Thursday, May 1, 2008

First Quarter 2008 Dividend Summary

Who doesn’t love passive income? Instead of working for money, the money is working for you. While the media has been focused on stock price depreciation over this past quarter, dividend producing assets have been chugging away in the background and paying out gains.

After reading about Living off Dividends recent passive income report, I decided to tally my own. It’s only logical that to help improve performance in just about anything from a physical activity/sport, to investing, to managing people or a business, one must first quantify or measure the activity to get a baseline. Once the baseline is established, periodic check ups can help identify trends and provide motivation to improve performance.

One other important point for me is that my passive income summary includes dividends only. Dividends are a steady, consistent income source. Whereas income from capital gains can vary wildly with a stock or fund’s performance. Also, I don’t include anything that requires physical activity – for instance rental income or blogging. There is nothing passive about blogging. It takes time and effort to create new posts on a regular basis.

Dividends are the purist form of passive income.

The chart below graphically displays my current dividend income streams. The largest contributor, providing 40% of my total dividend income, is a Real Estate Investment Trust (REIT). This asset class has had several banner years, then took a hit in 2007 with the housing crisis and is now rebounding in price very well. Through all of the ups and downs, it continues to pay out dividends with a 5.04% yield.

The next largest money maker is a money market fund, which is essentially my emergency cash fund. The fact that rates on money market funds have dropped considerably, from 5.21% to 2.46% this past quarter, has me exploring other options. I am also re-evaluating exactly how much cash I really need in an emergency fund. I currently have over twice my annual expenses stashed away and could probably reduce that to equal one year of expenses.

The next two significant dividend contributors are EWC and HTE. EWC is a Canadian ETF that pays out a small dividend, while HTE is a Canadian royalty trust that currently yields an impressive 16%. And finally, another 5% of my passive income is gathered from a health care mutual fund.

In comparison to the first quarter 2007, my dividend income has increased 18%. A portion of that can be attributed to the fact that over the last year I have been adding more dividend producing funds to my portfolio. Given the favorable tax situation with dividends, currently taxed at the same rate as long term capital gains (15% for those in the 28% income tax bracket and above), I will continue to add more dividend yielding funds over the next few months.

This past week I participated in the Festival of Frugality. My post "An ounce of prevention can help keep the plumber away" was included.


  1. Yet another excellent post showing your advanced knowledge and skills in money management. If you keep this up, you'll be forcing me to convince you to move to CA, or I'll have to move to TX. =)
    And I absolutely agree on your definition of "passive income"-income from ads on one's blogging site is not really passive as it really depends of updating your blog with new interesting material, which clearly takes work and effort.
    I'm also looking at dividend paying stocks. My company has recently updated their 401K plan to include Roth and self directed brokerage accounts. That makes for a good source to move a portion into dividend stocks.
    By the way, Countrywide, Corus, Indymac, and Alliant Credit Union still have savings accounts at the 4% return level.

  2. Thanks for providing the savings acct options - I need to check that out.

  3. I am glad you also posted a chart.It is much easier to understand the situations.