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Building A Dividend Portfolio For Passive Income

by retirebyforty on January 9, 2013 · 103 comments

in dividend, goals and milestones, passive income

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Update – I updated this article for 2014. See my updated Dividend Portfolio there.

One of my financial goals for 2013 is to generate $18,000 from passive income. This isn’t going to be easy because last year we only made $7,742 last year from dividend, rentals, peer to peer lending, and interest. However, the total was pulled down quite a bit by the rentals in 2012. I’m pretty sure 2013 will be better, but it is still a tall order to hit $18,000.

Dividend Income

Let’s look at dividend income today. In 2012, we generated $6,791 in dividend from our taxable account. For 2013, I’m hoping to generate around $9,000 from dividend. That’s a big increase, but last year I was still converting my investments in the taxable to dividend stocks. I had some stocks that didn’t pay dividend such as Berkshire Hathaway and Amazon. Now, I’m much further along now and most the investments in our taxable accounts are paying some dividend.

This year I’d like to keep better track of the dividend portfolio and share how well it does. The long term goal is for the % gain + % dividend to at least equal the S&P500 gain for the year. We’ll use VFINX as a benchmark.

dividend portfolio

The projected dividend income is still a bit under $9,000. However, we can add new money and reinvest the dividend throughout the year to increase the total for the year. Many of these companies have a good track record of increasing their dividend payout every year so we should see some increase in the % yield as well. If we’re lucky, the dividend payout will increase to $9,000 by the end of 2013.

Some Red Flags

  • This dividend portfolio is becoming unwieldy. I will need to cut down on the number of stocks because there are too many companies to keep track of.
  • Intel – I sold a bunch of Intel stocks and options in 2012, but I still have quite a few shares. I’ll need to sell more shares off at some point.
  • Abott Lab – They split into Abott Lab and AbbVie. I’m not sure what to do with both at this time. I’ll keep an eye on them.
  • Activision – Probably need to sell this one too. It hasn’t been doing much over the past couple of years.
  • Mondelez – This is a spinoff from Kraft. I need to keep an eye on this one.
  • Shell – It’s not doing as well as Exxon or Chevron. I probably should sell some shares and buy another energy company.
  • AT&T – The price seems high so I might need to take some profit. The dividend is quite nice though.

Passive Income 2013

Here is the plan to meet the $18,000 goal.

  1. Dividend: $9,000
  2. Rentals: $7,500
  3. Peer to Peer lending: $1,000
  4. Interest: $500

The biggest question mark here is still the rentals. I’m not sure how we’ll do in 2013 on that front. We’ll just have to compartmentalize and take care of one thing at a time. The dividend income is getting close to the target so that’s one less thing to worry about. With a little luck we should hit that $9,000 by the end of the year.

How about you? Do you have a plan to generate passive income? If you see any problem with our dividend portfolio above, don’t hesitate to call me out. I still have a lot to learn about stock picking.

Don’t miss Dividend Guy’s Best US Dividend Stocks for 2013.

Disclaimer: This is not a recommendation. My stock picking track record isn’t great so you need to do your own research. This post will help us keep track of the gain and dividend to see if they meet my 2013 goal. If you need help with financial planning, consider signing up with Personal Capital. Personal Capital will help you keep track of all your investments in one place and can hook you up with a personal financial adviser as well.

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{ 98 comments… read them below or add one }

Glen @ Monster Piggy Bank January 9, 2013 at 4:13 am

I stopped doing the whole buy and hold stocks for dividends thing in 2008 with the GFC. Since then I trade the market in the penny dreadful end looking for 5-10% returns. On the whole I do pretty well, but I have had some spectacular failures.

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retirebyforty January 9, 2013 at 2:51 pm

I don’t have the gut to deal with penny stocks. Whenever I tired, I ended up losing money.

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Dividend Growth Investor January 11, 2013 at 1:44 pm

I always get ads to trade penny stocks and turn $100 into $10,000. haha

On a more serious note, I am glad that you are planning on selling off some INTC, T and RDS-B. These three stocks generate 52% of your total dividend income. For safety, I actually own more than 40+ individual stocks in my dividend portfolio. If one of them cuts or eliminated dividends, I won’t be too terribly affected, and can redeploy funds elsewhere.

