DDI Monthly Income Update: April 2012 / Back In The Saddle Again
Yeah, it’s been awhile.
As I’ve mentioned in several posts over the last few days, I got off to a rough start in the first quarter of 2012 due to some illnesses and other family issues. But the good news is that even while I was away tending to my family, the DDI portfolio just kept doing it’s thing. Not only did it continue to generate “daily” passive income, but the income continued to increase as well!
The best “surprise” of all (which really isn’t a surprise), is that while the DOW, Nasdaq and S&P were all barreling ahead, the DDI portfolio was right there along for the ride! After trading between $125-$130k for the later part of 2011, the DDI portfolio recently hit a high of just over $150k. While the portfolio has pulled back with the recent market declines, it remains comfortably in the mid $145k range.
April’s Income Results
We’re here for the passive income though, so let’s get back to the monthly income results for April. As the first month of the quarter, April’s results will tend to lag those of the second and third months…
April 2012 came in at $465.54, with payments from 37 separate companies giving the portfolio a synthetic “daily” payout. We’re also getting closer and closer to our $500/month income goal. Looking at the trends for May and June, I expect to see income of $515 and $640, respectively. When you take the quarter as a whole, as I’ve done in the past, it’s clear that we’ve met the $500/month goal on a monthly average basis.
I wanted you to know I’ve made a few changes to the portfolio recently that I’ll discuss in an upcoming post that should give the monthly income stream for month #1 a little boost – I’m confident we’ll get to $500/month across the board by the end of 2012.
Spreading Out the Income
As I continue to add more and more positions to the portfolio, there is less emphasis on the major pay-outs from Realty Income (ticker: O), Sabine Royalty Trust (ticker: SBR) and the various preferred shares. While Realty Income remains the largest source of income to the DDI portfolio with over $85/month, the income stream is becoming more diversified over time. I’ll be focusing on adding companies to the portfolio with increasing dividends, allowing for the income stream from the portfolio to grow organically, even during months when I’m not able to add new new positions.
Just Tell Me -What’s The Yield?
One metric that many people will look at when building an income portfolio is the overall yield of the income stream. This is not a bad metric, however it can be somewhat deceiving. Case in point, even if the income stream continues to grow as companies increase their dividend payouts, if the overall value of the holdings increases faster, the current yield will continue to drop.
I decided to take a look at the current yield of the portfolio – as of May 27th, the portfolio was valued at about $144k and the estimated income for 2012 is $6450, which gives an effective current yield of 4.47%
Of course I don’t want the value of the portfolio to drop just so that the effective yield will rise, so as time goes on, it will be more and more important look for additions to the portfolio that will increase the overall yield.
The side-effect of searching for higher yield is often a trade-off with adding more (implied) risk. The trick is to find those investments where the implied risk is higher than the actual risk. Finding those investments will often pay out with higher yield as well as higher capital gains – a true win-win situation.
Month Over Month Comparisions
Since I haven’t done a monthly income update in a while, I won’t give any month over month comparisons with previous or future quarters this month. I will return to these comparisons once we have a quarter of results posted on the blog. It’s always good to track the trends of the portfolio and I look forward to seeing these results shortly.
That’s it for the April round up. I hope you find these reports informative. Are you building your own passive income portfolio? Let us know what you’re up to by sharing your best picks or anything that’s worked well for you – I always enjoy getting your input and feedback.