Passive Income

Passive Income is a powerful mechanism where I make my money work for me (and generate more money). While I employ various sources of passive income, my main source is via my investments. My investments in selected companies pay regular dividends supplementing my working/active income. When it comes to profiting from investments, I prefer this method than active trading in growth-focused stocks (which seldom pay dividends), where I do not see a profit or any return on my investment until I sell the stock. I want to own great companies and see the profits while I own the companies as opposed to renting a stock and seeing profits only when I sell and get out of the investment. With investments in mature dividend paying companies, I see a constant flow of generated profits.

I first started investing in 2007 and was focused on growth focused mutual funds and stocks and slowly started realizing the power of dividends. I finally understood the power of dividend growth investing in 2010-2011 and have subscribed to the idea ever since.

2017 Passive Income YTD = $4,835.77

2016 Passive Income = $9,099.70

2015 Passive Income = $7,840.03

2014 Passive Income = $5,133.33

2013 Passive Income = 2,682.27

2012 Passive Income = $1,647

2011 Passive Income = $762

2010 Passive Income = $554

2009 Passive Income = $48

2008 Passive Income = $19

2007 Passive Income = $0

Sources of Passive Income

  1. Investments (PI* 5 & 8): Most of my passive income comes from investments. My full list of holdings can be found here.
    • All of my investments in stocks/bonds pay dividends/distributions constituting most of my passive income.
    • I also generate some income by writing out-of-the-money options.
  2. Interest on cash (PI* 10)
  3. Cash back rewards (PI* 10): I got myself a cash back rewards credit card which pays me 2% on gas and grocery bills and 1% on everything else.
  4. Advertising revenue from this blog (PI* 3)
  5. Affiliate programs from BlueHost & Simply Wall St (PI* 10)
  6. Earnings from publishing premium articles at Seeking Alpha (PI* 3)

* PI indicates the Passivity Index. This is a scale I use to measure the passivity of each type of income. Read details about the Passivity Index here.

 

Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.

36 thoughts on “Passive Income

      • Do you have to have a self hosted site in order to post the spreadsheets from Google. I would really like to get some of them posted instead of using just a screenshot. I do not know how to post them without an upgraded site. However, upgrading my site is the next step for me….I think. Thanks.

        Keep cranking,

        Robert the DividendDreamer

        • Hey Robert,
          Ive seen sites from blogger, wordpress etc put on a spreadsheet from Google. I havent done it myself, so I cant give you any tips – but im sure people must’ve tried it. If you still have questions, maybe you could try the WordPress forums?

          Best wishes
          R2R

  1. Interesting and well written blog you got here and impressive passive income. Almost 4 000 dollars in passive income is a solid figure – you are truly on your way.
    Our passive income is currently about 2,300, so you are ahead of us by quite a bit (not that this is a race or anything).
    It’s going to be fun follow your journey. I’m adding your blog to my blogroll.
    Thanks for stopping by my blog by the way!

    /Best Regards

  2. New to DGI says:

    Nice work. You can really see the passive income snowball starting to have an effect. I hope my passive income portfolio can grow as quickly.

    • Thanks for stopping by and the comment, New to DGI.
      Time is your friend when it comes to investing. Look for good value and stay well diversified by investing in great DGI companies – the rest is taken care of. Let me know if you have any questions and I’d be happy to help.

      R2R

  3. Hello R2R,

    I’ve been following your blog for a while – great stuff! Now that I have my own blog I can get involved in the discussion!

    The growth of your passive income is astonishing, particularly in the last 2 years. I would also like to follow your footsteps and develop other streams of income besides DGI, as it obviously supercharges one’s income growth. Have you got any tips on this?

    Many thanks,

    DL

    • Welcome to the world of blogging, DL. And thanks for being a long time reader.
      Its great that you are looking at other sources to grow your passive income. I generate some from my writing (which is more semi-passive), but you could look at other options available. One common option that US investors use are P2P lending, which folks have had great returns with. Unfortunately, that option is not available to us in Canada, so I enviously look from across the border. Im not sure if something like that is available in UK. Credit card rewards are an easy one – and thats something I use as well.

      I will bookmark your site and follow along. Best wishes
      R2R

  4. Hey there, congrats on the passive income streams you’ve got set-up. It looks like we’re on about the part of your journeys, with around $500/month or so. I’m hoping to pump up my income to at least $700/month for 2015.

  5. R2R, I am not sure how much you like to divulge about your investments but I gotta try.

    How much do you need to have invested to get dividends like you are showing? I am completely indexed with my investing and have no idea whatsoever if I am even getting any. I assume that my mutual funds have a DRIP associated with the but I don’t know? I know that you are buying stock for the dividends so that will change it from the way I invest but it would be nice to know what kind of % dividend investors like yourself are getting paid (if you decide to take the money out)

    Also, when it comes time to start taking money out, what steps do you have to take to start getting checks? Or do you already just get dividend checks now and reinvest them?

    I apologize for being all over the map, just haven’t ever thought about going a passive income route to retirement.

    Any insight you have time for would be great!

    • Hi Jeff,
      I do not divulge the total portfolio size on the blog, but have indicated the percentages and based on the dividend income generated, one can make an educated guess of what my investment size is.

