Dividend Report February 2016

I invested heavily in HCP in December. It is my largest position, and it saw a huge downturn this past month. They are still holding on to their dividend payouts, and I'll hold on to the stock as long as they do. The large position means that the middle months of each quarter will generate a good amount of income.

COP cut dividends, and the company is on my sell list. The price is heavily tied to the oil price. I plan to sell on an (oil) upswing and use the proceeds to grow one of my other positions. I'm still exposed to oil with CVX, which has maintained and not grown their dividend.

The reason I called this blog Active Passive is exactly because I have to stay active to generate passive income. I wish I only picked winners and could just buy and hold, but it doesn't work that way.

Other stats:

• Dividend income: $ 721.70. Slightly higher than what I expected, due to currency fluctuations affecting RY payout.
• Trailing 12 months: $ 4,835.76.
• Forward 12 months: $ 5,581.96. This is a drop from last month, as COP cut their dividends.

In March I expect $ 436.10 in dividend income. I've now saved up two months worth of dividend income and plan to make a purchase in March.

Tax-Free Dividends in Retirement

 I'm not a tax adviser. I hear things, read up on them, and apply them to my situation. I hope this can help some people out. Do your own research or get professional help.

Many people have standard 401k accounts. It's great as it gives you a tax break now (more money to invest!), but you'll pay taxes when retire and start withdrawing. The idea is that your income is lower during retirement, and hence you'll be in a lower tax bracket. Sounds great. But have what will your income be in retirement. A disciplined dividend growth investor may end up with a sizable portfolio and passive income.

From: http://www.tax-brackets.org/federaltaxtable

Tax Bracket (Single)	Tax Bracket (Married)	Tax Bracket (Head of Household)	Marginal Tax Rate
$0+	$0+	$0+	10%
$9,225+	$18,450+	$13,150+	15%
$37,450+	$74,900+	$50,200+	25%
$90,750+	$151,200+	$129,600+	28%
$189,300+	$230,450+	$209,850+	33%
$411,500+	$411,500+	$411,500+	35%
$413,200+	$464,850+	$439,000+	39.6%

If you're building up a passive income portfolio for several decades, it's not that difficult to end up earning between 9k and 37k a year in dividends. So you have your dividend income, probably taxed at the dividend rate, currently 15%.  Then you have your 401k income, and any other pension, which I believe is taxed at the normal income tax rate per the table above.

The other thing is deductions. When you're working and you have a mortgage, you have some nice deductions to offset your income. When you're retired and possibly paid off your house, you no longer have many deductions.

So look into hedging on the tax rates, as they are extremely low in the US compared to other nations, and with the deficit as it is, there's a chance taxes will rise over the next decade or so. Regardless of which party runs the government. To hedge on tax rates, think about some ways to earn income tax free. Roth accounts like Roth IRA or Roth 401k are good vehicles. In those accounts, seek out the dividend paying funds or individual stocks if you have the option. If your passive income portfolio brings in 20k, 2.5k could be lost to taxes right away, or more if taxes increase. With tax free income, you pay taxes now, but all proceeds come out tax free, including dividends.  Check it out!

Two Div Picks to Spend Your Tax Refund On

Many people get a refund thanks to overpaying taxes all year. I try to minimize my over payment, as I'd rather invest throughout the year, but I usually end up with a refund. Instead of spending the refund, consider putting it toward dividend stocks. Even $500 can go a long way over 30 years. Of course, if there's high interest debt to be paid off, do that first. But don't see the refund as a bonus. After all, it's your own money!  The government just held on to it, interest-free, for up to a year. So now it's time to put that money to work.

Top stocks in the Active Passive screener are: CFR and LLTC. Both have a score of 19 out of 20, good yields, good payout ratios, a history of paying and growing payouts. Plus they're both at least 10% below their 52-week high. Take a look, do your research, and see if they're a fit for you. I have no position in either of these, and don't plan to buy in the next two weeks.

Last time, in October, I had CFR on the list, along with NEE. I bought NEE in December.

CFR details.

And LLTC.