Passive and Residual Income: 6 Key Strategies You Need to Know

Happy Friday!! Welcome to another edition of educational Fridays, where we will post up material (videos, infographic, links, etc) to help you learn more about passive income and investing.

Below is a introduction video on creating passive and residual income. Kate Northrup talks about 6 key points that will help you to start building or expand on your passive and residual income streams.

IRA Portfolio Update for August 2015


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This post is a monthly update to track the performance of my IRA portfolio. The goal of this portfolio is to build wealth and generate income for retirement. The strategy is to buy companies with strong growth prospects and a high dividend yield. All the dividends are automatically re-invested in the stocks. Dividends help grow income by buying more shares of the company and having more shares of the company help generate more income.

Account Balance
Account Balance at start of month: $14,783.38
Account Balance at end of month: $13,368.86
Net Gain/Loss for month: $-1,406.50 (-9.5%)

IRA Portfolio Holdings:
ARCP – 747.61 shares
UHT – 100 shares

Dividend Payouts This Month:
LNCO $91.08
Total: $91.08


With oil prices so low and with no recovery in sight, I think the low oil prices will stay down for a much longer time than expected. Therefore I have decided to dump my oil holdings, even those they are at a huge loss. SDRL has already suspended their dividends and LNCO will suspend their dividends very soon. Since there are no dividend payments anymore, these “dead” stocks have to go. I think I can use the capital for a better stock. These two stocks have definitely given a a huge and painful lesson.

At the end of August, I made a move to sell all shares of LNCO and SDRL. With the little money left, I made a purchase for 100 shares of Universal Health Realty Income Trust (NYSE:UHT) at $47.50. I feel UHT’s dividend is safe and they seem to grow their dividends over the long term.

Also, on a brighter note, ARCP has some positive news. First, they have decided to renew their image by changing their company name from American Realty Capital Properties, Inc. to VEREIT, Inc. (VER). The name is the blend of the word, veritas, the Latin word meaning truth, and REIT. Secondly, and most importantly, they announced to reinstate their dividends. I feel this company is making the right moves to right a wrong ship. It will definitely take time for this company to right its ship and when they do, this stock should moved higher. I will continue to hold my VER shares and see this one play out for now.



How To Build Smart Passive Income With Pat Flynn

Happy Friday!! Welcome to another edition of educational Fridays, where we will post up material (videos, infographic, links, etc) to help you learn more about passive income and investing.

This video is an interview with Pat Flynn, the founder of Smart Passive Income. He talks about his transparent style and how he build a site that grows from a small name to a big name in the passive income industry. Watch his interview and you may learn a thing or two new that can help you grow your passive income.

Growth for My Dividends

I realized that the dividend growth is an important factor for a dividend growth portfolio. I have shifted my focus to growth on dividends now and will look at this figure more closely from now on. I did some research and analyzed the stocks in my DGI Portfolio to see their rate of growth. I based the growth on the most recent 5 years to see determine the growth factor. This model strictly focuses on the growth of the dividends over time and does not take into consideration the yield of the dividend.

Below are the results:

Symbol Dividend Growth (5 year)
CVX 8.25%
VZ 2.99%
T 2.28%
JNJ 6.79%
GSK 5.33%
O 5.76%
ED 1.78%

From the results, I can see that that some of the dividend companies that I own don’t have very strong dividend growth. For example, ED, is a great and stable company, but it’s not a good growth prospect. Of course, I think ED will be around for a long time, it’s not going to go bankrupt, but the dividend growth model shows that this company doesn’t have a history of fast dividend growth. It’s a safe company, it’ll help me sleep well at night, but it won’t make me rich.

I would have to reconsider how I buy stocks in my DGI Portfolio. I would like to focus more on their dividend growth rather than the current dividend yield. It makes sense to weigh more on the dividend growth, because, over time the growth would win over the temporary higher yield. I may have to sacrifice some yield in the short term, but I believe the dividend growth could make up for the difference and play a bigger role in my dividend income over time. In the future, I will take into consideration of the dividend growth rate when adding a stock to my DGI Portfolio.

How to Create a Passive Income Asset with Pat Flynn

Happy Friday! Welcome to another edition of educational Fridays, where we will post up material (videos, infographic, links, etc) to help you learn more about passive income and investing.

This is a great podcast episode with Pat Flynn, the founder of Smart Passive Income. He knows a lot about building passive income. I know this video is longer than the usual ones that I have posted, but this one is worth listening to, especially if you’re interested in building passive income. You can learn more about Pat Flynn and the good stuff that he talks about in the video. He lost his 6-figure job and decided to work for himself. He turned the financial freedom dream to reality. He now brings in over $100,000 a month, according to his monthly income report. That’s amazing to me.


