your aim for div income to help diversify (and stabilize) your income streams? I hate taxes and try to avoid, so I haven’t really focused much on div income.

    Also, I noticed from some of your past net worth postings that you don’t hold much in cash. With 4 rentals plus your primary, do you find that you have enough cash on avg to pay for maintenance/improvements (maybe your monthly cashflow covers it)? Are you planning on adding more properties? Are your properties all local?

    I have a similar issue with what to invest in now. I have felt for the past 2-3 yrs that the stock mkt is overvalued, same for housing in CA. I have been shoveling money into paying down debt, but now that is done, what to invest in next? I guess, just keep in cash until something crashes?

    1. Yes, our dividends are heavily taxed – 20% + 3.8% Medicare surcharge. However, we are only paying 23.9% this year. Our income should be back to a more average/normal income of $300k next year, which means our dividends will be taxed at 15%.

      I don’t necessarily invest for income. Rather, I try to find stable, blue-chip companies with proven business models that I can reasonably predict will still be in business and making money in 10+ years. That analysis tends to result in large, dividend paying companies. Of course, I don’t mind receiving dividends or other income, as I can use that to make other investments (in effect, allowing me to rebalance our total portfolio).

      We have quite a bit in cash right now – nearly $1M. This is because I recently received a large commission check and haven’t found anywhere interesting to deploy the money (as you discussed).

      We actually have our primary residence plus 8 total rental properties. However, we co-own 4 of the properties 50/50 with my mom. We have plenty of cash to cover maintenance costs. The reality is that you don’t really need to keep much cash to deal with maintenance issues for rental properties. It’s pretty rare for any given expense to be more than $1,000. And since we make more than $1,000/month in profits from the rental properties, in any given month our rental cash flow would cover expected expenses. We then keep another $5k in cash to cover any unexpected large expense, and that’s proven to be more than enough.

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