Welcome to my latest dividend income update. For those of you new to these posts on my site, every month I discuss my approach to investing using dividend paying stocks and how reinvesting the dividends paid from the Canadian companies I own are helping me reach financial freedom.
Recently, I played golf with a very sharp economist whose opinions on investing I value greatly. During our round, amongst other topics, we chatted about the perceived housing bubble, Canadians’ debt load and the stock market. A few things stuck with me from our conversation between fairways and greens. One thing was the perceived patience this economist has when it comes to managing his portfolio, commenting “the average investor does not have enough patience to see things through”. He reminded me most investors worry about daily or weekly market fluctuations. My golfing partner focuses on long-term goals that extend over many years instead.
Another thing my golfing friend mentioned was the relative simplicity that should come with investing, where he said “I don’t think portfolios need to be complicated, in fact, they probably shouldn’t be.” The economist was an investor in many stocks but in recent years he has started to transition his portfolio out of multiple stocks into a focused basket of diversified, low-cost Exchange Traded Funds (ETFs).
In recent months, I’ve been thinking something similar. I believe I own enough Canadian dividend paying stocks (30) and it’s time to start investing more passively across my portfolio. I still intend to keep the stocks I own for many years to come, and reinvest dividends along the way, but where it makes sense I’m going to start investing more in low-cost broad equity ETFs. I’ve come to the conclusion it just makes so much sense to do so.
What does this mean for my monthly dividend income updates? I’ll still post them but they’ll include both dividends from Canadian companies and more (new) distributions from ETFs.
Thanks to Canadian companies that pay regular dividends (and ETFs that pay distributions) I’ve calculated we’re on pace to earn $7,250 in tax-efficient and tax-free income (thanks TFSA) by the end of this calendar year. This should occur as long as dividends and distributions are paid at their current rate. This is an increase of just over $100 beyond last month’s income projection. We’re still a long ways away from our retirement income goal but we’re moving in the right direction.
What’s your take on dividend investing? Do you invest using a blend of individual stocks and ETFs like I do? Do you think I should change the way I report these updates with this news?