How I Pick Dividend Stocks for my DGI Portfolio

Picking the right dividend stocks is an essential part of building my Dividend Growth Investing (DGI) Portfolio. I have made many mistakes in the past and I will learn from them. Hopefully I have a better formula for success now to build out a great dividend growth portfolio. Below are the requirements I have formalized. These are requirements that I have come up with from my experience in the many years of investing. Of course, over time I may learn more, and I may further fine tune these requirements.

Stock Purchase Requirements

  1. Must have positive earnings (EPS > 0)
  2. Must have a decent yield (Dividend Yield >= 3%)
  3. Must have dividend growth (5 Year Dividend Growth >= 0%)
  4. Must have a sizable market cap (Market Cap >= $10MM)
  5. Must have a healthy balance sheet (Debt is a low %)



I am only interested in companies that already have positive earnings, otherwise they are too speculative for me. I have bet on too many companies in the past that do not have positive earnings but I thought that would always have positive earnings in the near future. It was speculative, and I have lost hundreds of thousands of dollars. It’s a big lesson that I’ve learned. It may be okay to speculate on those stocks once in a while, but I have to keep in mind now that those are speculative positions at best and I shouldn’t bet the house on them.

For my Dividend Growth Investing (DGI) Portfolio, my focus is to build a nice stream of growing income, so therefore it’s important to have a decent yield and companies that will grow their dividends over time. I would like to collect an increasing pile of dividends over the long term.

I don’t want to buy penny stocks so, I want to make sure the companies that I buy are big companies that would not fold easily. Another important factor that I look for is a healthy balance sheet, with low debt ratios. Controlling debt is an essential part to any companies’ survival.

Some of the bad memories that come up to mind is AMD, SDRL and LNCO. AMD is a stock that I had high hopes for and I had made a huge bet on, but unfortunately, they just couldn’t make a breakthrough in the market and their huge debt has caused their stock price to collapse. AMD went from $4 to under $2 now. SDRL is another big mistake that I made in my IRA Portfolio. It was a dividend trap. The company had increase their dividend to $1 per quarter in 2014 and the company said that the dividend was sustainable but soon after that statement was made, the company suspended ALL dividends and the stock price collapsed. SDRL went from around $40 to $7 now. I invested in LNCO when the company had very strong prospects and it looked like the sky was the limit for them. But the company had made some bad decisions and got themselves into loads of debt. After the oil price collapsed, LNCO’s debt weight down on them hard and crushed the company. LNCO went from around $40 to under $3 now. I had suffered huge losses in AMD, SDRL, and LNCO. So now I have learned to be very careful with any companies that has a large amount of debt.




Creating a Passive Income with Persuasion

Welcome to another edition of educational Fridays, where we will post up material (videos, infographic, links, etc) to help you learn more about passive income and investing.

This is an interesting video that talks about how you can harness the power of persuasion to help you build up your passive income. It’s different from the other videos, because it is more of an indirect way to grow passive income, but nonetheless, I find the 6 points covered in the video to be good information. I think the 6 points can be applied to not only passive income, but anything from building friendship to building a business.

I find the reciprocity point to be very true, because I believe in that myself. When someone gives me a gift or does me a favor, I would have a tendency to return a gift or favor to the person. And I feel it’s true the other way as well, when I give someone a gift or do that person a favor, the other person usually has a tendency to return it, or at the very least, that person would feel appreciated.

Dividend Growth Investing (DGI) Portfolio Update for August 2015


This post is a monthly update to track the performance of my DGI Portfolio. The goal of this portfolio is to build a growing stream of passive income to achieve financial freedom. The strategy is to buy companies with dividends that are sustainable and increases over time. All the dividends are automatically re-invested in the stocks to buy more shares of the same companies.




Portfolio Holdings:

Symbol Current Price Quantity Current Value Annual Dividends Prorated Monthly Dividends
CVX 76.72 100 $7,672.00 $428.00 $35.67
VZ 44.82 202.357 $9,069.64 $445.19 $37.10
T 32.58 202.706 $6,604.16 $381.09 $31.76
JNJ 91.36 100 $9,136.00 $300.00 $25.00
GSK 39.72 200 $7,944.00 $464.00 $38.67
O 43.39 200 $8,678.00 $456.00 $38.00
OHI 32.35 404.546 $13,087.06 $890.00 $74.17
ED 60.88 150 $9,132.00 $390.00 $32.50
Total $71,322.87 $3,754.27 $312.86

Note: Cash balance not shown here.

Dividend Payouts This Month:

Symbol Date Amount
T 8/3/2015 $94.00
VZ 8/3/2015 $110.00
OHI 8/19/2015 $166.67

Monthly Total: $370.67

Total Dividends Received (Cumulative): $370.67
*This is the total dividends received since the inception of this portfolio.


