Comments on: Earning Regular Income from Stock Investing via Dividends

By: Joe Wood

Joe Wood — Tue, 30 Dec 2008 02:18:15 +0000

Fantastic article. Another possibility I’ve never seen you expounded upon (sorry if I missed any articles) is residential real estate investment. The bubble has popped and interest rates are really low. Being a landlord can produce amazing regular cash flow, if you do it right.

Joe Wood
http://www.thecrustylandlord.com

By: Beginner Stock trading

Beginner Stock trading — Mon, 10 Nov 2008 09:07:25 +0000

Understanding the basics of stock market investing is crucial before putting any of your money at risk. This is true whether you are going to pick your own stocks, put money in mutual funds or hire a financial adviser or stock broker to do it for you.

By: Ethan Bloch

Ethan Bloch — Thu, 06 Nov 2008 07:32:49 +0000

Great information. Thanks for sharing. This should be sent out in a national letter to all soon-to-be retiree’s ;p

Cheers.

Ethan

By: Matt Caldwell

Matt Caldwell — Sun, 02 Nov 2008 00:28:41 +0000

Excellent post! I’ve actually been looking into the possibility of dividend investing for a while now, but I don’t really have any extra disposable income to dump into the market right now. Nevertheless, I was wondering if it is feasible to earn a regular stream of supplemental income from dividends over a long period of time, and this seems to have answered my question. Thanks!

By: Sherilan

Sherilan — Wed, 29 Oct 2008 21:10:18 +0000

Thanks Trent, I have this on reserve at the library. Any plan to review “The Little Book of Bull Moves in a Bear Market,” “The Little Book that Saves your Assets,” or “The Smartest 401K Book you will ever read?”

By: George

George — Wed, 29 Oct 2008 18:29:09 +0000

@JIM – MLP distributions (aka dividends), for the first 10 years or so, do a “return of capital” that’s prorated and reduces the basis of the units (aka shares). Thus you only pay taxes on the amount of the distribution that’s above the prorated “return of capital”.

The paperwork is confusing if you make lots of trades while also collecting distributions, but, if you buy-and-hold, then the MLP has already done the legwork and it’s no worse than filing an extra tax form with your 1040 long form that is as simple as the 1040EZ.

MLP distributions, by law, need to be most of their profit (like 90%). At current market prices, most MLPs are yielding 8-12%. The ones I’m familiar with are APU, OKS, and AB (First two distribute energy and the third manages money).

By: George

George — Wed, 29 Oct 2008 18:13:53 +0000

@Cindy – you ask for a raise, look for a better paying job, and reduce expenses. Buy a few shares in a DRIP and let it grow.

By: Sharon

Sharon — Wed, 29 Oct 2008 01:42:20 +0000

When you are young you can DRIP, which is where the dividends are reinvested in buying more of the stock, which avoids any fees to purchase the stock. Then later you can switch to receiving the divident.

By: Cindy

Cindy — Tue, 28 Oct 2008 20:32:30 +0000

This sounds great but if you only have enough income to get check to check how do you accumulate anything. Also if there is an emergency which seems to always come up when you get ahead there is never any extra. What do you do?

By: Oliver

Oliver — Tue, 28 Oct 2008 19:43:44 +0000

There is the downside that you have to pay more taxes on dividends earlier than if the company was to reinvest all the earnings (due to the time value effect).
Also, the beneficiaries wont have to pay any capital gains tax at all if you pass away.
It is good to have stocks that pay dividends as part of a diversified portfolio, but I wouldn’t base it on dividend paying stock.

By: Kevin

Kevin — Tue, 28 Oct 2008 19:15:46 +0000

@No Debt Plan – the 15% long-term capital gains rate applies to dividends from domestic corporations through 2010. So we have that rate for this year and 2 more after.

Actually, if you’re in the normal 10% or 15% bracket, you pay 0% on these dividends!

@Jim – some REIT dividends are “qualified” which means they are taxed at the lower capital gains rate, but in my experience, most are taxed as “unqualified” dividends. LP’s have some tax loopholes, I guess, but the paperwork is daunting if you don’t hire a pro, and most of the time the losses are limited anyway since they are classified as “passive activities”.

By: Nate

Nate — Tue, 28 Oct 2008 18:59:55 +0000

I’m definitely going to have to pick up this book from the library. I’ve been looking into buying Stocks for some time. I already own one piece of Real Estate, maybe it’s time to get into the stock market as well.

-Nate

By: Jim

Jim — Tue, 28 Oct 2008 18:35:54 +0000

I’ve been more interested in buying high dividend stocks right now. I’m looking at both high yield large caps like AT&T, GE, Verizon, CAT, Cocacola, etc and also high yield REITS. There are some good REITS with sound financials paying very high yields right now. HRPT Properties (HRP) is yielding over 28% at the moment. Downside with REITs is that the earnings and dividend rates aren’t quite as dependable as a solid Dow stock.

@George, you said: “REITs and MLPs also have tax advantages that can be helpful, provided you’re willing to deal with the paperwork”. What are those tax advantages??

Jim

By: Stop Getting Cheated

Stop Getting Cheated — Tue, 28 Oct 2008 16:09:41 +0000

I have previously been a huge of dividend stocks, however with the credit crisis and volatility of the market I fear companies will plow profits back into the business to increase their market share, rather than extend dividend payments to shareholders.

With the market so hammered, I have been buying leveraged ETF’s that are selling at such low prices. I think there are great buys in all of this hysteria.

Of course, what fits for me may not look good at all to others.

By: Beauregard Picklefeather

Beauregard Picklefeather — Tue, 28 Oct 2008 16:07:46 +0000

What do y’all think of dividend reinvesting, whereby instead of taking a dividend payment every quarter, that money is automatically invested in additional shares. It’s like quarterly dollar cost averaging.

By: No Debt Plan

No Debt Plan — Tue, 28 Oct 2008 15:18:04 +0000

@Kevin: Wouldn’t this (the 15% rate) only be true as long as the Bush tax cuts hold? Or am I thinking of something else?

By: Kevin

Kevin — Tue, 28 Oct 2008 14:58:28 +0000

I have a couple clients that hold dividend paying stocks and they do quite well living off that income.

Contrary to what Brandon says – they only pay 15% income tax (same as long-term capital gains) on that money. It’s a great way to earn a living if you can do it.

By: Dividend Growth Investor

Dividend Growth Investor — Tue, 28 Oct 2008 14:56:11 +0000

Dividend Growth Investing is a nice strategy where you build a diversified portfolio of stocks that have a long history of consistently increasing their dividends for over 10 to over 25 years. The dividend growth from most such companies has been higher than inflation over the past couple of decades.

Furthermore, stocks that increase their dividends regularly have outpeformed stocks that don’t increase their dividends or even worse cut or eliminate them.

The Dividend Aristocrats list is pretty much a very good starting point to research.

http://www.dividendgrowthinvestor.com/2008/10/dividend-aristocrats-are-outperforming.html

By: Frugal Dad

Frugal Dad — Tue, 28 Oct 2008 12:59:45 +0000

This is an interesting concept. Combined with savings in high-yield cash-based vehicles, Treasuries, etc, I could see living off dividends a very real possibility.

By: Million Dollar Journey

Million Dollar Journey — Tue, 28 Oct 2008 12:11:21 +0000

Another thing to note is that dividends are paid with after tax dollars by the corporation which means a tax break for dividends received by the investor. That’s what I base my whole leveraged investing strategy on, buying strong dividend paying companies that increase their dividends on a regular basis.