Welcome to my final 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 Canadian dividend paying stocks and Exchange Traded Funds (ETFs), and how reinvesting the dividends and distributions paid from these holdings are helping us reach financial freedom.
For the year that was:
- The S&P/TSX Composite Index ended the year down about 11%. The Canadian part of my portfolio was down almost as much since most of my individual holdings are the same companies held by many of the largest equity ETFs and mutual funds sold in Canada.
- South of the Border, the Dow Jones Industrial Average was rather flat for the year and so was the U.S. side of my portfolio. Overall, not a great year for portfolio growth.
The income side was different however…
We hold some Canadian dividend stocks non-registered because we’ve been very fortunate to max out my TFSA and RRSP in recent years. Even with oil and gas prices tanking, significantly in 2015, along with price corrections by other companies towards the end of last year, we saw this an opportunity to continue reinvesting the dividends paid by companies we own. We figure reinvesting dividends (at cheaper prices) will pay big dividends, literally, later on. With our portfolio value dropping in late-2015, we remained invested, remained patient and simply stayed the investing course. It wasn’t always that way, I used to tinker with my portfolio quite a bit which was a big fat investing mistake among others.
Where did this holding-the-line get us for the end of the 2015 calendar year? Closer to our goal.
Some of the Canadian dividend paying stocks we own cut their dividend in 2015 but many others like these ones increased their dividend. The net result was even though the Canadian market was down double-digits last year our dividend income increased.
There are three big reasons why the income continues to go up year after year even as the market is going sideways or down:
- New money was invested in 2015, into Canadian stocks and ETFs.
- As much as possible, all dividends and distributions paid were reinvested (to buy more shares or ETF units commission-free).
- Dividend increases occurred for many companies we own.
Thanks to Canadian blue-chip stocks that continue to reward shareholders, a few of them for generations on end, our dividend income rose from $9,550 earned at the end of 2014 to about $11,700 last year. Compare that to our December 2013 report card and we’ve made some significant progress over the last couple of years.
Our financial plan tells us to continue diversifying more in 2016, indexing more in our RRSPs to offset some of the risks we’ve been taking by owning individual stocks in other accounts that are part of these updates. Our hope is that in the years to come, our passive income can be derived from a more balanced (say 50/50) blend of stocks and ETFs. As we get older we simply want to take less risks.
Big goals like early retirement through some passive income take time, and so we leave 2015 with some good progress made. I have no idea what 2016 might bring when it comes to our financial plan, plans are always subject to change, yet I remain confident if we continue on our current path; keep a good savings rate, remain invested, reinvest all dividends and distributions, and diversify our equities over time, I’m confident we’ll get to where we want to be.
Got any comments for our passive income goal? What do you make of our investing approach and these updates?