What is Investment ‘Income’ and How Do You Get It?

Clients consistently ask what they are receiving in “income.” What they are really asking is how much money they are receiving through the interest and dividend income of their investments.

For example, say you own a home that you rent. Your tenant pays you monthly rent. You then use that rent money to pay expenses, such as repairs and maintenance to the home, as well as a mortgage payment to the bank for the loan on the rental property. Once you pay those expenses, the leftover money is your “income.” It’s yours to spend as you please.

But what happens if you spend all of that rent payment on what you please and you skip paying for repairs, or you skip paying the mortgage? Your rental house will eventually be foreclosed upon by the bank (and the city for not paying taxes), and you will lose the property.

Comparatively, be wary of companies with too high of a dividend yield – the “income” –relative to their price. Companies like that, with unhealthy balance sheets, may be forced to cut their dividend, which may result in a further reduction in its stock price. 

Still have questions about your “income” from investments? Give us a call (402-933-1970), and we will give your portfolio a thorough and honest review.