      It sounds like you are not well aware of what your mutual fund holdings are or if they pay dividends/distributions. I recommend reading the prospect of your mutual fund – all funds will have a section which indicates how much they pay out in distributions – some funds may pay out regularly on a monthly or quarterly basis, some on an annual basis, but some might not pay out at all. It all depends on the funds. The type of fund matters a lot – whether it is focused for generating income or focused on growth or balanced. When it comes to stocks, again it depends – but when you invest in dividend growth stocks, the starting yield might be low – but it grows over time, which (hopefully) beats inflation rates. I usually use a combination of low-yield-high-dividend-growth and high-yield-low-dividend-growth stocks to balance out my current income and future income. Sorry, if its not clear – ask away and I will try to answer more questions.

      As for the last question – it all depends on how much of a nest egg I can build up leading up to retirement. Right now, I get the dividends deposited into the investment account and I dont take the money out, and use that money to buy new stocks or DRIP it. This way, I let the investments compound over time. Eventually, the dream is to build an investment stream so big that I can live completely off the dividend checks and not touch my initial principal investment. To put things into a bit of perspective, if I have $1M invested, assuming a 3% yield, I can generate a $30,000/yr passive income stream.

      Hope that helps
      R2R

  6. Hey thanks for the lengthy review. As I mentioned all of my investments are in total market index funds, they aren’t designed to be high growth or high yield just to track the market. I just go through a bank and they never gave me the option to take dividends if i wanted them, so they must have automatically go DRIP.

    The more I read these dividend blogs it is starting to make more sense to just buy dividend producing individual shares. If 3% is a realistic number for dividend returns, I see this a an extremely viable way to fund a retirement. Beats the hell out of only hoping that the share value goes up over time to fund it. I like the sounds of having actual cash flow instead.

    Thanks for the help.

    • Glad to be of help, Jeff. Most mutual funds automatically DRIP and the fees are really hidden from consumers – its the biggest scam in the financial industry. When it comes to investment fees, mortgage $ amounts, its all hidden from the consumer – and you have to pull teeth to figure out what it is and then you are shocked to see what you are charged. Thats why I decided to move away from mutual funds and transition to dividend investing. Its better to be a shareholder in the bank than to pay those fees!

      Usually, most calculations take 3% as a round time for the sake of convenience and I think its a good number to work with. There are plenty of companies out there that pay 3%, in fact a lot of big companies in Canada – like the banks and telecom pay more than that – closer to 4%. And those dividends grow year over year, so your income grows over time.

      Theres plenty written about strategies to transition from mutual funds to individual stocks – be sure to check em out. If you have any questions, I’d be happy to answer. Also, check out http://www.dividendgrowthforum.com – I am quite active there – and lots of folks happy to help out if you have questions.

      cheers
      R2R

    • You got it, BSR. I am, in a sense, building up my pension slowing growing my passive income stream that will help me retire without really touching my principal investment.

      Thanks for stopping by
      cheers
      R2R

  7. Ciao R2R,

    Impressive! Surely the start in 2007 helped to build such a strong portfolio, but it’s when I see people like you that I think that “given enough time” I can be there too! Great work!
    You are on my read list now! 🙂

    Ciao ciao

    Stal

    • It takes time to build a good portfolio – and its impressive how fast you have built yours. The slow growth and compounding of passive income is proof that dividend growth investing works! 🙂

      Great to have you as a reader and follower. I will add you to my blogroll.
      R2R

  8. Your focus is your reality. True that R2R. Your hard work is paying off and slowly and surely, you’ll crush all of your goals. I know it. Your family must be so proud of you my friend. Thanks for having a wonderful website. You always provide such great content. I’m glad to be travelling with you Sabeel.

    • Thanks for the words of encouragement, Tyler. You are very kind and the motivation and words of affirmation keeps me going 🙂

      Im really happy to hear that you are enjoying the content that I am writing…as always, please let me know if there is a way for me to make it better. Any feedback is appreciated.

      Lets enjoy this path towards financial independence together, buddy. Im enjoying this quest together with you.
      R2R

    • Hi DF,
      It almost seems pointless when you are starting out. A few bucks here and some pocket change there. But as time goes on – as the investments keep piling up and dividend increases take effect, that number keeps rising.

      Keep at it and lets reach FI together!
      R2R

  9. mat says:

    Excellent,
    i want to be able to re-invest my dividends and see the power of reinvesting. Until now i use to add almost all the cash to invest from my work-saving,.. when have you been able to see and feel that a great part of your purchases come from your dividends ?

    i hope my question is clear.

    best
    mat

    • Hi mat,
      I felt that for the most part, the first couple of years my portfolio was not generating enough income…so, it was nothing to write home about. But now, they generate decent income and I let it compound by reinvesting. I DRIP a few companies but not all..I let the cash collect and decide which one to buy when I have enough cash. I think your progress will depend on how fast your portfolio is building up and depends on savings and contribution rate.

      R2R

      • mat says:

        Yeah, for sure it depends on savings and contribution rate. I think that re-investing the dividends is one of the greatest parts of this technique , because you feel that you earn “for free” additional shares in your account…

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