For the last few years on my site I’ve posted monthly dividend income updates like these. From these articles I receive a number of emails and questions from readers regarding my DIY approach to saving and investing. Today’s post will tackle a few of those so let’s get into it.
I’ve been reading these updates and it seems the income is going up every month. Is this all because of reinvested dividends and distributions or you are making new investments as well?
Great question. Yes and yes. The income is on the rise largely because almost all dividends paid by the companies I own and report on are being reinvested every month or quarter. Same goes for the Exchange Traded Funds (ETFs) I own, distributions paid are being reinvested as well. I am also buying more stocks every 3-6 months if I can save up the money to do so.
Are you spending any dividends or distributions paid?
No, largely because a good portion of the income is in a Tax Free Savings Account or what I call my Tax Free Retirement Account (TFRA). When you put money into a TFSA you probably know you do not get any tax deduction (unlike an RRSP) for doing so. While this sounds bad the major upside is investment growth and income earned inside the TFSA grows tax free. I keep a few Canadian dividend paying stocks in this account. Starting this year I am indexing more inside this account.
Aren’t you worried that your portfolio is not keeping up with market returns?
Not really. I mean, yes, I am or I have been but my portfolio is slowly transitioning to focus more on indexing in my registered accounts. This will leave mostly Canadian dividend paying stocks in my non-registered account. I believe I’m on the right path: indexing mostly in registered accounts and keeping the Canadian stocks I have for passive dividend income and capital appreciation in taxable accounts. I can also take advantage of the dividend tax credit for non-registered investing.
When do you think you’ll reach your financial goal (for passive income)?
I don’t know for sure, since dividend increases, distribution increases, and stock returns are totally out of my control. If I had to guess I would say as long as a number of things don’t change (meaning we can continue contributing to our accounts at the same rate, dividends and distributions are paid remain roughly around the same rate, and other variables stay constant) the timeline is likely another 10-15 years.
In closing, I’ll be the first person to acknowledge my saving and investing approach is not for everyone but I believe in it and we’re making progress because of it. Thanks for every reader question on this subject. Keep your comments and feedback coming.
Any questions for me? Drop me a comment or send me an email via my About & Contact page.