The only people on the internet who advise “concentrated” portfolios with 10 stocks are those who are not dealing with real money. If you are serious about this income stream, you need at least 30 individual stocks representative of as many sectors that make sense. And if you are still learning about investing, it is ok to actually have the money sit in the bank.

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retirebyforty January 13, 2013 at 9:37 am

I’m planning to diversify more, but 40+ stocks are quite a lot of keep track of.
I’ll sell off some of stocks this year.

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Chris January 9, 2013 at 4:35 am

Have you ever considered the higher yielding dividends such as SDRL or AGNC (and of course there are others)?
If not, why not? After all, you could literally make your dividend in the $9k range from what it seems you have in other stocks such as KO, etc.
For instance, SDRL would be paying out $2.64/shr over the past year (WARNING: they sped up the next quarter dividend into last year to avoid possible tax implications for investors).

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retirebyforty January 9, 2013 at 8:42 am

I’m considering REIT purchases and will research that next. At this point, my number 1 goal is to preserve capital so I don’t want to be more conservative. I will probably put at most 5% into these higher dividend funds/stocks. I can’t react fast enough if there are bad news. AGNC has been doing pretty well.

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jim January 9, 2013 at 10:35 am

I’d be careful with some of the high dividend REITs. Looking at AGNC they invest in mortgage securities rather than physical real estate. They may be making money via arbitrage due to currently low interest rates or simply gambling on high risk mortgages in default. I’d take a careful look at their annual report to see what they’re really doing and make sure you know what you’re buying.

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Jess January 11, 2013 at 2:59 pm

I agree with jim. There are various types of REITs that specialize in different things and their books are not always easy to comb through. For a beginning investor its probably not the best sector to start in.

As for AGNC, I currently own it and expect a dividend cut in a quarter or two. The Feds low interest rate policy is hurting their ability to make money.

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JC @ Passive-Income-Pursuit January 9, 2013 at 6:01 am

I’m hoping to receive $2750 in dividends and option premiums for the year from selling puts. It’s about a $1,000 jump from where my forward 12-month dividends were at the end of 2012. Should be an interesting year. I have a few positions I need to shed as well and also some ESPP stock that I can start selling off in June for full LTCG treatment. Best wishes in 2013!

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Jane Savers @ The Money Puzzle January 9, 2013 at 6:23 am

I first learned about peer to peer lending from your site. I have looked in to what is available for me to try in Canada and I have decided the industry is too new and the risk is too high for my little bits of available investment money.

I have enrolled in the DRIP program for my dividend paying stocks. Canadians are lucky enough to have a tax free savings account, TFSA, that I keep my tiny collection of stocks in. The dividend income is automatically reinvested in more stocks because I want this income for my retirement.

I plan to add another Canadian bank and perhaps an energy company (Suncor?) to my portfolio this year.

In 2012 I made less than $100.00 in passive income but it was my first year buying stocks.

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retirebyforty January 9, 2013 at 9:42 pm

I wouldn’t put a lot of money into peer to peer lending.
Great job with the passive income. We all have to start somewhere. Good luck!

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SavvyFinancialLatina January 9, 2013 at 7:22 am

I think it’s awesome that you are sharing your dividend strategy. Especially because I wanted to know :)

I don’t think we will be able to start investing in a dividend portfolio until 2014. We are concentrating on saving for a down payment. I think once we buy a house, all the monthly savings that are currently going into house down payment will be free to be invested. I’m starting research now though :)

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retirebyforty January 9, 2013 at 9:43 pm

Good luck with the house. It’s much more affordable in your area.
I think the price is rising though so you might need to get a down payment together quick.

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SavvyFinancialLatina January 10, 2013 at 2:29 pm

Prices are rising but our apartment lease doesn’t end till the end of 2012. Not sure how we could get out of our lease without incurring some hefty fees. Guess I shouldn’t have signed such a long lease. My mistake :/

At least interest rates are suppose to stay flat.

Plus don’t think we will have the 20% down payment ready until October. $30K is quite a lot of money!

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Hunter January 9, 2013 at 8:33 am

Would you ever consider trading some stocks for dividend etf’s like SDY or VIG? It might simplify things. Although, you are extremely well organized and possibly not seeking simplicity. I think you’re in great shape.

