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Get Excited About Pennies

It's time to get excited about pennies!
Pennies add up to build dollars, and dollars add up to build wealth

My kids get excited about pennies. If they find one on the ground, they are sure to pick it up. I think that most kids are like this. I know that I was when I was their age.

As we get older, however, that excitement tends to fade. A penny by itself will buy pretty much nothing. Most adults tend to think of pennies as being pretty worthless. They are anything but. I’ll admit that pennies still excite me!

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Pennies are important building blocks. Five of them make a nickel. Ten make a dime. 100 make a dollar. When we get to dollars, we’re talking real money. Each and every penny that we find and pick up or earn in some manner is building block towards a better financial state of being. That’s why it’s important to get excited about pennies.

Think Of Pennies As Stepping Stones

I’ve already noted that pennies are building blocks. They can be important stepping stones to getting where you want to be. A while back, I read an article that got me thinking in this direction. Rather than pennies, it stated that millionaires are made $10 at a time.

Sometimes, we can make lots of pennies really quickly. This happens when we’re at work. When I started working, minimum wage was $4.25. I had it figured out that I made about 7 cents a minute at that rate. This meant that I earned a penny about every 9 seconds. I’d annoy some of my co-workers by stating things like, “I just made $0.21” after three minutes on the clock.

While $0.21 is not much to get excited about, the addition of many $0.21s over time started to build up. So much so that I had about $7,000 in the bank after a couple of years of working at a minimum wage job. In the interest of full disclosure, I’ll admit that I was in college and living at home. Still 7 grand for working part-time for minimum wage at McDonald’s wasn’t bad.

Many of my coworkers complained about the poor pay, and it was poor. However, I looked at my income in an optimistic manner. It gave me some freedom to do the things I wanted to do. It did’t take much for me to get excited about pennies.

The more pennies we make, but more pennies we can save. It was Ben Franklin who said that a penny saved is a penny earned. While pennies were worth more in Franklin’s day, the basic premise still holds true.

Get Excited About Pennies: They Help Build Passive Income

I’ve stated many times that my favorite type of income is passive income. I think this is the case because passive income comes to me whether I put in any effort or not. It’s just keeps rolling in.

Passive income trickles in whether I’m sleeping or working hard. My passive income from dividends started out at $0.02 a day when I first started tracking it. Rather than get frustrated that I only made $0.64 in a month, I looked at the $0.02 a day that I made as the start of something great.

Now, I’m making much more in terms of passive income, even a dollar or two a day in most months. It takes time and, yes, pennies, to build this passive income. My passive income growth is documented by my monthly dividend income posts. It’s been growing at a good clip.

Dividends are usually stated in pennies. With the exception of companies with really high stock prices, most quarterly dividends come in at less than $1 a share. As an example, I own some shares of AT & T. These pay me $0.49 a quarter. That’s 49 pennies, quarter in and quarter out.. The dividends from one share won’t pay for much, but if reinvested, these pennies can start to build momentum into something pretty amazing.

Those who own as few as 180 shares of AT & T could pretty much pay for the lowest priced cell phone plan from Cricket Wireless (owned by AT & T), which is $30 a month. That’s a pretty awesome concept, if you ask me. This would effectively constitute free cell phone service, all from a buildup of pennies.

Over time, enough pennies could actually fund your entire lifestyle. That’s really something exciting.

How To Make A Few Extra Pennies

Now that you’ve read up on how pennies are important stepping stones to the life that you want, you might wonder how you can make even more. There are pretty easy ways that you can make a few extra pennies online in your spare time if you don’t want to get a part-time job flipping burgers.

I’ve written several articles for the online freelance site Textbroker. For most of these articles, I’ve earned 1.4 cents a word. These pennies have added up to several thousand bucks over the past five years or so. Many times, I can average more than $20 an hour if I find jobs that I can complete easily.

Not everyone can write coherently though. I also have recommendations for these folks. There are many ways that you can make money online. Two of my favorites are Swagbucks and EarnHoney. I can earn by searching the web and answering some easy surveys on Swagbucks and by letting videos play passively with EarnHoney. It’s a few pennies here and there, but I cash out some of these pennies each and every month.

With the money I’m bringing in from letting videos play, I’m buying shares in stocks like AT & T that pay me even more pennies. I’ve also put this money toward paying off debt in a more accelerated fashion. This is what allows me to get excited about pennies. I’m improving my financial situation with each and every penny I get.

