To help our investors build a safe passive dividend income stream through automated, emotion-free analysis and investment in Dividend Paying Stocks, REITs, and MLPs
Passive Income for Busy Professionals
Dividend Cultivator was born out of an elusive problem: Generating passive income. Like many people, I earn a salary. In exchange for that salary, I provide my time and expertise as a software engineer to help my company grow really fast! And it is hugely rewarding!
However, I wanted to build a mostly passive income stream outside of traditional retirement accounts like 401(k)s, 403(b)s, and the vast assortment of IRAs (Traditional, Roth, SEP, etc.). I’ve evaluated and tried various things like running blogs, building apps, and selling products, but nothing has really stuck, nor is it really “passive” in a way that I need it to be as an entrepreneur Father of 4 boys.
For a few reasons, I have always been intrigued by stocks and real estate investment; whether it meant purchasing an investment property while finishing my MBA, learning how to program in order to create statistical models for pricing stock options, underwriting investment property loans for single individuals up to multi-billion dollar REITs, or creating a successful property management software startup. I believe that accumulating these assets are one of the most stable and predictable ways to generate income and accumulate wealth.
This is an intentionally high income, moderate dividend growth focused site for various reasons. We happen to like REITs a lot, due to the legal structure and requirements for REITs and how that impacts the ways we can value them. REITs in the US are required to distribute 90% of their income as dividends. They can choose how frequently they’d like to distribute them, however they are forced to pay them otherwise they face a penalty. This dividend stream is effectively a perpetuity of (hopefully) consistently rising income. To finance geeks like me, this is one of the easiest things to value.
Enter the Dividend Discount or Gordon Growth Model. This finance model takes an income stream, makes some assumptions on growth, inputs the company’s cost of equity and discounts that future income stream into a current value. The nice thing is that with current software and data sources we can extract dividend streams, costs of equity, and other inputs nearly automatically.
Every week, we gather data from various providers, updates our list of dividends, costs of equity, and values each stock that we track. We identify stocks that we believe to be under or overvalued based on our assumptions of growth given their history. We also attempt to identify the “Quality” of the dividend income stream based on various financial and statistical factors.
I sincerely hope you find Dividend Cultivator useful in your passive income building endeavors and welcome any feedback!