All my dividend paying investments are currency in retirement vehicles, predominantly Roth IRA. Our rental income should surpass $25k this year – I’m really excited about that and hope to purchase another property next year.

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retirebyforty January 9, 2013 at 9:44 pm

I’m thinking about VIG. If I can’t beat it this year, then I’ll probably just move the majority of the investment over.
Great job with the rental income. $25k is awesome.

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Mr. 1500 January 9, 2013 at 8:38 am

From a recent post, it sounds like you have some reservations about P2P lending (Prosper and Lending Club), but I suggest you keep at it. I’ve been doing it now for over 2 years and have been able to maintain 10%+ income. Reading lendacademy.com is a must as you’ll find a ton of useful information there.

The main drawback to P2P lending is that gains are taxed as normal income.

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retirebyforty January 9, 2013 at 9:48 pm

I’m a little discouraged because I’ve had a spade of defaults over the past few months. Hopefully the default rate will slow down and the ROI go back up. Thanks for the tip. I’ll read more there.

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Sustainable Life Blog January 9, 2013 at 8:39 am

That is a very enviable set of dividend returns there joe, congrats. Hopefully you dont have as many repair issues in 2013 as you did in 2012. Are you planning on increasing your real-estate holdings this year, or are you comfortable with what you’ve got?

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retirebyforty January 9, 2013 at 9:49 pm

I am comfortable with this much headache at the moment. :) No more real estate. I’m thinking about REIT though.

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Brick by Brick Investing January 9, 2013 at 10:14 am

I like your goal for $9000 in dividends this year. It looks like you have some dividend behemoths in your portfolio. Do you plan to liquidate some of the more speculative/cyclical investments and add more blue chip dividend paying companies such as JNJ, MSFT, etc?

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retirebyforty January 9, 2013 at 9:51 pm

Most of these are blue chip stocks already. I do plan to move more money toward dividend aristocrats in the future.

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jim January 9, 2013 at 10:39 am

Looks like a pretty good portfolio. What are the red flags based on?

I was doing more dividend stock investing in my Roth account but I’ve mostly switched over to indexes. But some of my indexes are dividend focused.

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retirebyforty January 9, 2013 at 9:52 pm

They are actually yellow flags. I just want to keep an eye on those stocks listed.
I probably have too much Intel and AT&T and should sell some to diversify.

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My Own Advisor January 9, 2013 at 11:47 am

Awesome work. I hope to hit $8,000 this year. We’ll see…. :)

I just posted my December 2012 dividend income on my site.

I like many your blue-chip selections.

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retirebyforty January 9, 2013 at 9:57 pm

I like your dividend payout trend. I’ll keep track this year and hope to see similar increase. Thanks!

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pauljyoung January 9, 2013 at 12:02 pm

I read a number of books and the ones that give me the best direction in investing for retirement are books written by Ric Edelman, John Bogle, Mark Matson and a new one by William Worth: Seven Lies Financial Planners tell and the Truth about Investing – a Kindle book on Amazon. These writers lay a good foundation for successful investing.

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retirebyforty January 9, 2013 at 9:57 pm

Thanks for the tips. I’ll put them on my list.

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Mike @ financialmemos.com January 9, 2013 at 12:05 pm

Great work. I am also trying to form a portfolio based on dividends as nothing beats the passive income. In addition, the fact that no matter what happens to the market if the company is doing well, the dividend will be paid makes it even better!

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retirebyforty January 9, 2013 at 9:58 pm

Good luck with your dividend portfolio.

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My Financial Independence Journey January 9, 2013 at 3:17 pm

Most of those stocks are standard dividend growth stocks. I don’t think that you have too many companies. If anything, you need a few more. In analyzing your portfolio, it would be helpful if you could list the weighting of the stocks. You suggest that you’ve got a lot of Intel stock, but how much is a lot?

I wouldn’t sell AT&T. It’s been paying out ever increasing dividends for over 10 years and I doubt that’s going to change.

I would run like hell from Leggett and Platt. It’s only a matter of time before they cut their dividend and their stock price tanks too.

