My online conversation with Barry, the dividend-investor millionaire
A few years ago, I read an excellent Million Dollar Journey (MDJ) article about a 60-year-old with lots of cash but no portfolio. Like I did after reading many MDJ blogposts, I left a comment. Due to the phenomenal traffic MDJ receives, I was just one of many comments for this particular post, which was nothing new. Million Dollar Journey is one of the top personal finance and investing blogs in this country with over 15,000 dedicated readers! However, in looking through the comments, I stumbled upon a few left by “Barry” who was also close to 60 at the time. I wrote a few questions to Barry and he was nice enough to write back, often. I was just getting more into dividend-investing at the time and Barry’s comments and responses were inspiring to me back then.
For today’s post, I thought I’d share some content from MDJ (Thanks Frugal Trader) and my online conversation with Barry, the dividend-investor millionaire.
Barry, if you’re out there, still reading Million Dollar Journey or other quality financial blogs maybe you can make some time to check out my blog and simply say hello. You’ve encouraged me to take a stronger grip on my investments - I owe you a big thanks for that!
I’m 56, married and draw an income from a portfolio which at time of switch to a DIY account had $1,164,000. I bought 30% (12 in total) “perpetual discount” preferred (stocks) from CDN banks and insurers. 35% went into 11 bluest of the blue chip dividend stocks … plus RioCan REIT and Encana. Bought 50 grand of XCB Cdn Corporate Bond Index.
Based on his portfolio, Barry had a dividend income of $47,000 with 35% cash, cash-in-waiting for another market dip to buy more dividend-paying stocks. He said his $47,000 income was “virtually tax free” in BC thanks to the federal and provincial dividend tax credit.”
Needless to say, that got my attention: $47,000 virtually tax free income???
Mark in Nepean (now My Own Advisor):
Barry, just from curiosity, what are your “bluest” of blue chips you speak of? How much did you have to invest to make your $47 K/year income?
I told Barry I was about 30 years away from retirement, but that certainly didn’t mean I didn’t want to retire much earlier than that.
Barry wrote back and informed me he had a dividend-stock portfolio of about $770,000. He owned:
- Banks: Bank of Nova Scotia, TD, Royal Bank and Bank of Montreal.
- One Insurance Company: Power Financial.
- Utilities: Atco, Canadian Utilities, Fortis, Emera.
- Pipelines: Enbridge and Trans Canada Corp.
He also held RioCan REIT (for their strong distributions), Encana (as his growth investment), Metro and Canadian National Railway (CNR). He said you could dispute how “blue” these blue-chip companies were but I think his results speak for themselves. Barry said “I don’t own income trusts or mutual funds” and instead stays with tax efficient dividend-paying stocks with a history of raising their dividends. Barry went on to state his preference to Canadian banks and resources in general: “Canada is today well positioned to save our financial sector if the case was necessary but compared to other countries we are not in the same pickle … and with every resource the world (read China and India) wants. The future looks fantastic when we get over the multi-year deleveraging which will keep the stock market in a up and down “range bound market” for … god knows how long.”
Mark in Nepean (now My Own Advisor):
Thanked Barry for his insight on his (bluest) “chips”. I told him this was the year to finally and fully get out of my high-priced equity mutual funds and instead into DRIPs of great Canadian companies. I told him I owned Enbridge already and was looking to make a significant contribution (for me at least) into Bank of Montreal. I told him I was hopeful to follow the same investing path he did since making $47,000 in nearly tax-free income seemed pretty comfortable to me.
He wrote me back and wished me well. He said “you’ll make plenty of “mistakes” along the way, he still does but offered words of wisdom about ”patience and learning to understand what you can tolerate as you will experience a “sure thing” turning sour momentarily.” His words that followed now seem very prophetic now that I type them:
“We are going through an ongoing disruptive multi-year correction of bad habits accumulated over the past 20 some odd years. This will reflect in the stock market. There will also be times when certain stocks or sectors will become sexy and skyrocket while yours will dawdle. As long as those dividends keep coming this won’t matter very much as eventually – if the stock represents true long term value in price – it will rise. The tortoise wins the race.”
Barry comments got even better…he said:
“You will also hear a lot of talking heads, elite members of the chattering class on TV, spout all kinds of well honed arguments as to why oil will reach 1000 dollars a barrel, or else the Dow is headed to 36000 or 1000, or else Gold is going to $2000, or inflation is going to make the seventies like a tea party, or we’re headed to a Depression. It ultimately ends as white noise because nobody knows, only believes. What you have to figure out is how to find the best way to avert a loss of income in case any of the above may be true.”
Barry’s answer for avoiding market risk in the past is the same for his future - a diversified basket of dividend-paying stocks that are held through all types of market cycles.
Not everyone needs to invest like Barry. Dividend-paying stocks and dividend investing is not for everyone. There are other ways to invest, ways that involve less risk and much less active management. With dividend-investing, risks go beyond companies that rise and fall. Dividends alone don’t need to be chased, something Canadian Capitalist reminded us of last week. However this dividend-investing approach, when well-executed with companies bought and held that have a proven history of payment in good times and bad, can make for a very rewarding retirement journey for investors. I’m slowly working on my own, thanks to Barry, excellent sites to learn from like Million Dollar Journey and savvy DIY investors who readily contribute their knowledge and experience with investing, dividend-paying stocks or any strategy they prefer.
A special thanks to Frugal Trader who supported this post (with permission of content leveraged from his site). Your blog Frugal Trader continues to be informative resource to many DIY investors. No wonder you have 15,000 readers! Barry and I included, of course
As always, share your comments! I look forward to hearing from you.Thanks for reading and sharing this article.