I’d urge you to get started looking for ways to pick up a few dollars worth of pennies each month. How much could an additional $25, $50, or even $100 each month help you out? It takes a new mindset to think of pennies as worth the trouble. Get excited about pennies!

Be Sure To Follow My Updates

If you’d like to follow my progress each month, be sure to go to the top of the page and sign up for updates. You can also follow me on Twitter.  I’m now above 300 followers, and I’d like to get more than 400 by the end of summer. You can help!

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Passive Dividend Income, May 2017

Another month is in the books. May has come and gone. We are now past Memorial Day, which was traditionally the beginning of summer vacation, although many are still in school. The end of the month is a great time for reflecting on how the previous month unfolded. It’s also a good time to look into passive dividend income.

I started investing for dividend income nearly two years ago. I had been reading popular personal finance blogs like Mr. Money Mustache and popular PF books like Dave Ramsey’s The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness, which I highly recommend if you’ve not yet read it. (You can click the link above or the image below if you want to buy it and support me just a bit). Just about all of these financial gurus recommend spending less (sometimes much less) than you make and then investing the rest.

Then I came upon the old Dividend Mantra site after reading an interview on Mr. Money Mustache. This guy, Jason Fieber, was in the process of documenting the growth of his dividend growth portfolio with a goal to come up with enough passive income to live off of indefinitely, thus making paid work optional. I thought this was a great idea and bought my first dividend-paying stock in July 2015.

Now, I’m nearly two years into this journey. My first dividend was a whopping $0.64 from Apple. I’ve since sold that stock for a profit to pay off some debt, and I’ve now started emphasizing investment through an IRA rollover. My income has grown from that point, exponentially, in fact. However, I’m nowhere near what I’ll need to pay for my expenses. This is a long game.

Why Passive Dividend Income?

You might wonder why I focused on dividend income rather than total return or guessing which stock might take off like Apple or Google. I like the idea that a dividend is a return of some of the capital that I’ve invested. Companies cannot pay them out for the long run without actually having the cash flow and profits to sustain them.

Companies that have long dividend streaks have increased revenue and earnings per share over time. Some of them have done so through multiple recessions. These are the companies that I tend to like the most. I have some relatively high yielders and some that have low yields. But I like the cash coming in each month.

Passive Dividend Income Builds Up Slowly But Surely

Last month, I was in Europe on a (sort of) work trip. I got two separate emails during the trip that indicated dividends had posted to my account. I can literally be anywhere in the world, and I’ll have income flowing in because the companies that I own make money on a daily basis. Passive dividend income flows toward me no matter what I might be doing at a given moment. My money is working for me, and the more money that I put to work, the harder it will work.

Passive Dividend Income For May 2017

During the month of May, I earned (actually received, as it’s unearned income) dividends from three of the companies that I hold in my traditional IRA,. I also received a dividend from one fund in a 401k plan. Here is the income that passively came my way in May 2017:

AT & T (T):                                                                                      $7.35
Omega Healthcare Investors (OHI)                                $31.50
Realty Income Corp. (O)                                                          $2.11

Total for IRA Account:                                                           $40.96

JP Morgan Equity Income R5 (OIERX)                            $3.14

Total Passive Dividend Income for May:                 $44.10

I must say that I’m pretty happy with this amount, but it should grow in August, as I’ve added to both AT & T and Realty Income since the last ex-dividend date. This means that the monthly payout should be even larger.

Year-Over-Year Comparison

Last May, I earned only $9.18 for the entire month. This means that my $44.10 is a 380 percent increase in just over a year. I can’t complain much about that.

My dividend income in terms of the number of hours of freedom that it will buy me is something I really like to track. I could have bought just more than 2 hours and 12 minutes of freedom in May, based upon my belief that $20/hour would take care of my current standard of living pretty well.

I’ve now earned $149.41 for 2017 to this point. That’s just a hair below $30 a month. My forward dividend income for the next 12 months should come in right around $438.45. This is just short of 22 hours of freedom. I like my job and would probably continue to work should I actually get enough passive income to pay for my lifestyle. However, the ability to scale back would be pretty amazing.

I’ve basically gone from $0 in monthly dividend income to $36.53 on average (based on the $438.45 noted above). This took less than two years. With the reinvestment of dividends and new capital added, this snowball should continue rolling and picking up steam into the future.