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retirebyforty January 9, 2013 at 9:59 pm

I have about 1,900 shares of Intel. Thanks for the tips. I’ll check out LEG more.

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My Financial Independence Journey January 10, 2013 at 7:08 pm

I’m posting an analysis of LEG on Monday. That will pretty much sum up my opinion of it. It’s a dividend cut waiting to happen.

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Lance @ Money Life and More January 9, 2013 at 3:35 pm

I don’t have a passive income plan… yet! Right now our goal is to get rid of my girlfriend’s student loans which hopefully will be done this year. Hopefully we’ll have one for 2014!

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retirebyforty January 9, 2013 at 10:00 pm

Good luck getting rid of the student loans. It’s tough for young folks these days.

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Mike @ Personal Finance Beat January 9, 2013 at 3:45 pm

Love this post. I am a big proponent of dividend investing and currently hold the following stocks: MO, XOM, JNJ, KPM, MCD, PEP, VZ and WMT.

If you are shooting for $9k in dividends alone, then your portfolio must be pretty large! Mine is not quite that size yet.

I’m also looking to get started in peer-to-peer lending at Lending Club. I would be interested in reading any future posts about your experiences there.

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retirebyforty January 9, 2013 at 10:02 pm

I’m investing with Prosper, but I’m thinking about opening an account at Lending Club so I can compare the two. Here is a post about peer to peer lending.
http://retireby40.org/2012/03/p2p-lending-retirement-income/
Good luck!

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The Passive Income Earner January 9, 2013 at 4:06 pm

Well done! You and My Own Advisor are ahead of me. I am short of $6K for the year. I had higher yielding stocks early on when I started with dividends but since they don’t grow their dividends or appreciate as much, I started focusing on buying valued Dividend Aristocrats where I know I get a dividend raise every year. In some cases, I look for those that increase their dividend by 10% on average.

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retirebyforty January 9, 2013 at 10:03 pm

10% sounds like a good number to shoot for. I’ll see by the end of the year if we can hit that. Good luck in 2013.

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Kitty January 9, 2013 at 4:11 pm

Are you ever tempted to sell when its near the higher prices and buy back the AT&T stock a month later?

Could you maybe explain why it would be a bad idea to do that? Other than worrying that the stock price doesn’t go down again, are there any significantly negative reasons to not sell the AT&T stock once the capital gain, net of short-term capital gain and commission costs is at least double the next quarterly dividend, net of qualified dividend tax rate?

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Kitty January 9, 2013 at 4:11 pm

Sorry if this there’s a really obvious reason why and I’m just missing it. ^^;;

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retirebyforty January 9, 2013 at 10:08 pm

It’s just a lot of headache. I usually sell if I don’t want to own the investment anymore. I guess if you have time to keep track of everything, then it might be a good idea. I don’t like paying a lot of tax either. :)

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Mike January 9, 2013 at 4:29 pm

I guess I am not as interested in stocks as some people are. I am spending more of time with mutual funds, IRAs and a few of the other alternatives out there on the market. I guess I err on the side of caution on that.

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JT January 9, 2013 at 4:55 pm

If you’re going to hold stocks, you might want to consider selling covered calls against them for additional monthly income. As long as you have at least 100 shares of a stock you can do it. Some people think trading options is risky but this strategy is one of the least risky since all your downside risk is in holding stock in the first place.

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retirebyforty January 9, 2013 at 10:09 pm

I’m sell some covered call this year. It doesn’t seem to generate much money though.

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Anil @ PeerCube January 9, 2013 at 4:59 pm

Great post on generating passive income through dividends. I agree 20 dividend stocks seems to be too many unless this portfolio is $1MM+.

If you are interested in dividend through individual stocks, I will suggest you look into value oriented stock selection strategies such as Dogs of Dow, Dogs of S&P500 and in general Dogs of Index and trim the number of stocks in your portfolio.

I also wouldn’t discount buying growth/capital appreciation stocks for generating passive income. Buy one growth stock every month, after a year review the stock either sell whole position or capital appreciation portion. Do the same for every stock on 12 month anniversary. You will have nice monthly gains assuming you have large enough position in each stock for transaction cost to be just a blip and stocks of established stable companies that don’t swing big in short term.

