Tallying my 2006 Passive Income

So where am I at with my passive income? After all this is just as important as measuring my net worth, if I can't generate enough income to pay for my living expenses, that I won't be financially free no matter what my net worth is.

2006 was another good year for me to increase my annual passive income. I continued to make some strong long term investments in pharmaceuticals with high dividend yields (mainly Pfizer), I completed the 1st full year of my cash flow positive rental property, and I also took advantage of several 0% APR credit cards to generate free loans that earned interest in higher yield online savings account like HSBC and EmigrantDirect. I also benefited from dividend hikes with several of my stock investments.

Dividend Income
Here is a list of the stock investment I have with dividend income in 2005 and 2006:

	Annual Dividends
Investment	2005	2006
Pepco	$ 18.85	$ 20.48
Bellsouth*	$ 166.38	$ 51.78
Chevron	$ 21.62	$ 25.62
Duke Energy	$ 88.66	$ 108.56
Edison	$ 11.88	$ 13.16
ExxonMobil	$ 54.68	$ 62.76
GE	$ 73.91	$ 86.29
IBM*	$ 251.37	$ 431.23
Lowes	$ 2.70	$ 4.34
Medtronic	$ 22.80	$ 30.85
Merck	$ 108.56	$ 198.82
P&G	$ 31.09	$ 35.19
Pfizer	$ 300.02	$ 592.73
Anheuser Busch	$ 54.00	$ 113.54
Microsoft	$ -	$ 0.56
JNJ	$ -	$ 12.42
VXF	$ -	$ 40.89
VWO	$ -	$ 1.02
VTI	$ -	$ 0.20
Total	$ 1,206.52	$ 1,830.44

Note: This is dividend income from individual securities I own in taxable accounts. This does not include assets in 401k or Roth IRA.
*I sold a portion of these holdings during 2006.

My dividend payments in these taxable accounts are up over 52% from last year. I expect these to continue to increase each year as I make new investments in these and other companies.

Interest Income

	2004	2005	2006
Interest	$ 39.76	$ 783.99	$1,426.15

The amount of interest I earned in 2006 increased dramatically as a result of several 0% Balance Transfers offers and increasing interest rates. I currently have most of my savings in EmigrantDirect which is paying 5.05%APY.

Rental Property Income
2006 was the first year I saw a cash return on my rental property. I received a net $1,810.36 after all the expenses for the rental property were paid. I don't expect 2007 to be as profitable as I may have to hire someone to manage the property while I'm on an upcoming assignment.

Summary
Overall, my passive income is up signficantly from 2005:

	2005	2006
Total Passive Income	$ 1,990.51	$ 5,066.95

However, I think passive income is the one area I need to focus on. I really need to get my passive income 10x above where it is today to start to feeling financially free. How I get this done is something I need to think about.

Also see my 2005 passive income.

Related in Wealth Building:

2016 Passive Income: Dividends (Feb 24, 2017) Its been a couple years since I shared our passive income so I thought I would publish a summary of our 2016 dividend income. This passive income comes from our taxable stock portfolio. All retirement investment holdings are excluded from...

Household Debt Snapshot September 2011 (Sep 12, 2011) Here is an updated snapshot of our current debt (all mortgages on our primary and rental properties). The last debt breakdown I provided was back in March 2011 with a total of $356,358. Loan Description Property Balance Payment Matures 1...

Updated Household Debt Snapshot (Mar 23, 2011) Here is an updated snapshot of our current debt (all mortgages on our primary and rental properties). The last debt breakdown I provided was back in April 2010 with a total of $377,596. Loan Description House Current Balance Matures 1...

Comments (14)

Looks like great progress on your passive income...

I have to ask, though; if you need to "focus on your passive income", is it really passive? At what point does passive income just become another income stream, with regular hours needed to maintain it?

I ask not to be snarky, but because I'm trying to make money in similar ways. But so far, if I were to calculate the income from these alternative streams compared to the effort going into them, I'm probably better off working at McDonalds! :)

Posted by samerwriter | January 16, 2007 11:56 AM

Samewriter - you are absolutely correct - this isn't really passive, but its a lot more passive than my job.

I guess I am using the term passive rather loosely. Especially with the rental property that I manage myself.

Posted by 2 million | January 16, 2007 12:42 PM

Nice blog, I appreciate the candor.

Have you studied Benjamin Graham's classic "The Intelligent Investor", or studied "margin of safety" or "intrinsic value" with regards to investing?