How was your dividend income in May? Is it going in the right direction? I’ll be updating my dividend income page to reflect this month’s income.

If you’d like to keep up with my progress, be sure to sign up for updates in the email signup box near the top of the page. You can also follow me on Twitter.

Disclaimer: I am not a professional financial advisor. I intend this information for informational and educational purposes only. Perform due diligence before investing in any equities. See my disclosures page for more information. I’m long T, O, OHI, and OIERX.

 

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November 2016 Passive Dividend Income

Another month is in the books. November 2016 has come and gone. While I’m not terribly happy that the wind is kicking up from the north and bringing cold weather, I am happy that some great companies continue to provide me with money from dividends that I can deploy to buy more income. Over time, I hope to build a nice stash of dividend-paying stocks that could take care of a nice portion of my expenses each and every month.

One of the greatest things about dividends is the fact that they come in whether I work or not. I had a few days off for Thanksgiving, but the companies that I own continued to do their thing, earning revenue that will hopefully be turned into profits, that will in turn come my way in the form of additional dividends. I have made a few sales to pay off some debt over the past couple of months, so I did not get as many dividends as I would have expected in November.  Additionally, Starbucks, which usually pays out in the second month of the quarter, is going to be paying off in early December. I’ll still get paid, just in a different month than usual. In spite of these facts, I busted through the $20 number in a month for the very first time since I started this journey last year. Here are the two payments I received in November 2016:

Taxable accounts:

AT & T (T)                                                                    $7.01

IRA

Omega Healthcare Investors (OHI)        $18.30

TOTAL for November:                                   $25.31

As you can see from the listing above, I not only smashed through the $20 mark, I received a Jackson and a Lincoln along with some change (that’s a $20 and a $5). My $25.31 set a new record for my dividend growth investing history. It now brings my total dividend income for the year up to $141.48, which is well above the $15.08 that I had earned at this time last year. Additionally, I only earned $5.41 in November 2015, so I earned nearly five times the dividend income that I earned in the same month just one short year ago. That’s a pretty impressive increase, from my standpoint, as I would have to earn about $125 next year if I were able to duplicate this jump for 2017. I don’t think I’ll quite get to this point, but it would definitely be nice to achieve.

My estimated dividend income for the next 12 months is now at $252.49. This is more than $20 a month on average, which would allow me to take off slightly more than an hour a month with my estimation that I’d need to replace $20 an hour if I were to live solely off of dividend income.

How did your dividend income shape up for the month of November? Did you have a year-over-year increase? Let me know in the comments.  I have updated my monthly dividend page to reflect these payments.  Also, if you’d like to follow my progress on a monthly basis, be sure to sign up to get updates.

Disclaimers: Long OHI; I am not a financial professional. Information listed in this post does not constitute a recommendation to buy or sell. It is intended for educational and informational purposes only. Equities can increase or decrease in value, and losses up to and including all money invested can occur. Consult with a licensed professional before making an investment decisions. 

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Using Dividends to Buy More Dividends

One of my long-term goals is to build up a decent amount of wealth that can produce a nice level of passive income over the long haul. While I’m not likely to get to the $1 million per year in passive income, I believe that several thousand, if not tens of thousands in annual income, is definitely doable over the next couple of decades. When trying to earn money in pajamas, one of the best ways to make this happen is through dividend income. This is passive income that accumulates as a return on capital from allowing great companies to use said capital to operate and grow their businesses.  As I’ve said before, passive income is the best income.

Earning more money is always a good thing. The bad thing about earning more money is the time that it usually takes to do so. There are, however, some strategies that can be used to make more money without putting in any additional effort. Investing for dividends is one such strategy. Here is an article that lists three great reasons for investing in dividend paying stocks. The final reason is key. Even stable dividends pay out more over time. “How can this be?” you might be wondering. The answer is simple–COMPOUNDING.

There is one step and one step alone that is required to compound the your gains, provided that the dividend is left stable by the company paying it out. This one step is reinvesting. There are a couple of different avenues that can accomplish the reinvestment of dividends. The first is through a DRIP program. The DRIP stands for Dividend ReInvestment Program, and in this situation, an investor automatically reinvests the dividend into additional shares of the company that originally paid out the dividend. This will basically increase the dividend payout by the annual yield. A dividend yield of 3 percent that gets reinvested will see the annual dividend payment raise by about 3 percent over the course of a year because the number of shares that our hypothetical investor has should increase by about 3 percent. This is an increase in income that’s more than inflation has been over the past few years–all without lifting a finger.

