2011 Passive Income Summary

Here is my annual look at our passive income. I've historically focused on dividends, but I bought my first fixed income asset this year so I'll include it in the review.

Our dividend income improved in 2011, but it was less than anticipated and as a result a disappointing year for me. We peaked our dividend income in 2008 and we are still trying to catch up and then continue to build past those income levels. After all passive income from stocks/bonds are a critical part of our financial freedom plan.

Our dividend income increased about 10.6% in 2011. Its decent, but we'll need to increase at a higher annual rate to generate the income we'll need in the next 10 years if we stick to our current financial freedom plan.

Here is a look at our annual dividend income in 2011:

	Annual Dividends
Investment	2008	2009	2010	2012
Sold off Equity Holdings	$ 576.28	$ 135.81	$ 29.44
Pepco	$ 22.67	$ 22.68	$ 22.68	22.68
Argo International	$ -	$ -	$ 10.84	$ 14.63
AT&T	$ 20.80	$ 21.32	$ 21.84	$ 22.36
Bank of America	$ -	$ 1.00	$ 6.65	$ 20.15
BP	$ -	$ 11.02	$ 9.40	$ 16.80
Connoco	$ 44.78	$ 106.56	$ 156.58	$ 211.65
Chevron	$ 34.16	$ 37.17	$ 41.19	$ 46.35
Duke Energy	$ 100.98	$ 111.83	$ 122.30	$ 131.90
Edison	$ 15.57	$ 16.35	$ 17.28	$ 18.16
ExxonMobil	$ 80.66	$ 88.24	$ 94.80	$ 103.31
Fairfax Financial	$ -	$ -	$ 260.00	$ 450.08
GE	$ 114.97	$ 102.07	$ 199.00	$ 281.29
Healthcare SPDR	$ -	$ 173.76	$ 175.93	$ 200.42
IBM	$ 555.74	$ 520.33	$ 394.42	$ 241.02
Lowes	$ 14.59	$ 15.72	$ 18.28	$ 23.10
Medtronic	$ 53.74	$ 68.70	$ 76.82	$ 84.97
Merck	$ 212.83	$ 222.68	$ 229.84	$ 229.84
P&G	$ 46.94	$ 53.52	$ 60.49	$ 68.03
Pfizer	$ 972.66	$ 255.60	$ 247.48	$ 114.96
Radian	$ -	$ -	$ 1.14	$ 1.52
Spectra	$ 45.07	$ 49.54	$ 51.97	$ 53.15
Microsoft	$ 0.75	$ 0.86	$ 0.93	$ 1.17
Johnson & Johnson	$ 16.13	$ 17.88	$ 20.21	$ 65.09
Union Bancshares	$ -	$ 6.00	$ 25.21	$ 39.30
VXF	$ 66.84	$ 55.31	$ 62.46	$ 1.75
VWO	$ 108.32	$ 52.62	$ 79.73	$ 99.23
VTI	$ 96.93	$ 337.00	$ 370.01	$ 419.20
KBE ETF	$ 92.58	$ 208.17	$ 68.17	$ 198.78
Total	$ 3,293.99	$ 2,691.74	$ 2,875.09	$ 3,180.89

Fixed Income
In 2011 we invested in our first fixed debt instrument - a "bond" traded on the NYSE of an insurance company - Markel. This "bond" pays 7.5% annually at face value and we've basically picked up small quantities when it was trading around or below par - $25/share. I've started toying with this even though debt yields are very low currently because we'll need to significantly increase our ownership over the next 10 years to add additional passive income to meet our financial freedom plan. When the return vs risk calculations improve we'll be evaluating heavier investments in this area.

Fixed Income
Investment	2011
Markel Debt	$ 164.06

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Comments (7)

Can you do a detailed post on the bond purchase? I'm curious how you identify and then go through the entire buying process.

Posted by John | January 12, 2012 6:42 PM

You and others had posted on 12/01/06 about "Why you own no bonds" and your conclusion was that they weren't a good deal. Not sure if you saw the articles that just came out a few weeks ago, but bonds outperformed stocks over the last 30 year investment cycle. I'm not saying that bonds are a great buy now because of the low interest rates, but the idea that stocks always do better over the longterm has just been proven wrong.

Posted by Steve | January 12, 2012 8:26 PM

What is this Markel bond's stock symbol?

Posted by ryne | January 13, 2012 5:15 AM

You have a fairly extensive list of dividend-paying stocks in your portfolio--I'm curious whether you do any options trading to boost your dividend earnings? There are some very conservative ways to add another 1-2% per month to your existing equity income, but I haven't seen call/put writing addressed on the site.

Posted by Ken | January 14, 2012 12:01 PM

Hi there,

You have been very corrageous by investing nearly $ 760,000 in the real estate.

For me the biggest question is - that in most of the cases administration fees are quite high (8% of the rental income), alternatively it is quite consuming exercise. For 4 properties it could be as high as a week a month.

But than, if you could manage to get $30,000 out of it - great, it is almost 4% annually. The beauty that it will be inflation protected income!

I think you are on the right track and the journey is going to be good fun!

Posted by Financial Independence | January 17, 2012 7:45 AM

Hello,

It is not a bond, what you have purchased is the preferred stock for Markel. The symbol is MKV. Hope this help for others who might be wondering.

Posted by Arnold | January 22, 2012 10:08 PM

FI - I agree either high admin fees or time consumption with rental property.

Arnold, I'm no expert but from my research I believe MKV to be debt. They are called Markel 7.5% Senior Debentures 2046 (due in 2046, but I believe callable in 2013). I have to go back and find the prospectus to be sure though.

Posted by 2million | January 23, 2012 9:22 AM