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krantcents January 9, 2013 at 5:03 pm

If you just shift your investments to higher yielding investments, it seems you would achieve your goal. I am less concerned about passive income, however I want growth for now. As I get closer to retirement, I will shift to stabilize my portfolio.

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retirebyforty January 9, 2013 at 10:11 pm

I want growth too, but the growth stocks didn’t do much better than dividend stocks over the last few years.

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Jon @ MoneySmartGuides January 9, 2013 at 6:02 pm

Good to see I’m not the only one unsure about what to do with Abbott. The majority of the dividend went with the new company, but I think the “old” Abbott will increase it’s dividend quickly, but I’m not so sure how quickly.

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retirebyforty January 9, 2013 at 10:12 pm

We’ll have to keep an eye on the old Abbott. The yield is quite low at the moment.

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Rod J. Rogers (@FreeAgentRogers) January 9, 2013 at 7:16 pm

Congrats on making money in rentals. I’m selling mine off as owner financed sales to get rid of the headaches.

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retirebyforty January 9, 2013 at 10:13 pm

I’ll try it for a few more years. If we can’t make it work, I’ll probably move the investment over to REITs.

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Simple Moolah January 9, 2013 at 7:58 pm

Hi Joe,

I think that it’s great that you have a goal to increase your passive income for 2013 and you have a plan laid out for it. It has definitely inspired me to do the same. I’m new to your site, and have been looking around and I find your story very inspirational.

In terms of stock picking, my belief is to learn from those who are successful in doing whatever it is you want to accomplish. So for me, I chose to follow Warren Buffett. The book I read called “Warren Buffet and the Interpretation of Financial Statements” has helped me tremendously in picking good quality stocks. This book teaches you how to interpret a company’s financial statements and determine if it’s a good company to invest in or not. These are the principles that Warren follows.

If you’re looking for ways to increase your dividend portfolio from stocks, this book will definitely help you find those quality stocks to keep for the long term.

Wishing you all the best with your goals for 2013!

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retirebyforty January 9, 2013 at 10:13 pm

Thanks for the recommendation. I’ll put it on my reading list.
Good luck to you as well.

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T3 January 9, 2013 at 8:45 pm

Fabulous post (my favorite thus far), was hoping you would elaborate on the dividend income. If I had a few hours I could transpose that information into excel and figure this out myself (so I don’t feel nosey asking), but how much total did you have invested purely in dividend stocks (not including the stocks that gave surprise dividends) to get that return?
I’m an amateur at all this, but I did purchase AGNC and PBI in the last quarter of 2012 and though they’re both down 10% (again, amateur) they did make about 5% in that last dividend payout.

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retirebyforty January 9, 2013 at 10:17 pm

The current valuation is a little over $200k. I’m not sure about how money I have invested because I have been adding to the investment over the years. Good luck in 2013!

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Terah@The Credit Report Chick January 10, 2013 at 6:42 am

I’m new to the whole passive income movement, but I’m jumping in with both feet. My husband and I are making an offer on duplex (that will give us $600 in cash flow per month) and plan on using our income tax and my freelance income to invest in dividends stocks. Thank you for being a great source!

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retirebyforty January 10, 2013 at 10:27 pm

Good luck! $600/month is great.

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Justin January 10, 2013 at 7:40 am

Check out HPT for a high dividend REIT with physical assets. No money in it yet but it is in my watch list.

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retirebyforty January 10, 2013 at 10:28 pm

Thanks for the tip. I’ll put it on my watch list.

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G January 10, 2013 at 4:50 pm

T 1893
XOM 526
GAS 952
HCA 1300
FE 220
TOTAL 4891

HCA PAID A DIVDEND OF 6.50, NICE HUH? trying to increase to 5500 for next year, and increase 500 a year until i reach around 10-12 thousand a year.

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retirebyforty January 10, 2013 at 10:31 pm

6.5% is quite good. I’ll check them out. Thanks for the tips.

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Dividend January 16, 2013 at 2:01 am

Good. But I think that see history of the company before investing in dividends.

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Jay January 11, 2013 at 11:37 am

How about doing more rentals? I pay my entire mortgage through them. The problem with rentals, though, is that if you want to get enough to live off of, managing things yourself will not scale.

