Passive Income – October 2013 Update

Just a couple of months back from the present now! And that break last summer is but a distant memory! 

My favorite post of the month is my monthly passive income update as it shows each month how I am getting a step closer in developing enough streams of passive income to supplement my working income and achieve financial independence. I’ve been steadily increasing my projected income, so let’s see how October actually turned out!

Passive Income:

Lending Club: Well that sucked! Hitting my lowest amount since April, my Lending Club investments definitely took a hit right on the chin. However, there is no reason to mope considering I still earned $126.92 of net interest during the month. Must be tough to have triple digits of passive income from just one of my investments in the bad months! That being said, even with a down month I am increasing my account balances each month setting myself up to continue to snowball the passive income. I would expect each reinvested $100 to bring me an additional $10-12 per year of net interest income. With a few more years of compounding like this, it will be great to see the monthly amounts grow.

As the end of October, my weighted average interest rates were 17.95% and 15.30% 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 begin 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 October, my overall internal rate of return was 12.37% across both accounts. Again, not bad for a down month!

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 October Lending Club update.

Prosper Marketplace: Steady Eddy here continued to rock out the consistent net interest with another solid month. During October this new account earned $18.01 of net interest income, just a tick higher than in September and August. Since I’ve recently added some more capital in this account, I am expecting the net interest number to start increasing over the next couple of months as those dollars get invested. At the end of the month, my average interest rate of the notes invested in is 22.04%. I am really making great progress on my 2013 goal of $120 in net interest from Prosper, although I need to average almost $19 per month in net interest income to exceed my goal. If you haven’t yet, check out my full October Prosper Marketplace update.

Dividends: During October, I received dividend payments from five of my holdings, American Realty Capital Partners (ARCP), Cisco Systems (CSCO), Coca Cola (KO), Philip Morris International (PM), and Prospect Capital (PSEC). My dividends dipped to $63.71 in October, as it is not one of my higher paying months, and the details can be found below:

• ARCP: $7.17, reinvested into 0.567 shares
• CSCO: $8.75, reinvested into 0.387 shares
• KO: $10.64, reinvested into 0.280 shares
• PM: $18.80, reinvested into 0.217 shares
• PSEC: $18.35, reinvested into 1.597 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 twelve-month dividends increased to $1,258.07 from $1,239.48, an increase of $18.59. Pretty spectacular to see how compounding increases my projected income on a monthly basis!

Passive Income Summary:

October was a down month from a passive income perspective for a couple of reasons. The first is the cyclical nature of dividend payments. In September I received over twice the number of dividends than I did in October. Nothing changed with the quality of my investments, just month companies do not pay out monthly. The second factor was the hit to my interest income numbers from Lending Club as I got hit with some charge-offs and defaults. This is just the nature of the biz, and I expect to continue to grow these accounts. Important to note is that I beat the previous period (October compares to July) by not quite $3 of passive income. So even with a down month I am continuing to grow my passive income!

These quarterly swings are normal for those relying on dividends to produce passive income. As I said above, most dividend payers pay out quarterly thus creating the illusion of dips on a monthly basis. Because of this illusion of declining passive income due to timing, I’ve added a trailing three-month average to the chart below. This average will smooth out and better reflect the growing stream of passive income I am generating with my investments.

Overall, the down month did give me some pause as it comes to hitting my 2013 passive income goals. As of the end of October I need $575.78 of passive income, with $303.75 of it required from Lending Club. Knowing that November will be a big month for dividends, I can only hope my peer to peer lending accounts can pick up the remaining slack!

And with that, we’ve reached capped off another passive income update. Without a ton of time or energy my investments earned $208.64 of total passive income for me during the month of October! What types of investments have you found successful in generating a consistent and increase level of passive income?

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 progress on my 2013 goals on the Goals page.

Flickr: USDA NRCS South Dakota