Learn how I make passive dividend income
I have been investing in stock and bonds since I was 25. I have used many theories in the past including “stock charting”, “dogs of the Dow”, the “foolish four” and others. I have been successful using many different theories, but my current strategy is to generate a constant flow of monthly or quarterly passive dividend income while balancing my portfolio risk. Currently, I am reinvesting all dividends because I don’t need the income living expenses. When I retire this income will be used to my pay bills.
What is dividend income? Dividend income refers to any distribution of a company earnings to shareholders from stocks or mutual funds you own.
My current dividend income includes:
- ETF’s – An ETF, or exchange-traded fund, is a security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange.
- Mutual Funds – A mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers.
- Municipal Bond Fund – A mutual fund that invests in municipal bond funds or “munis.” Municipal bonds are debt securities issued by a state, municipality, county, or special purpose district (public schools, airports, etc.) to finance capital expenditures. They are exempt from federal tax and are generally exempt from state taxes for residents of the state in which they are issued.
- REIT’s – Real estate investment trusts (REITs) enable individual investors to participate in large-scale, income-producing real estate investments.
- MLP’s – Master Limited Partnerships are similar to real estate investment trusts in that they do not pay income taxes, and their shares trade on the major stock exchanges just like regular stocks. However, REITs and MLPs are different in structure. Unlike REITs, which are a special type of corporation, MLPs are partnerships.
Listed below are my dividend investments and current yields as of 2017.
My monthly passive dividend income generated from the investments noted above for 2016 and 2017 along with an estimated income for future years.
Tax implications of dividend investing
Most dividend stocks pay qualified dividends, which receive special tax treatment. Depending on your tax bracket, qualified dividends are taxed at a significantly lower than the ordinary income tax rates. Some dividends on my list above are classified as ordinary dividends and are taxed as ordinary income. Real estate investment trusts, or REITs, are considered ordinary income.
My top websites for passive dividend income investing:
I use many sites to find my dividend options. These are my favorites:
- TD Ameritrade (Rated #1 for long-term investing for 2017 by Barron’s)
- Yahoo finance (A must for quotes and company information)
- Dividenddective (Great source of dividend information)
- Vanguard (Low cost mutual funds)
Market Quotes by TradingView
My recommended books for passive dividend income investing:
The Single Best Investment: Creating Wealth with Dividend Growth Click HERE to purchase though Amazon
by Lowell Miller
This witty guide advises readers to stop playing the stock market or listening to television gurus and instead put their money into dividend-paying, moderate-growth companies that offer consistent returns and minimum risk. Citing statistics that show companies initiating and raising dividends at the fastest rate in 30 years, this analysis declares once-stodgy dividends to be “the next new thing” and provides simple rules for choosing the best stocks, using traditional evaluation tools, reinvesting dividends, comparing stocks and bonds, and building a portfolio. Technical aspects of the stock market are explained in the final pages that include two new chapters and revised statistics as well as academic studies, historic back-tests, examples of real-time performance, and a list of resources for further research
Dividend Stocks For Dummies Click HERE to purchase though Amazon
by Lawrence Carrel
Dividend Stocks For Dummies gives you the expert information and advice you need to successfully add dividends to your investment portfolio, revealing how to make the most out of dividend stock investing-no matter the type of market. The book explains the nuts and bolts of dividends, values, and returns. It shows you how to effectively research companies, gauge growth and return, and the best way to manage a dividend portfolio. And, Dividend Stocks For Dummies provides strategies for increasing dividend investments.
The Total Money Makeover: A Proven Plan for Financial Fitness Click HERE to purchase though Amazon
by Dave Ramey
Dave Ramsey debunks the many myths of money (exposing the dangers of cash advance, rent-to-own, debt consolidation) and attacks the illusions and downright deceptions of the American dream, which encourages nothing but overspending and massive amounts of debt.
Radio talk-show host and bestselling author Ramsey (Financial Peace) exhorts the reader to take “baby steps,” which are designed to build on each other: first save $1,000 as an emergency fund, then pay off all debts from smallest to largest, save a larger three-to-six-month emergency fund, invest, and finally start to save for college and pay off your home mortgage.