I can’t express how much I enjoy tracking my passive income. I’ve got spreadsheets galore where I built odd little data sets with charts and other analysis. Keeping with that, reviewing how my passive income is growing is a tremendous joy and something I look forward to as I expand my asset base. While the accounts covered here on this blog are not the entirety of my financial picture, they are certainly the most fun to write about and discuss! Diversification and balance are paramount with investing, and developing a stream of passive income to supplement my working income and help me to achieve financial independence is the goal with these particular investments.
I set goals for myself not quite a year ago, and revised them when it became clear I was going to crush those goals. Part of goal setting for me is to challenge myself to go places they didn’t think were possible, to learn and expand my knowledge base in things I am unfamiliar with, and to stretch myself in ways I wouldn’t have expected. I will be sharing my goals for 2014 in the next week or two, but first, let’s review December’s passive income, and see how I measured up against my 2013 revised goals.
Lending Club: As I highlighted in more detail in my December Lending Club post, I ended the year with a record-setting month! I was concerned I might not hit my 2013 goal, so I was extremely surprised by the margin in which I actually achieved my goal. Requiring $163.74 of net interest in December, my two accounts earned a combined $186.79, going over my goal by $23.05. Considering the late notes and the expectation for charge-offs, it was a surprise to have hit that high of a total for the month, far exceeding any previous month’s total. Combined, my Lending Club accounts earned a phenomenal $1,503.05 of net interest for the year.
As the end of December, my weighted average interest rates were 17.95% and 15.35% in my Roth IRA and taxable accounts, respectively, giving me the potential for high returns over the course of the next few years. I would expect that those two averages continue to move towards one another as the loans I’ve been able to select are averaging in the mid-17% range. For the month of December, my overall internal rate of return (IRR) was 18.04% across both accounts. For all of 2013, my IRR for both accounts combined to be 13.08%. Not bad for an alternative, passive income producing investment!
Important to understand, I calculate my monthly net interest amount to be interest received less any charge-offs, defaults, and services fees in the given period. If you haven’t yet, check out my full December and Year-End Lending Club update.
Prosper Marketplace: I opened my account at beginning of May, and since then, it has far exceeded my expectations for the year, even after I set a fairly aggressive net interest goal. As with the November, my monthly net interest increased again as my capital contributions were invested and began to kick off payments. Needing only $13.41 to hit my goal, I flew by with $27.90 of net interest during December, a further $3.46 over November’s amount.
Unfortunately, I am starting to see some issues with getting all of my contributions and payments invested, and will need to explore different options to ensure I don’t hurt my returns with excess cash drag.
At the end of the December, my average interest rate of the notes invested in is 21.49%. Over the course of the year since I opened my account, I was able to earn $134.49 of net interest and a return of 15.88%. If you haven’t yet, check out my full December and Year-End Prosper Marketplace update.
Dividends: As I mentioned last month, for many dividend growth investors, the March, June, September, and December months are the largest of the year. Given my current portfolio makeup, I currently receive the highest level of dividends during the February, May, August, and November period. So with that being said, during December, I received dividend payments from six of my holdings. Those holdings were Aflac (AFL), American Realty Capital Partners (ARCP), Coca-Cola (KO), Lorillard (LO), Prospect Capital (PSEC), and TAL International (TAL). My dividends received for the month totaled $94.29, down from November’s high of $145.83, and the details can be found below:
- AFL: $11.24, reinvested into 0.169 shares
- ARCP: $7.49, reinvested into 0.602 shares
- KO: $10.72, reinvested into 0.272 shares
- LO: $21.99, reinvested into 0.432 shares
- PSEC: $18.71, reinvested into 1.65 shares
- TAL: $24.14, reinvested into 0.439 shares
As with previous months, I plan on directly reinvesting all my dividends until my annual dividend income falls between $2-3,000 per year, allowing me to reinvest more selectively a few times per year.
When factoring in the dividend reinvestments mentioned above, and any dividend increases to my portfolio, my forward 12-month dividends increased to $1,285.19 from $1,278.28, an increase of $6.91. Pretty spectacular to see how compounding increases my projected income on a monthly basis! I’ve added the below chart to show the both the dividends I’ve received each month and the increases in forward 12-month dividends.
My goal for the year was $1,000 in dividends and with a solid month of December, I was able to just hit my goal. During the year I earned $1,005.94, only possible through dividend raises and the additions of some capital throughout the course of the year. As a means of comparison, in the first quarter of 2013 I received a total of $135.37 in dividends, while in the fourth quarter I received $303.83, an increase of $168.46.
Passive Income Summary:
As I’ve done in the past couple of months, I like to examine the cyclical nature of my passive income due to timing. Smoothing out the trends of income is important to me, so finding a good means of doing this was something I worked on before deciding to do a three-month moving average. This will allow me to see my growing passive income stream while helping to erase the swings in timing from dividends and the somewhat choppy nature of peer to peer lending. Tracking the entirety of 2013, the chart below shows my moving average, as well as the individual income from each of the underlying investments:
I like to compare my “quarterly average” of passive income to reflect my growing stream of passive income. For December, this means comparing my three-month moving average to September’s three-month moving average. I ended the year with an average of $275.97, an increase in passive income by $15.35 over September’s $260.62. Representing an annualized increase of almost 24%, I am quite pleased with my continued progress. Looking forward, each month and quarter will not be as consistent in progressing, but over time, my gains will be noticeable.
2013 Goals in Review
For me, my goals were a stretch, and to hit all of them in the last month of the year was exhilarating and quite thrilling. A couple of months ago, in October, I thought my ability to hit my Lending Club goal was going to be smoked by a few lower months of net interest. Additionally, I couldn’t have projected such high performance from my Prosper account or how quickly the dividend income can pile up when investing in quality companies at solid valuations.
With all three investments combining to produce $2,643.48 of passive income, I exceeded my 2013 overall passive income goal by 1.67%. Prosper did the heavy lifting by not having any defaults in the first eight months of its existence, and exceeded its goal by 12.1%. I increased my trailing three-month average from $113.52 in March all the way to $275.97 in December. While I can’t ever reasonably expect to have a 143.1% increase over the course of a year, this bodes well for the start of my passive income journey. Planning for my 2014 goals is underway, and I am excited to share them in a week or two.
And with that, we’ve reached capped off another passive income update. Without a ton of time or energy my investments earned $308.98 of total passive income for me during the month of December!
Don’t hesitate to look around; you can find details on the various aspects of my passive income pieces under their respective pages, Lending Club, Prosper, and Dividend Growth. Additionally, you can find all of my monthly updates under the Passive Income Updates page, and all my monthly updates and incremental progress towards my 2013 goals on the Goals page.
Did you crush your 2013 goals? How do you plan on using progress made in 2013 to push further in 2014?
Flickr: Peter Thoeny