Account Balance
Account Balance at start of month: $59,372.44
Account Balance at end of month: $56,862.13
Net Gain/Loss for month: $-2,510.31 (-4.22%)

Added $20,000 deposit, new balance is $76,862.13


Funding Status: 80% Funded
I have added another $20,000 to the portfolio this month. And now the total deposit to this account is $80,000, which is 80% of the planned $100,000. In September, I will allocate another $20,000 to this portfolio to make this fully funded with a total of a $100,000 deposit.

Portfolio Update
Since the dividends are a bigger focus, I have moved the dividends income to a higher spot in the blog post and moved the portfolio balance lower. I’m not even sure if I should list the portfolio balance since it’s not a key focus of this portfolio investing.

August has certainly seen an extremely volatile market, with daily movements of greater than 300 points in both directions, and on August 24, the stock market had a plunge of 1000 points in the DOW. The biggest sector that was hit is the oil sector. My CVX holding is the biggest loser in this oil crisis. Fortunately, I bought a PUT option in CVX to help mitigate some risk and sold it for a small profit. Nevertheless, my CVX holding is still down a lot from my purchase price of around $100.

The global slowdown has also affected the US stock market and my portfolio holdings. However, I believe the stocks I have are very strong companies and will survive global selloff in the long term. In the mean time, I will collect their dividends, which I think are safe.

I took advantage of the market drops and purchased two of my favorite companies, Realty Income Corp (NYSE:O) and Consolidated Edison, Inc. (NYSE:ED). In hindsight, I could have waited a little bit and bought these companies for cheaper, but I didn’t want to miss the opportunity to own them. Even thought I could have bought them at better prices, I feel it’s not bad to own them and collect dividends now. Over the long run, O and ED should rebounded in stock price. But most importantly, O and ED are known for their dividend growth and will play an important role in my portfolio. I also added 100 shares of OHI. I feel that OHI is a very strong company and it’s a good opportunity to pick up more shares. OHI also has a great dividend growth and yield, so I could not pass up that opportunity.

I’m excited that I finally get to see dividends come in for this portfolio. I have collected a total of $370.67 in dividends this month and those dividends are automatically re-invested in their respective stocks. These re-invested dividends will help buy more shares of the companies and having more shares will allow me to collect more dividends in the future. This compounding effect will help me build a growing stream of passive income.

Currently my monthly passive income for this portfolio is at $312.86. I believe this number will increase over time due to the repurchase of shares in those companies and also when there are dividend increases, this number will also get adjusted upward. My goal of reaching $2,000 in dividend income a month by the year 2020 may actually be possible if things go my way. Of course, we will see in time. Once I have more data, I can plot the trajectory of growth in this portfolio. I think I’m off to a good start for now.

Happy investing!!



Buy “Safe” DGI Stocks in a Volatile Stock Market

The stock market has been in a wild swing lately, with the DOW dropping a whopping 1,000 points following a 580 point drop the previous trading day. The recent stock market “correction” has wiped out a tremendous amount of wealth and market cap.

It’s is very important to proceed very cautious lately. I think it’s also a good opportunity to pick up some good solid companies that will do very well in the long run. I look for companies with a solid business that can weather this storm and will eventually come out victorious. The short term noise can present very good prices to pick them up in a long dividend growth portfolio, such as my DGI Portfolio.

I have learned a valuable lesson about taking on too much risk and losing all my principal capital. Therefore, now when I invest for the long term, I analyze the stock to see if they can outperform the market in the long term. Also I look for companies that do not have big swings, which is indicated by the beta. Beta is the measure of volatility in the stock market. A beta of one means that the stock moves with the market, a beta that is higher than one means that the stock moves more than the market and a beta that is lower than one means that the stock moves less than the market. I prefer companies that have a beta lower than one. Most of the stocks in my DGI Portfolio have a relatively low beta. This is by design, because I do not want to see my portfolio drop too much in a down market. Fortunately, the low beta did help mitigate the swings from the huge drops in the stock market.

I also took advantage of the huge drops to pick up some good names like OHI and ED. ED has such a low beta of -0.01, which means it is not affected by the movements. ED is a utility stock, they will always make money in any type of market, because everyone needs to use their utilities regardless if the market is good or bad. Therefore, ED is a very good long term stock. It moves very slowly but progressively up. Don’t expect to be rich with this stock, it’s not going to be the next Google or Facebook, but it is going to be a great long term holding that will build you lots of passive income.

In this market, it’s important to buy companies that generate growing revenue and earnings. Because the companies that make money are the ones that will survive this market turmoil.