Dividend Investing - Month 7

The month of September provided a 1.55% increase in avg. monthly dividend gain.  Although its a small gain, it is STILL a gain!  I also keep in mind that I get a whopping 2-4% max. increase in my salary ONCE a year with my day job. 

At this point in time, I am still concentrating my efforts on debt reduction.  High payout ratios for our dividend stocks are not sustainable and usually end in tragedy.  I think the same about me with my personal debt.  If I lose my job and am still forced to make interest payments on loans, what will my payout ratio become?  I don't even want to think of the figures.

A few stocks I will be following for October, MCD, INTC and NSC.




Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Real Estate: Real-life risks associated with leveraging.

A while back I wrote an article called "Cash vs. Mortgage, and a Scenario." There I explain a few key differences between paying cash for investment properties, or mortgaging them.  Today I reviewed my real-estate portfolio and was in shock about how much risk I am really taking on.  I want to provide insight for my viewers to see some real-life examples and to further motivate me to pay my debts off!

I went into my investment properties with nothing down, since I really had nothing to give.  This leverage allowed me to take on long-term debt without using any short term cash.  Having three properties in the portfolio provides 8 renting possibilities.  Assuming no property destruction and no tax benefits, here are the 8 outcomes:

As you can see above, vacancies result in serious financial consequences.  To help minimized risk, I have tenants sign 1-year leases which are staggered so the possibility of multiple vacancies is reduced.  But still, things still can happen that can put me in a bind.  Over the years I have established a hefty emergency real-estate fund for tough times ahead (though this could be easily wiped out should multiple vacancies occur over extended periods of time).

Having real-estate debt has always put a damper on my dividend investing contributions.  I often opt to pay additional cash onto the principal over purchasing a good-valued dividend stock.  This results in less long-term debt and risk.  If I manage to pay off the properties, here is how the 8 outcomes would look like:

After reviewing the chart, the risk here is almost non-existent.  All 3 properties would need to be vacant in order to have a negative cashflow!  If this was the case for me every month I would have a much easier time getting additional properties or helping the dividend-investing portfolio.

It is important to note; that when vacancies occur there are always repairs that need to be done (or house cleaning).  This is usually a minimum of $150 if you have a professional involved.  Insurance and taxes have been included in the scenarios above, making the data easier to digest.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Rental Property - Ranch House 2

Description: 3 bed, 2 bath, 1500 square feet, 1 acre.

Major work completed:
Everything, built this house from the ground-up.

Financial Information:
Estimated monthly cash-flow: $240.43

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

To protect the tenants and their identities, this is only a visual representation of the rental property, not the actual home itself.

Dividend Investing - Month 6

The average monthly dividend payment experienced a significant increase this month.   A 16.77% jump was the result of making a quick sale and investing the proceeds into other companies.

I have been good so far at separating my emotions from the facts and focusing on the RRR values of my positions.  As mentioned in my previous post, the RRR value of WMT just couldn't cut it anymore, and I had no problem dropping this position and picking up new ones to take its place. 

I figured my emotions wouldn't get in the way of the transactions but sometimes you just never know.

Using my RRR theory about evaluating stocks, price gets pushed to the side and allows me to focus on the long term benefits of my positions.  This is the average monthly dividend payments!  Watching stock prices constantly rise and fall make me dizzy, while watching these payments consistently rise gives me hope for the future.  But do remember, higher stock prices lead to lower RRR values ~ which will help you sell when stock prices go up.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

1 Sale = 3 Purchases

I sold half of my holdings in WMT and purchased CVX, TCAP and UHT this month.  This will help my dividend income stream while providing additional diversification in the portfolio.

WMT: I set a personal price target of $68.50 for WMT and as it stands, has been overvalued for a bit.  With the release of their most recent earnings, I knew stock prices would decline if it didn't beat the 'stock analysts' expectations, so I had to be proactive and sell.  Seeing a yield of 2.15% didn't slow me down either...

TCAP = Triangle Capital has a great management team and if you visit Pulling ourselves up financially you can see a good fellow blogger's review of the company.  Using my dividend investing strategy, TCAP had an RRR value of 10.05 at time of purchase.

CVX = In my opinion this stock is way under-valued.  With a 26% payout, there is lots of room for the dividend to grow over the years.  The RRR value was 11.88.

UHT = a REIT that deals with hospitals and other medical facilities, this great dividend play had a yield around 5.75% and an RRR value of 14.50

In case you didn't know, the RRR is simply pairing up the payout ratios with the dividends themselves to measure the "Risk Reward Ratio".  You can learn more about the strategy at here on my blog.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Dividend Investing and Politics - How will it affect you?

It was recently announced that Mitt Romney's Vice President pick is Paul Ryan.  For those who don't know, Paul Ryan places a HUGE emphasis on fixing our country's fiscal crisis.  If elected, 2 major changes to our tax code could take place and have great impacts on our investing strategies.


1)Ryan "promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax." He believes that double-taxation on the American people is unfair.  Period.

2)Ryan "wishes to replace the corporate income tax – currently the second highest in the industrialized world – with a border-adjustable business consumption tax of 8.5 percent. This new rate is roughly half that of the rest of the industrialized world."

What impact would this have on the way we invest?  Let me dwell on the first point.  No taxes on dividends?  Awesome- more money we can keep and continually re-invest for greater compounding returns.  Not capital gains taxes?  Great when stocks go up we can sell and keep all profits and invest into stocks with lower p/e ratios or discounted stocks etc.  We would also be able to sell our rental properties and use all of the profits to invest in cheaper rentals as well, without worrying about our profits being taken by the government.

Now with the second point... Current corporate tax rates sit around 39.2%, putting the United States rate just below Japans 39.7%.  Now imagine how much more profitable companies can be if they had their tax rates slashed by over 30%...  This provides a lot more room for growth of our dividends and capital, which again, wouldn't be taxed.   =)


If Romney and Ryan make it to the white house, how do you think your investment strategy will change?  If Obama and Biden are re-elected, will your strategy change as well?

My Secret Cash Machine

Over the past few months, I have been developing a way to supplement my dividend purchases through means other than rental property cashflows.  This now generates 97% passive income and has been a great way to help diversify my income stream.

My initial investment was 60$ which was really not intended to be an investment at all.  It was more like an entertainment expense.  I now generate $5-10 steadily (minimum) per week here, which may not seem like much, but when re-invested for dividend stocks and compounded over time, this could be big, as items sell from $1.25 to $250.00

Problems:  The game company charges a 15% sale fee for every item.  My money is then sent to an account with the company that can only be used to buy their products, and never withdrawn. So when I choose to move the proceeds of each sale to my paypal account, the company charges an additional $1.... If caught using a robot my account will be banned permanently.  The "97%" is a problem because 3% of the time I need to look at my robot's findings and determine how valuable each item is and whether it would result in a successful sale.  I prefer 100% passive income but this is close enough.

I can only have 10 auctions up at once, many of which may not sell.  This of course is another problem...  Technically the electricity usage and the fee for having internet service will eat up a lot of the income too, but since I travel for a living the hotels always have this provided =)

Opportunities: I could use my robot for much longer and generate more potential income, but I don't want to put my account at risk too much for the moment.  I could also buy 10 accounts and run 10 robots simultaneously, but this would probably put a lot of stress on my hardware.  And as a last opportunity I can play the game manually like a normal person and have fun beating up on monsters and finding my own goodies.  This is a great way to keep my entertainment expenses down to a minimum and possibly make some legitimate cash on the side.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Additional Disclaimer: Cheating is against the video game company's EULA and will result in a permanent ban on your account.