As I am digging my way out of debt, I’m beginning to ask myself, “What’s next?” I know that job security is at an all-time low and I’m very fortunate to have employment with a reputable company. However, based on the current economy, my employment could end at any time. I have known quite a few people that have expressed their confidence in their job security, but a few weeks later, their boss said ‘see-ya’. The way to defend your finances from this scenario: passive income.
What if you were completely dependent on your current income? Maybe you’re even living paycheck to paycheck. All of the sudden, you lose your job and your income has plummeted to $0.00 a month. It gives you a pretty sick feeling doesn’t it?
Now, what if you have developed a passive income that generates an extra $2,000 a month and is completely independent of your regular day job? Losing that job wouldn’t be quite as frightening would it? Sure, you’d have to pinch some pennies, but you could survive.
Today, one of the most popular forms of passive income is dividends. Simply put, dividends are consistent quarterly payouts from companies to their share holders. If I owned a stock that paid dividends, I would receive a check from them after each quarter.
Years ago, it used to be quite common for companies to pay a dividend, but more recently, it has become popular for a company to worry more about growth and improving the value of the stock rather than payout earnings to their share holders. But, there are still some great companies that offer dividends. If they do well, not only will their stock price increase (which increases the value of your portfolio), but they also continually pay those dividends.
2011 Stock Picks
After reviewing the list of stocks that offer dividends, I am considering these for my portfolio. As a sidebar, if you’re considering a stock purchase, make sure that you use this TradeKing promotional code for the best deal.
CIM is my top pick. This is a fairly new company, but they obviously pay out a great dividend and have seen consistent growth in the past couple of years.
MPW is a real estate operations company that mainly works with health care facilities. This company has a solid foundation with a debt/equity ratio of 0.41, plus the health care field is on the rise (thank you baby-boomers). Also, the company has shown constant growth of the past few years (see below)
BKCC jumped out at me as well. Their debt/equity ratio is only 0.32 (meaning that they have far more equity than debt), plus there is a consistant rise in the stock price.
SPH and MO have a smaller dividend, but both of these companies has shown a tremendous increase in their stock value in the recent past. If this increase continues and they continue to pay out their dividend, there is simply no downside to this move.
If these stocks were purchased today and their stock price did not move up or down, you will still earn a profit because of the dividends! This is why it is considered passive income.
In the short term, this will not create unbelievable wealth, but over time, these dividend earnings can be put back into the market, and then you begin to benefit from compound interest. That is a beautiful thing. Before you know it, you’ll have created a healthy passive income.
Do you have any thoughts about my portfolio considerations?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.