2008 Passive Income Review

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

Dividend Income
Here is a list of the stock investments we have with dividend income in 2008:

 

Annual Dividends

 

Investment

2005

2006

2007

2008

Pepco

$ 18.85

$ 20.48

$ 21.31

$ 22.67

AT&T*

$ 166.38

$ 51.78

$ 18.48

$ 20.80

CMS

$ -

$ -

$ 12.02

$ 21.99

Connoco

$ -

$ -

$ 28.49

$ 44.78

Chevron

$ 21.62

$ 25.62

$ 29.71

$ 34.16

Duke Energy*

$ 88.66

$ 108.56

$ 92.15

$ 100.98

Edison

$ 11.88

$ 13.16

$ 14.48

$ 15.57

ExxonMobil

$ 54.68

$ 62.76

$ 70.07

$ 80.66

GE

$ 73.91

$ 86.29

$ 99.58

$ 114.97

IBM*

$ 251.37

$ 431.23

$ 459.98

$ 555.74

Lowes

$ 2.70

$ 4.34

$ 11.37

$ 14.59

Medtronic

$ 22.80

$ 30.85

$ 39.97

$ 53.74

Merck

$ 108.56

$ 198.82

$ 206.25

$ 212.83

P&G

$ 31.09

$ 35.19

$ 40.33

$ 46.94

Pfizer

$ 300.02

$ 592.73

$ 803.70

$ 972.66

Spectra

$ -

$ -

$ 29.95

$ 45.07

Anheuser Busch

$ 54.00

$ 113.54

$ 128.49

$ 147.58

Microsoft

$ -

$ 0.56

$ 0.66

$ 0.75

Johnson & Johnson

$ -

$ 12.42

$ 14.18

$ 16.13

Marsh&Mclennan

$ -

$ -

$ 10.76

$ 46.14

Wachovia

$ -

$ -

$ 23.95

$ 360.57

VXF

$ -

$ 40.89

$ 69.99

$ 66.84

VWO

$ -

$ 1.02

$ 87.34

$ 108.32

VTI

$ -

$ 0.20

$ 0.76

$ 96.93

KBE ETF

$ -

$ -

$ -

92.58

 Total

$ 1,206.52

$1,830.44

$ 2,313.97

$ 3,293.99

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, 2007, or 2008. Those stocks I sold at the end of 2008 after dividend payments were made are not included.

My dividend payments in these taxable accounts were up 42% from 2007. I am looking for 50%+ growth at least for the next couple years given the relatively small amount of dividend income we receive.

Interest Income

 

2004

2005

2006

2007

2008

Interest

$39.76

$783.99

$1,426.15

$3,076.01

$2,595.98

The amount of interest we earned in 2008 actually decreased due to us taking advantage of less 0% Balance Transfers offers than we did in 2007. We currently have most of my savings in our Vanguard Prime Money Market account.

Rental Property Income
2008 was the first full year for our second rental property. We received a net $931.87 after all the expenses for both rental properties were paid. This number was unimpressive largely because of the additional expenses we had due to management fees, repairs we had to outsource since we spent most of the year on our international assignment, and a break-in at the second rental property.

Summary
Overall, my passive income is up 10% from 2007:

 

2005

2006

2007

2008

Total Passive Income

$1,990.51

$5,066.95

$6,188.36

$6,821.84

I am again disappointed in our passive income growth. I had hoped we would have surpassed $10,000 in 2008, but fell well short. 2009 will even be a greater challenge given our shifting capacity to invest, dividend cuts taken by several of our investments, and falling interest rates.

Also see my 2005 passive income, 2006 Passive Income, and 2007 passive income reviews.

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Comments (7)


Hi - while dividend passive income is nice (better than nothing), you are paying a higher tax burden for this in the long run --- unless you are planning on retiring in the next few years, it is far more tax advantageous to hold dividend stocks in your non-taxable shelters and minimize dividend stocks in your taxable accounts... your thoughts?

I wonder about the rate of return you are getting on your rental property. I haven't calculated the return, but it seems pretty low. Are you making a better return than if you had sold the houses and put the money in a CD?

Jared, Great question. The answer is I am pretty sure I getting a decent return on my rentals - although its been a couple yrs since I did the detailed analysis. Let me refer you to this post I did the last time I analyzed my rental property return which showed a 7% return before tax benefits. In 2008 I obviously came no where close to that because of my international assignment - there were additional expenses involved as a result of being remote. However that was offset by assignment benefits in my opinion. Going forward I hope to return to a 5%+ return range.

I would add that the 7% return is highly leveraged. Risk-adjusted, I think the CD outperforms.

Selling the rental property with a positive return doesn't really make sense at this point. Even if your CD would make a slightly better percentage.

I am not sure his 7% return counted payoff of principal or appreciation (which would probably be negative right now)? I set my net worth using the cost basis(?), the purchase price of the property. However, when I project a properties profitability I include cash profit + principal reduction + appreciation

I always set the appreciation to 2% (historical average) for my projections. In the past 10 years the 2% appreciation was under what the market was showing but now after the drop 2% is back on target, so I feel it is a safe number.

fyi - I just fixed the link to the rental property return calcultion above.

jGeee - 7% return counted principal payoff, but did not factor in appreciation - I figured it was best to ignore it for the calculation and I will recognize it when the place is sold. If I assumed 2% annually it would certainly increase that 7% by several percent.

I was just wondering, how much did you make from your blog in 2008? I know blogging is not "passive" but mostly an alternative income stream, but still it would interesting to see how your revenues fluctuated over the years.

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A personal finance weblog of my journey to reach my goal of $2 million + the value of my primary residence.
Current Net Worth: $1,701,144

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