Several brokerages, such as TradeKing, allow you to automatically DRIP your dividends into companies that permit dividend reinvestment. TradeKing is currently offering a $50 bonus for new signups under my referral link listed above.  You would get $50 for meeting the requirements, and I would also get $50. You don’t have to sign up with my link to invest through TradeKing, but I greatly appreciate any support you might feel like giving. This bonus could be used to buy a share or two of many great dividend-paying stocks.

Automatic reinvestment is one strategy, but there is another. I use the DRIP in my Tradeking account, but I have to use the other strategy in my Loyal3 account because DRIPing is not an option. This involves stocking up on dividend payments until a certain minimum amount of cash is reached. The minimum investment through Loyal3 is $10, and I pay no fees for my investments on this site. You can check out my review of Loyal3 here.  Those who invest through a TradeKing, Scwhab, or any other investment account can also pool dividends to diversify. It’s probably best to pool until a decent amount of money is available so that you can keep the transaction cost to a minimum. For example, a share of AT & T costs around $40 a share right now. Through TradeKing, if you were to purchase only one share, you’d pay $4.95 in transaction fees, which effectively adds about 12 percent to your purchase price.  It would also eat up more than the $1.92 in dividend income you’d get in the first year. It would be year three before dividend income would exceed your transaction cost. If you were to hold off until you could buy 10 shares, the transaction fee would drop to slightly more than 1 percent of the purchase price, which will definitely help long-term returns.

loyal3-logo

I decided in January to use my dividends from my Loyal3 account to diversify. Any additional purchases would come from new funds, while dividend income would just sit until I reached $10 in the account. During the first week of April, I reached the requisite level to make my first purchase from my dividend income stash. I decided that I would buy shares of Unilever (UL), which is a massive international consumer goods company that produces everything from butter to deodorant. I again started to pool the dividends after making this small $10 purchase, except now, I would be adding the small dividend from Unilever into the equation. My first payment came in June, and added $0.08 to my account.  Admittedly, this was a very small amount of money, but it allowed me to inch toward another purchase a little bit more quickly.

I hit $13 worth of dividends in my account by the first week of July, as my payment from Coca-Cola pushed me across the necessary $10 threshold. Again, I put the accumulated dividends toward more UL. Last week, I got my second payment from Unilever, and it was up to $0.17 over the course of a quarter, still not a huge amount, but an increase over the course of three months that allows me to edge ever closer to another purchase. This morning, I awoke to find that a dividend payment of nearly $4 from McDonald’s had posted into my account. This brought my account total $11.49, and I made my third purchase of Unilever stock for $11. If all goes according to plan, I will see a payment of around $0.25 for the fourth quarter in December.

I admit that I’ve put more capital toward my account with Loyal3 over the past nine months, but it’s been great to see that my dividends are growing and allowing me to purchase additional dividends. Even if I never added any additional capital to my account, I should be able to grow my dividends as companies decide to give dividend increases and I reinvest my dividends. This is the power of compounding. Of course, I’m hoping to have enough capital available to pay my bills and to invest each and every month going into the future, but seeing additional dividend income come in without doing more than making a few clicks and keystrokes is positive reinforcement. It’s exciting to see my dividend payments going higher and higher over time.

Disclaimer: I am not a financial advisor. This article is not a recommendation to buy any security. It is intended only for educational/entertainment purposes.

I am long all stock listed in this article.

If you’ve found this article interesting, be sure to sign up to receive updates to the site at the top of the page. You can also follow me on Twitter.

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May 2016 Passive Dividend Earnings

It’s again one of my favorite times of the month–the time that I get to recount my passive dividend income that rolled in over the past 30 (or so) days. The month of May is over, and I again made some money while working on my day job and while sleeping at night. My dividend income was already ahead of all of last year at the end of March. April and May have just added to this amount.