To combat that, this year, I want to try some turnkey companies that will rehab and manage your rentals for you. This way, it’s more passive and you can take advantage of lower out-of-state prices.

Best example I saw recently: a duplex in Ohio that would give over a 60% cash-on-cash ROI, after taxes and insurance.

This year, I’ll probably get something in Ohio. And next month I’m heading to Tennessee to check things out there. Let me know if you’re interested, I’ll let you know how it goes.

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retirebyforty January 11, 2013 at 1:44 pm

I like rentals, but I’m not sure if I have the temperament to be a landlord in the long term. I think we have enough properties at the moment. We’ll see in a few years if we can continue to be invested.

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Integrator January 12, 2013 at 4:34 am

Nice work Joe, my only suggestion to you would be to focus on stocks that can drive higher dividend growth over time. Try and look past the higher yield today. To that end, your right on looking to get rid of AT&T. They don’t generate the growth to lift their dividend more than low single digits today. CME is one I’d suggest you look into. I just recently reviewed it. Be a little watchful of Western Union as well, it’s had flat revenue and cash flow growth for quite some time.

Integrator.

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retirebyforty January 13, 2013 at 9:46 am

Thanks! I’ll focus on dividend growth for future investments. I’ll do some research on CME.

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The Dividend Guy Blog January 14, 2013 at 2:51 am

First, thx for the mention :-) I truly appreciate it!

I can see in your portfolio that you already have some of my picks for 2013!

What are you going to do with your dividend payouts? DRIPs or buying other stocks?

I’m considering selling INTC this year as well… it’s on my “selling watch list” this year :-)

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retirebyforty January 14, 2013 at 2:35 pm

In this portfolio, I collect the dividend until I can buy other stocks. INTC and T are on my sell list.
Your 2013 list was really helpful.

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TheGooch January 23, 2013 at 11:05 pm

I’ve never invested in dividend stocks, but I have dabbled with lending club. I still have to much debt to invest much, even for retirement. This post has renewed my desire to at least allocate a small slice of my discretionary income in passive streams of income.

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retirebyforty January 24, 2013 at 8:54 am

Good luck. Generally I would recommend paying off high interest debt first, but dabbling a bit in investing is a good thing too. Go for it!

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The College Investor February 25, 2013 at 9:25 pm

I’m a big fan of ABT and ABBV. They are both paying dividends, and both are highly rated by Wall Street. I highly recommend holding both for at least a year before selling. I think both with be great plays, just different companies.

Abbott will now be the slow, steady, consumer products company, while Abbvie will be the pharma company. Humera is still on patent for a while, so give it a chance to develop.

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Mike February 25, 2013 at 11:12 pm

Interesting read. I haven’t touched the market much in the last few years. As an uneducated not even novice to trading your goals inspire me. But I am trying to do one thing at a time and build a business first. Will keep an eye on your page when I try to get into trading later this year. (that’s the plan anyways)

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S. B. March 16, 2013 at 2:20 pm

I agree with the comments suggesting more diversity rather than less. It’s not really that difficult to keep track of 30 or 40 stocks, but you do need to be systematic and disciplined. I also try to hold dividend stocks from a variety of sectors.

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jake March 22, 2013 at 8:09 pm

Hi
I like BKLN, PGX, SDIV, O, MAIN, WSR, HLSS, MO,ARCP, AMLP, SPHD , KBWD and RWX for my passive dividend portfolio. Any more ideas? Any comments on these holdings?

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Dividend April 9, 2013 at 5:56 am

If you want to build your dividend portfolio you should focus on several things. Always remember that you are investing for your future income need so you don’t need to take company risk. Your main focus should be receiving dividends not just growth.

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retirebyforty April 9, 2013 at 3:32 pm

Hey, I love your site and use it all the time to check dividend payout dates. Thanks for dropping by. :)

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Dividend April 17, 2013 at 1:03 am

Thanks @ retirebyforty..:)

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ivan April 26, 2013 at 10:15 am

Looks good. But your spread out to far. I created a custodial account for our son in 2008 and he is looking at 15% return for this year. You need to narrow it down. I would focus on the big stocks i have below.