On another note, it would be interesting to re-calculate your ROR on net worth by not only factoring in dividend yields paid, but also your own "non-controlling" share of each company's retained earnings. After all, the whole point behind a company retaining its earnings is to produce greater future profit growth and greater overall return for its investors. If it doesn't, I suppose management is just burning cash (or perhaps doling out bonuses...). This "imaginary" portfolio value would be less volatile relative to market swings, but doesn't add much to your bottom line in the here-and-now.

Finally: about a year ago, I also took advantage of no fee, 0% interest balance transfer checks. Nice to see you sticking it to the banking industry.

Jonathan

Posted by Jonathan C | January 16, 2007 4:55 PM

Everbank for savings and E-Loan for savings accounts. You will make much more passive money with these.

http://finance.webaplex.com/11/e-loan-savings-account/
http://finance.webaplex.com/12/everbank/

Posted by Nagel | January 16, 2007 9:00 PM

I have a few questions for you. For your dividends, do you reinvest the divident to purchase more stock, or do you funnel the money to a high-yield savings account?

Also, you didn't seem to mention passive income from blogging? Is that because you don't wish to reveal what this might make you, or because it was an insignificant enough amount. My thinking is that the income from blogging is more passive than the income from maintaining a rental property - or at least "as passive."

Posted by The Travelin' Man | January 16, 2007 9:16 PM

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Posted by bullrally | January 17, 2007 1:22 AM

It's hard to categorize income outside of your 9 to 5 job.

Some income might be hobby related while other sources of income could be doing something you enjoy, while yet other sources of income might be something you are interested in, but are unsure of, but since you can make some $$$ off of it, you continue to pursue it.

I'm not sure how you would categorize these streams, except that each is additional income.

Posted by Ray | January 17, 2007 8:02 AM

Jonathan - Interesting - I never thought of tracking retained earnings, but that makes alot of sense. Ill give this some thought. I did just finish reading the Intellegent Investor a short time ago.

Travelling Man - Good point - blogging income is not shown here because I didn't consider that passive income (because of all the work I put into it :-). Its way more work than anything else at the moment, but I probably should include it as well. Ill have to consider this.

Ray your right - I enjoy working on my properties (which is why I manage the rental myself for now). Same with the blog income. The job is work and is all about the income. My focus on passive income is to help me get to the point where decision making about what work I do (such as my job) doesn't need to factor in the financial impact.

Posted by 2 million | January 17, 2007 10:52 AM

I'm interested in learning more about your rental property. This is something that I've been looking into -- it's hard to find any good information out their about rental properties.

1mil from millionster.com

Posted by 1mil | January 17, 2007 5:40 PM

Check out my rental properties topic page for a listing of all posts on my rental property.

Posted by 2million | January 17, 2007 6:28 PM

Good to see other bloggers reporting their passive income - mine shows only my dividend income. The real cool thing to see is that the 2006 numbers are higher than the 2005 numbers. Keep doing that year after year and you should do well.

Posted by The Dividend Guy | January 19, 2007 11:08 AM

I noted my passive income in this post: http://moominhouse.blogspot.com/2007/01/annual-report-2006-part-ii.html My idea was to include every payment I would receive without actually doing anything - interest, dividends, and mutual fund distributions. This is opposed to active trading which I also do. But really I think of passive return as also including long-term capital gains realized or unrealized. Short-term gains are active income.

Posted by moom | January 20, 2007 5:07 PM

$2M, you inspired me, I wrote up a longwinded post on why neither you nor I will be able to retire on our passive income for a long time!
Despite the positioning, you're doing a great job - keep building that passive income up!!
Here's my article.
Regards, makingourway

Posted by makingourway | January 22, 2007 12:47 PM

$2M, thanks for creating this site and this post in particular. We also own rental properties and have other passively-generated income coming in from notes we hold (purchased subject-to and sold on wrap notes). I am set to buy a small apartment complex (12 units) early in '08. Our passive income is about $2k/month (excluding appreciation...but including tax shielding benefits) with the assumptions that 45% of gross rents will be consumed by expenses for properties we still hold title to.

Real estate has been one of the big drivers of our wealth for the last two years and will continue to help w/the net worth gains when we buy via distress sales. I know several people that have retired in 2-3 years by buying real estate and living on the proceeds. The trick is learning to buy correctly. You should check out multi-family dwellings if you want to amplify your passive income generation.

We are a bit behind you net-worth-wise (~320k), but seem to be younger (wee lads at 27/28). We are electrical engineers, but I am contemplating escaping to the finance industry to leverage my MBA and make more dough. Anyway...thanks for the site and the post! It is nice to know that others are doing similar things to leverage their time ;-)

Posted by mr_orange | December 30, 2007 1:35 AM