April 2012 Dividend Income Update
Last month in my dividend income update, I wrote “as an investor, I should never lose sight of the risks direct stock ownership can mean.”
How true, because active money management comes with more risks than other types of investing. Unlike indexing for example, I’ll never be able to entirely set and forget my dividend investing approach but I really don’t mind. Dividend investing takes some active work, work I enjoy for now but the dividends certainly don’t take any effort. Dividend investing continues to be a great complement to my indexing products.
As of this month, I own 23 Canadian companies that pay me dividends every month or every quarter. Some are riskier investments than others (I’m looking at you TransAlta and CML HealthCare) but overall, I feel my portfolio is taking a more diversified and balanced shape with every new purchase I make. My Canadian dividend paying stocks are a nice complement to my RRSP, which is mostly indexed although I do keep a few U.S. dividend paying stocks in this account like Johnson & Johnson and Abbott Laboratories to name a few.
At the end of March, after dividends were paid and reinvested wherever possible, I mentioned our dividend income for the 2012 calendar year was projected to be $5,500. I said we’d hit this target as long as dividends weren’t reduced and the companies we own keep paying them. Well, they’re paying dividends alright and in some cases, the dividends are increasing! Recently, Canadian Oil Sands increased their dividend by 17% to $0.35 per share. That small $0.05 dividend hike increased our annual dividend income by over $25 right there! You might already know, dividends, if raised once per year, can fight inflation and preserve the purchasing power of goods and services you and I depend on. Dividend increases aren’t guaranteed every year but many of the companies I own have a history of increasing them often, so it’s a good reason to own such companies long-term.
During April, on the theme of goods and services I depend on, I also purchased some shares in Progressive Waste Solutions (BIN). I figure the need for waste management is not going anywhere anytime soon. Of course, no investment is risk-free and not even blue-chip companies are immune to short-term problems however the more different companies I own, the more diversified I am over time, the more reliable my passive income stream will be. Even if Canadian Oil Sands and Progressive Waste Solutions share prices drop, I will probably still get paid.
This past month alone, we were paid just over $500 in dividends, most of that money reinvested for our future, buying more shares in the companies we own. Left over cash, albeit small amounts accumulated again this month so later this year, I’ll be hunting for more companies to own. We’re on pace to earn just over $5,500 in dividends in 2012, inching closer to my indirect goal of $6,000.
I hope we get there and I’m looking forward to celebrating a little bit if and when we do.