I’ve written this statement before on my site but dividend investing seems to be more popular than ever. There could be a few reasons for this…
Maybe investors are fed up with the meager returns that bonds and GICs have been providing for many years, to borrow a phrase from Rob McLister’s site, our “sustainably unsustainable” low interest rates seem to have no end in sight. Two, maybe more investors are going the do-it-yourself (DIY) investing route, using dividend paying stocks, because these investors have realized the high-priced mutual funds (that eat away at their portfolio values) tend to hold many of the same Canadian blue-chip stocks. Third, maybe investors are learning more and more to stay the course, sticking with brand-name stocks that have been around for decades and are subsequently avoiding more speculative smaller-cap stocks that trigger too much active trading and other bad habits. There are many more reasons I’m convinced but I know for me, established companies that pay consistent dividends seem to make sense.
To demonstrate the power of sticking to my plan, maxing out our Tax Free Savings Accounts (TFSAs) and making contributions to other accounts, this time last year we were on pace to earn just under $7k for the calendar year from dividend income. This year, we’re on pace to earn just over $8,400 thanks to monthly saving and investing habits along with dividend increases from many Canadian companies. The S&P/TSX has been red-hot of late and while the capital appreciation is great this doesn’t actually help my dividend reinvestment plans (DRIPs) very much – I’m buying more shares at higher prices every month and quarter. I might have to revisit turning off some DRIP taps soon contrary to what I’ve been doing for a few years now:
As long as the companies we own continue to pay dividends, even with only a few DRIPs running, our dividend income will increase later this year. This investing approach is a lot like a marathon in many respects, there are no shortcuts to finishing the race. It takes lots of time and lots of training. I’m willing to be patient and train my investing brain as much as I can.
“We can do anything we want to do if we stick to it long enough.”
What’s your take on the red-hot equity market of late? Has this changed your investing approach?