November 2012 Dividend Income Update

Warren Buffett has become one of the most successful investors our world has ever seen not by selling or trading companies, but by owning them.  I will never amass the wealth of Warren, not even close, but you and I can apply some of his investing habits for our portfolios.  Before I report my dividend income for last month, let’s take a look at some of Buffett’s most famous quotes and what dividend investors can apply from his words.

Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.

Never losing money might seem impossible because stock prices always float up and down.  However, if you avoid selling the quality companies you bought in the first place when prices slide, and instead, keep the faith in your established companies that have a long history of paying dividends you can be rewarded for sticking to your plan long term.

Never invest in a business you can’t understand.

Although a subset of the rule above, even the best investor on our planet only invests in what he understands.  Coca-Cola, a few big U.S. banks, Procter & Gamble and some big box stores like Costco are just a few of his holdings within his circle of competence – many of these companies have paid dividends for decades.

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.

Not much else to say really.  If you’re not comfortable with owning stocks for many years then don’t bother with direct stock ownership at all.

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

When most investors feel panic-stricken when the stock market declines.  Buffett feels the opposite and instead looks for opportunities to buy established companies at cheaper prices.

I’m definitely no stock market expert.  I rely on some rather simple strategies to select and hold my stocks.  When I see some of the companies I own hike their dividend recently I draw inspiration from the wisdom above, increasing my conviction that investing in established blue-chip companies alongside my indexing strategy is absolutely the right approach for me.  At the end of last month, after most of my dividends were reinvested to buy more shares in the companies I already own I calculated the dividend income for the 2012 calendar year will be close to $6,300, instead of $6,220 projected a month ago.  There’s one more month to go.  Let’s see where I end up.

How is your passive income coming along in 2012?  Are you investing in dividend paying stocks for income?

18 Responses to "November 2012 Dividend Income Update"

  1. The stocks that I have been choosing recently are not for the purpose of dividend income, rather playing the long game. A few risky choices, but I have most of my money in Asian funds!

  2. Yes, I have. I’ve moved away from full DRIPs that have SPPs and now into synthetic DRIPs with my brokerage. Full DRIPs are great to get you started but I prefer to not use them as much once I can synthetically DRIP most of my portfolio.

    Thanks for encouragement about the dividends :)

  3. Fair point Michael. How do you measure that anyhow? Circle of competence? Understanding a business is all relative. Is this another case for indexing since you don’t have too worry about this – ever?

  4. As we are getting on a bit, we have a lot of our investments in fixed income. However, we do also invest in dividend stocks for what will need to be income in the future. (Right now we re-invest the dividends.)

    We particularly keep an eye out for stocks that pay a monthly dividend as they would be handy to still own when we retire. One that has done well for us so far is KBL. It’s even had a large capital gain, but since we haven’t sold it, we can’t really count that.

    What do you do when your “long term” dividend stock has a large capital gain? Do you sell part of your position? Or just keep it and hope it doesn’t crash without you ever realizing all or part of the gain?

    Thanks for an interesting article!

  5. Hey Bet Crooks,

    Thanks for the comment. A blogger I knew was a big fan of KBL. As for my long term dividend stocks that have capital gains – well – I’m trying to move them into my TFSA bit by bit. That will reduce the hit over time. I have not sold my positions in any companies that have had a good run up, since capital gains are favourably taxed, all things being equal.

  6. Congratulations on exceeding your income goals. I myself am a big fan of Buffett, and his common sense investing approach. The one thing that few investors see however is that Buffett is very flexible in his investing approach, and does not seem to be focusing on a strict set of investment criteria. Examples include his investments in the FOREX market in the mid 2000s, purchase of preferred shares of GE, GS in 2008 -2009 and BAC in 2011 as well as his investments in KO in 1988- 1994. I guess the most important thing for any investor is to never stop learning.

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