While the amount is not terribly impressive, it’s growing over time, and that’s my goal. My goal is to build up a growing stream of passive income that allows me to handle many of my expenses when I get closer to retirement. Pennies today will grow to dollars tomorrow, and then into hundreds in a few years. My current forward annual dividend income is estimated at a total of $142.90. During the month of May, I was able to earn the following dividends:

Apple (AAPL):                               $2.24

Starbucks (SBUX):                     $0.09

AT & T (T):                                      $6.85

TOTAL for May 2016              $9.18

This dividend income from May brings my annual total to $42.46, which is well above my $20.91 total for all of 2015. I’ve currently more than doubled my annual dividend income.  I earned my first dividend from Starbucks in May, and I was able to add to both my Apple and AT & T payment from February. My dividend from AT & T was reinvested into 0.175 additional shares of the telecom giant. This DRIP will add $0.34 to my annual dividend income. I did not buy any new companies in May, and I am currently invested in a total of 10 companies.

My dividends from May were $2.91 more than my payout in February. This was an increase of 46 percent in just three months. I did not have a dividend payment in May 2015, so my year-over-year increase is not available. This comparison will start to be available in August.  The growth in my passive income is really exciting. I’m looking forward to the day when I can earn hundreds every month from my recliner. How did your dividend income look for May?

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March 2016 Passive Dividend Income

The month of March has ended, and it’s one of my most favorite times of the month–time to update my monthly dividend income. My previous monthly record was just a whisker shy of reaching double figures (a Hamilton in US currency terms), and as the third month of the quarter seems to be the most popular for companies that pay out dividends, I was expecting to finally hit this level for the first time, about eight months after receiving my first dividend payment of a whopping $0.64 from Apple back in August. The month’s payments did not disappoint. Here they are:

Kellogg’s (K)                               $0.57

McDonald’s (MCD)                   $2.71

Royal Dutch Shell (RDS.B)      $10.34

TOTAL dividend income for March 2016:     $13.62 

Dividend income for 2016:                               $24.38

This total might not seem like much, but it’s money that I didn’t have to work for. It’s also $13.62 more than I was making in passive income just 8 months ago. Over time, this money should start to add up. My payment from Shell went toward DRIPping 0.23 shares in RDS.A. I’m not sure why it went toward the A shares as opposed to the B shares, but this additional purchase should add $0.86 toward my annualized dividend income, which is now estimated at $124.18. Dividend income is passive income, which is the best type of income. My other dividends are sitting in my Loyal3 account waiting to be deployed when I reach $10 or more so that I can diversify into another great company. This should happen next week after April payments from Coca-Cola and Wal-Mart.

During the month of March, I also added $25 purchases toward Apple and Wal-Mart stock in my Loyal3 account and 4 additional whole shares of AT & T in my TradeKing account. These purchases are additional building blocks toward financial freedom. You can open a TradeKing account here and receive a $50 bonus for signing up, funding an account, and making a minimum number of trades.  Some of my capital for stock purchases comes from my use of SwagBucks. Every time I get $25 in PayPal cash from SwagBucks, I transfer it to my bank and then one of my brokerage accounts. You can sign up for SwagBucks here. I earn money just for searching and watching videos, and it’s money I earn while simultaneously watching TV–definitely an example of maximizing time to earn money in pajamas.

Disclaimer: I am not a licensed financial professional. Please use the information on this site for educational/entertainment purposes only. Be sure to check with a financial professional before purchasing equities.

Disclaimer 2: I may receive compensation if you decide to sign up for any of my affiliate links. Should you choose to do so, I thank you for your support.

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February 2016 Passive Dividend Income

Well, it’s my favorite time of the month. It’s time to look back and see how much passive income I was able to get from owning high-quality companies during the month of February. I owned no individual dividend stocks at this time last year, so anything is infinitely better than what I got from dividends in February 2015. I was able to deploy a little bit of capital over the month, so my income will hopefully grow even more in future months. I earned two dividends in February, and here they are, without further ado:

Apple (AAPL)                    $1.40

AT & T (T)                          $4.87

TOTAL for February:    $6.27

This was up from $5.41 in the second month of the last quarter, which was an increase of nearly 16 percent over the past three months. My AT & T dividend purchased 0.135 additional shares, which will add about $0.26 to my dividend payout when T forwards money to my DRIP in May. My total dividend income thus far in 2016 is up to $10.75, which is $10.75 ahead of this time last year. I also added some capital to Apple since the last payout, and it should grow. March should be a good month, as I will get paid by three different companies, including my largest holding. I should cross over the $10 mark for a single month for the first time. Hopefully, I can add a couple of zeros to this in the not-too-distant future.

