Welcome to my first dividend income update for 2015. For those of you new to these posts on my site, every month I discuss my approach to investing using dividend paying stocks and low-cost Exchange Traded Funds (ETFs) and how reinvesting the dividends and distributions paid from these investments is helping me reach financial freedom.
Where has the time gone?
Hard to believe but it was almost seven years ago when I decided to start my first full dividend reinvestment plan (DRIP) with Enbridge. Among other reasons I chose Enbridge (ENB) for my first dividend paying stock after coming home from work one day, getting the mail, and opening my monthly invoice from them. That fat bill payment got me thinking…
If we’re paying Enbridge this much every month, I wonder how many other people are?
Why don’t I become an owner of what we consume?
I wonder how much money this company makes?
A few short months after opening that fat bill I was up and running with my Enbridge dividend reinvestment plan (DRIP). Since those days I’ve rinsed and repeated that cycle for many Canadian dividend paying stocks. Today, I no longer use stock transfer agents to run full DRIPs but I do continue to reinvest all dividends paid every quarter using synthetic DRIPs, from Enbridge, and more than a dozen other companies that are expected to provide cash flow for our future selves.
Taking some advice…
This month I also reflected on something that Satish Rai said about this time last year in a Globe and Mail article. Satish mentioned this when asked what a boomer approaching retirement should do:
“I have a simple piece of advice for boomers: Live off the dividend income, not capital gains from stocks or bonds. If you need the capital gains, you have to try to time the market when you buy and sell. But if you’re able to sustain your lifestyle with dividend income—plus OAS, CPP and your pension plan—you won’t have to worry about fluctuations in the value of your portfolio.”
Satish Rai was the Chief Investment Officer of TD Asset Management. My understanding is he retired last month, maybe to live off dividend income, who knows.
I’m not a boomer, far from it, but I have embraced this advice. The best brains in the financial industry usually provide the following advice to all investors: invest for the long-term, keep your costs low-costs and diversify. I’m working on that again this year. Thanks to Canadian companies and ETFs that pay regular dividends and distributions, money that can be reinvested commission-free, we’re on pace to earn just shy of $10,500 by this December if we keep up our reinvesting habits. This is a milestone moment for us. I hope we can go above and beyond that barrier if a) we can save more but more than likely b) if we see more dividend increases throughout 2015. That’s the upside. The downside is we need to avoid holding companies that deliver any major dividend cuts. On that note the future is always cloudy. That makes thinking long-term, keeping costs low and diversifying more across companies, sectors and countries paramount as part of our plan.
Realizing this income goal in 2015 will put us about 1/3 of the way towards our passive income retirement goal so there is a dim light at the end of the investing tunnel. I hope we can get there this year and I encourage you to come back every month for the updates on the journey. Thanks for reading.
Got any comments or questions for our passive income retirement plan using individual stocks and ETFs?