AT&T
Intel
Coca-Cola
Altria – (Maybe)
Proctor & Gamble

You should add Real Estate as well I have Vanguard VNQ ETF I am up about 23% since Dec 2011 other stocks I have include MSFT, SBUX, NKE, DIS (63% return since 2011) I recently added Ford I already have Intel and GE and a few others. But not bad at all sir.

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Tom June 2, 2013 at 3:19 pm

Interesting stuff here. Will definitely think about it moving forward.

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K July 5, 2013 at 1:53 pm

How many stocks do you have to own to get $9,000 a year?

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The Passive Income Earner July 6, 2013 at 8:11 am

@K
It really depends on your philosophy and diversification goals. I have a $6,000 income with 32 stocks but I am more focused on increasing my positions now then adding new stocks. The number of stocks is not really what drives the income but rather the amount of money invested and therefore how much you have saved.

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mayanqueen July 19, 2013 at 3:14 pm

Retireby40,
Do you know anything about Scottrade to manage investments? I am new at it and want to try with help. I work full time and really wouldn’t have time to watch over my investments. After reading many of your posts and watching my I brother struggle as a landlord…I believe I am ready but with help. When you invest and buy do you just go directly to each company or do you need a broker to buy? Thanks for sharing and helping!
God bless you and your loved ones!

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retirebyforty July 22, 2013 at 8:39 am

I think Scottrade is a discount broker. They don’t usually help with investment management.
If you are just starting out, I would invest in a Vanguard index fund like VTSMX or VFINX.
These are big funds with many many companies in them. You just need to keep adding to your investment every month and you should do well in 10+ years.
You can also buy individual stocks (company like Apple) through Scottrade. You probably should put this off until you are more comfortable with stock investing.
Good luck!

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davidmichael August 3, 2013 at 7:10 pm

Just a short note about dividend paying stocks. I think this is a great way to add passive income. My attorney has invested his retirement funds around dividend paying stocks and is doing very well. I note that some people suggest trading here and there for added funds. After 20 years of stock trading with options, stocks, as well as covered calls, I don’t recommend trading at all. Buffet said it well…”Rule #1. Don’t lose money. Rule #2. Don’t forget rule #1.” I recommend a solid portfolio of 1) Dividend Paying stocks, 2) I-Bonds, 3) Real Estate Rentals, 4) Social Security (at a later date). I lost small fortunes by wanting too much too fast. Follow the Turtle and not the Hare. Congratulations. You are on your way! And…a great blog!

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retirebyforty August 3, 2013 at 10:31 pm

I like your recommendation. Real estate rental could be tough though.

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TheGooch August 4, 2013 at 11:39 am

I have about zero free time to watch the stock market and manage investments, so I invest in funds, not individual stocks/bonds, that balance themselves periodically.

I am interested in I-Bonds. Would you keep them in an IRA or outside of it?

I know about as much as Real Estate investing as I do writing Kanji :) Are there any good REI funds out there?

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retirebyforty August 5, 2013 at 8:57 am

I’m mostly invested in Funds as well. I do have a dividend portfolio that have individual stocks.
I keep my I-Bonds at Treasury Direct (taxable account.) You don’t have to pay tax until you redeem though.
You probably need to read a good REIT book. I don’t know much about them either. :( The book was pretty boring….

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Fab August 17, 2013 at 7:07 am

Hi,

Which brokerage are you using for your taxable dividend portfolio? Do you know of any free screener/platform where it’s possible to set email alerts based on price.
I currently keep all my 401K/IRA money in Vanguard index funds but plan on building an early-retirement taxable dividend portfolio of around 40 stocks. Thanks.

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retirebyforty August 18, 2013 at 2:29 pm

I’m using Firstrade. I don’t know about the email alerts. You probably should google that and see if you can find any good site.
Good luck!

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Drew @ financialvoodoo.com August 21, 2013 at 11:15 am

I see your gain on the securities was only 1.18% + dividends. So what was your overall return on these securities. Not to be mean, but my way of thinking says to look at the return of an investment not just the dividends.

To me it seems like you might do better with a simple cover call strategy. It might not be dividends, but its more consistent and more frequent returns where you can choose your own shielding to downward movement. I would argue that cover calling is MORE conservative than your approach with better returns.