I’m hoping to cross $10 of dividend income in my Loyal3 account that I can then use to open up another position. Starbucks (SBUX), Disney (DIS), or Unilever (UL) are the most likely subjects for this new position, but I’m waiting until I can make the purchase to decide for sure. Unilever has a higher dividend yield at the moment, and they sell stuff that people buy every day. However, the other two are likely to be able to grow their dividends more rapidly in the future because of low payouts. What would be the best buy in this circumstance? Let me know your thoughts?

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November 2015 Passive Dividend Income

One of the best ways to earn money in pajamas is through dividend income. This is truly passive income, as other people work hard to make money on capital that I’ve deployed. I worked hard to earn the initial capital, but I do not have to put in any additional effort to earn this income, other than a few clicks of the mouse and a few keystrokes to buy stock. While there is risk inherent with buying stocks, it’s unlikely that every dividend stock that I’ve bought will go belly-up in the very near term. Spreading the risk across several different companies is a great way to mitigate some of the risk.

November is now finished, and one of my favorite posts for the past several months is the post that allows me to look back at the growth of my passive dividend income over time. I’m building this income up with the deployment of $25 here or $100 there into high-quality companies that pay me to allow them the use of my capital. I received two “checks” (AKA dividend payments) during the month of November. While most dividend investors will not set any records during this month of the quarter, I did because of the addition of a new payer. Back in August, I earned my first dividend from Apple (AAPL). I earned a slightly increased dividend from Apple, but I also added income from AT &T (T). Here are the amounts that I earned over the month:

Apple (AAPL)                              $0.71

AT &T (T)                                    $4.70

November TOTAL:                    $5.41

TOTAL for 2015:                        $11.24

The $4.70 payment was reinvested into more AT & T stock, and bought me an additional 0.14 shares, adding $0.26 to my estimated dividend income for the next year. This is dividend growth that is totally passive on my part.  Next month, December, is setting up to pay me a record number of dividend payments with a record income. I’m looking forward to the next update as a result. How much dividend income did you earn in your pajamas last month?

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More Passive Dividend Income – T

Today, I had the opportunity to put some more capital to work toward some more passive dividend income that I can earn while in pajamas. I had $150 in additional capital that went into my TradeKing account this morning, and I decided to put it to work. My only regret is that I had to put the money to work on a day that saw a big uptick in stock prices. Of course, prices could go up tomorrow too, and there’s no guarantee that they won’t be 5 percent higher by the end of the week or the month. Prices are volatile, so I decided to put the money to work today and lock in some dividends that should pay off early next month.

In September, I purchased 5 shares of telecommunications giant AT & T. I saw where the ex-dividend date was in two days. I was hoping to add to this position in the near term, so this made my decision a bit easier. Royal Dutch Shell PLC was the other stock on my radar today, and I might try to buy a bit more before their next ex-dividend date if I have some capital to put to work. I had enough to purchase an additional 5 shares of AT & T. My total cost for this transaction was $171.20 with the $4.95 TradeKing transaction fee added in. This purchase brings an additional $9.40 to my annual dividend income based upon the current dividend of $1.88 per share ($0.47 per quarter). I now own 10 shares, and I plan to DRIP the dividends into more shares of T at this point. If the price stays where it is, this should pay of in about 1/7 of another share in early November.

This is nearly $0.80 per month, and it brings my total dividend income to nearly $58 on an annualized basis–nearly $5 per month. This might not seem like much, but it’s a start. If I go based upon an estimate of earning $20 per hour (which is not what I make, but it’s near the average hourly wage for an average American with the favorable tax treatment that dividend payments for middle-class people receives). That means that I can take about 15 minutes off each month, or about 3 hours at the end of the year. Every $20 dollars of dividend income earns me another hour of freedom. And the best part of this income is that I have to do absolutely nothing more to earn it. This is passive income at its finest, and as I’ve noted before, passive income is the best income.

DISCLAIMER: I am not a professional investor. Please consult one before investing in securities. You can lose money on stocks. Past performance is no indicator of future results. 

African Spurred Tortoise Edited

Stock Purchases

Last week, I wrote about the way I’ve earned money in pajamas with my first dividend in my passive income account. Passive income comes in whether I’m working or not. While I only earned $0.64 on my first earnings report, I’ve continued purchasing stock in some pretty strong companies the past week. I’ve been buying stocks through a Loyal3 account before this week.  I intend to continue buying the companies that Loyal3 services through their platform because of the fee-free structure. However, the biggest weakness with this broker is the fact that purchases are limited to the 65 companies that Loyal3 works with.

