For most people, passive income is a bit of extra pocket change that requires minimal effort to earn to supplement a main source of income.
For Steve Ballmer, it’s $US1 billion ($A1.4 billion).
Ballmer, the sixth-richest person in the world, is due to collect that much in dividends from Microsoft in 2024.
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This comes after the tech giant boosted its quarterly dividend payout to 75 cents a share, or $US3 a share annually.
Since Ballmer, the former CEO of Microsoft, owned 333.2 million shares of the company as of 2014 (the last time he filed an ownership disclosure and appears to have adjusted his Microsoft stock), the equivalent of a 4 per cent stake, he would receive just shy of $US1 billion in fiscal year 2024.
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That’s for simply owning the stock — regardless of how it performs.
Ballmer did not respond to a request for comment.
Steve Ballmer. Credit: Steven Ferdman/Getty Images
That’s of course, assuming Microsoft’s board of directors doesn’t decide to slash dividends.
But that doesn’t seem likely.
Since the company began paying dividends to shareholders in 2003, the amount has only increased.
Ballmer won’t be the only one raking it in. Uncle Sam will be getting a generous cut as well.
Given Ballmer reported $US656 million ($A957 million) in income to the Internal Revenue Service in 2018 according to ProPublica, it’s probably safe to say he’ll be subject to the 20 per cent tax on dividends for individuals earning a taxable income of $US500,000 ($A729,000) a year or more.
That means he’ll pay close to $US200 million ($A290 million) in taxes on the Microsoft dividends he collects.
Ballmer isn’t the only one set to earn a lot from owning stocks that pay dividends.
Warren Buffet’s Berkshire Hathaway is due to collect $US6 billion ($A8.7 billion) in dividends for the year, according to a Wall Street Journal analysis.
That’s because the majority of stocks Berkshire Hathaway invests in pay dividends.
Included in that list is Chevron, Bank of America, Apple, Coca-Cola, Kraft Heinz and American Express.