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Mike November 28, 2013 at 6:10 pm

I’m attempting to retire in one year. I am in the process of moving about $1M of my nest egg into high dividend ETFs. For now I’m in LVL, DWX, SDIV. I should get around 6% dividend annually if they repeat past performance and the exposure is global. I’d like to add two or three more to the mix.

My question is, will I get the same sort of yield appreciation over time that one can get from owning an individual stock?

One example would be where a company raises its dividend annually as its share price increases, so as to keep the annual dividend yield constant. After ten years, the yield on the original investment would no doubt reach double digits.

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Ap999 March 26, 2014 at 3:44 pm

Am I missing out by not investing in individual dividend stocks? I am currently 29 years old, I am following the low cost passive indexing approach. My portfolio currently contains the Vanguard US total stock market fund, Vanguard small cap index value fund, and the Vanguard Total international fund. I am 70% US/30% international. I do get some nice sizable dividends quarterly. I like this simple approach…. Occasionally I have dabbled in some momentum stocks and turned a nice profit, but that’s about it. I sleep better a night not being in any one individual stock for the most part.

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retirebyforty March 26, 2014 at 11:20 pm

It sounds like you’re very comfortable with your style of investing so you probably stick with it. The sleep better at night factor is a big one.

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brian August 15, 2014 at 6:06 pm

I had pretty much the same approach that you had except I also had a bit of this and a bit of that (dividend growth stocks, pure tech growth stocks, stock du-jurs, etc). I’ve recently made a switch to a mostly Dividend Growth model and currently have 38 positions in 4 different accounts (401k, Rollover IRA, Roth IRA, and Brokerage) that has a total portfolio weighted yield of 4.42% with an overall weighted Beta of 0.76, which I feel is pretty strong considering the higher than average yield. I still currently hold 41% of my total portfolio in various index tracking funds (and 35% of that is in my 401k)

I’m using the Index Funds as a balance with my Dividend Growth and High Yield Dividend portfolios. I’m still in a few pure growth stocks (zero dividends) and I don’t know how much longer I’ll be in those, but for now they’re holding well and I like the companies so it’s ok as they’re only 3.5% of my total portfolio.

Like you, I’ve been sleeping better at night knowing that my portfolio is working for me as well with the dividend growth choices I’ve made. It’s not an easy conversion and it’s not for everyone. Good luck with your future choices.

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pdxlager April 30, 2014 at 9:45 am

So $9,000 in dividend income would be about $6,000 after state & federal income taxes, or about $500/month? What is the total taxable portfolio size, about $100K+?

The only downside is that you are trading long term (compounded) growth for current earnings. But I’m sure you’re already aware of that and it sounds like you know what you’re doing and why.

I have a less ambitious goal of buying enough stock in a company to offset my expenses in that company’s product/service, such as buying enough NWN (Northwest Natural Gas) shares so that their annual dividend pays my entire gas bill :)

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Jim May 17, 2014 at 3:57 pm

Dividend Investing – qualified plans

I actually would take issue with your dividend investing approach. Nothing wrong with the stocks but save for T and MO, none of them generate dividends in excess of the RMD. And as you note, most did not have principal growth and most are slow dividend growers. True, most have DRIP plans so you will get a boost from compounding. So for creating wealth, I would question whether this is the best approach. My portfolio currently generates about 12% on invested capital. The universe of holdings is made up of BDC’s, closed end MLP’s, (to avoid UBTI), an mREIT ETN, (MORL), Natural Resource ETF (GGN), Natural Gas Storage NKA, Dry Bulk Shipper NMM, and a few others (OXLC, NYMT, NTI) . I have rounded out the portfolio with additional growth names (MO, VZ, SCCO, CLF, DOW) on which I can write monthly calls that generate about 3/4 – 1% per month in additional income. Like yours, most of these do not offer much growth so they are ‘coupon clippers.’ Most either have DRIPS or the equivalent through my broker Schwab. Anyway, that’s what I’m doing. Jim

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retirebyforty May 19, 2014 at 9:56 am

THanks for your input. I’m not familiar with the stocks you hold so I’ll need to check them out. Actually, my portfolio has about 10% yield on invested capital. Check it out.
http://retireby40.org/effortlessly-increase-dividend-yield/

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