To broaden my horizons and purchase stocks that are not offered by Loyal3, I decided to open up an account with TradeKing, which is a low-cost online broker that allows users to make straight-up stock purchases for $4.95. They also offer options, but I am not comfortable utilizing this service at this point. Many passive income bloggers advocate saving up around a grand to minimize the cost. This is a good idea, but I had just $500 to invest after cashing in some US savings bonds that were purchased for me more than 20 years ago.  If I were to throw all of the funds that I had available at one stock on Loyal3 or on TradeKing, that would have put all of the money at risk if the one company I bought into were to go belly-up. I try to invest in solid companies with solid earnings and solid track records, but changes in the market can lead to crazy things like Bear Stearns becoming a non-entity in really short order.  I wanted to diversify quickly to cut down on the risk that comes from having all of one’s eggs in a single basket.

I threw between $150 and $200 into all of my Loyal3 holdings, with the exception of my latest purchase in Kellogg, which I am hoping to build to that level. I wanted to move into three different sectors of the economy that I had no exposure to. I wanted the companies to have a strong history of paying dividends. I also wanted to see that I was able to get stocks at a relatively good price after the recent drop in the market. The price/earnings ratio of each of these stocks is attractive based upon the broader market and based upon their own P/E ratio from earlier this year.

Oil and energy stocks have been hit hard in recent months as the Saudi government has been trying to squeeze American suppliers out of the market. I went back and forth between a purchase of Exxon-Mobil and Royal Dutch Shell. I decided to go with the latter. Shell (RDS.B) has not cut a dividend since World War II, and this includes all sorts of market conditions. With my $4.95 brokerage fee, I bought 3 shares at a total cost of $156.72, or just over $52 per share. The current annual dividend is $3.76 per share. I do not expect this to increase this year because of the market conditions in the energy sector. However, I also expect oil prices to rebound in the coming year or so.

via Wikimedia Commons, Ralf Roletschek, CC BY 3.0
via Wikimedia Commons, Ralf Roletschek, CC BY 3.0

My second purchase was in the financial sector. I decided to go with a Canadian Bank that started paying out dividends more than 25 years before the US Civil War started. The Bank of Nova Scotia has been paying investors since 1833, and they just announced an increase of their dividend to $0.70 in Canadian dollars per quarter. From what I’ve been reading, Canadian banks are more conservative than American banks because of regulatory requirements. Despite this conservative bent, the banks are quite profitable, and the “Big Six” Canadian Banks (a group that includes BNS) controls about 90 percent of the banking industry in our northern neighbor. BNS held their dividend steady during the 2007-2009 financial crisis, but they’ve been steadily increasing their payments to shareholders in the years since. I was able to purchase 3 shares, and with my brokerage fee, the total cost was $140.31. My 3 shares should bring approximately $2.19 per share in terms of the dividend payout, although this is subject to vary with fluctuations in the currency exchange rate.

My final purchase was an American telecom giant. AT &T (T) has been increasing dividends each year for more than three decades. They just purchased DirecTV, and along with Verizon, they are definitely a leader in the telecommunications industry. I went back and forth between VZ and T, and finally decided upon T. I purchased 5 shares of T, and these shares set me back $171.35. The annual dividend that AT & T pays out is currently $1.88 per share.

These three purchases give me international diversification in three solid companies from three different countries (four if you count the Anglo-Dutch nature of RDS.B). These companies have a strong history of rewarding their shareholders. They also gave me exposure to three different sectors of the economy. I chose to enroll in dividend reinvestment in each. Although my dividends will be small in the short term, each payment will go toward buying additional shares of these stocks. These partial shares will pay dividends as well, which will supercharge the rate of compounding. I don’t expect Shell to yield more than 7 percent for long, but in the short term, that should help me build my position a bit quicker than usual.

Combined, at the current payout rate, I should earn approximately $27.25 in additional dividends over the next year. This brings my annual total for expected passive income from dividends to $46.27, which is just under $4 per month. This is obviously well below my budget, but I plan to put additional capital to work and anticipate these companies increasing their dividends over time. I figure that I’ll need to supplement my retirement accounts and Social Security, and passive monthly income from dividends will be a great way to do just that. I now have positions in eight different companies, and I hope to build upon this in the future.

DISCLAIMER: I am not a licensed professional advisor, and the information on this site is merely for informational and educational purchases. Make sure to consult a professional before investing in securities, as you can lose money.