April 2013 Dividend Income Update

Warren Buffett is recognized as one of the greatest long-term investors of all time.  Buffett has said many things about buying and holding stocks for the long run, but this is one of my favourite quotes from him:  our favorite holding period is forever.

How long should you and I hold a stock?

Buffett answered this question by saying if you don’t feel comfortable owning a stock for 10 years you probably shouldn’t own it for 10 minutes.  Sage advice.  ‘m trying to follow that advice as much as I can.  For most part, unless my companies change direction dramatically and as long as they pay dividends, I’m holding them.  In some cases, I’m buying more of them automatically via dividend reinvestment plans (DRIPs).

How has this strategy worked out for me over the last few years?  Not bad actually.  My 28 Canadian companies are on target to pay out just over $6,850 in dividend income this year (an increase of $80 over last month) but I suspect the income might be more since I reinvest dividends often and I will likely make more contributions to our TFSA before December while other monies go towards lump sum mortgage payments.

Our dividend income is a critical component of our retirement plan so we can’t spend the dividends today.  Instead, it must be reinvested or at very least saved so we can buy new companies if equity markets decide to retreat a bit.  I can’t predict when markets might slide (I really have no clue if and when they will do) but I’m cheering for falling  markets since this investor likes to buy stock(s) at cheaper prices than today.  I don’t always get my way but once in a while my wish comes true.  Thinking about this wish reminded me of an article by Andrew Hallam, author of Millionaire Teacher who wrote this in the Globe and Mail about falling markets:

The notion that bad markets are good opportunities is a tough thing for inexperienced investors to get their heads around. They are often happy when markets rise. But as Warren Buffett likes to point out, this makes as much sense as celebrating the rising costs of groceries.

Hopefully many years into the future Andrew I’ll be celebrating the fruits of my labour after doing a few things very well:  holding blue-chip companies that pay dividends as close to forever as I can.

Friends of My Own Advisor, can this strategy work out for me in the long run?  What should I be mindful of with my dividend income strategy?

12 Responses to "April 2013 Dividend Income Update"

  1. Great income, is that year to date so far or the estimate for the entire year? I am new to this blog so I have to read more posts to become familar with your info. Dividend Income is a great way to supplement retirement. Hopefully I can catch up to you one day.

  2. Thanks for your comment and checking out the blog.

    I’m biased, but dividend stocks are great for retirement accounts because with companies like Coca-Cola and JNJ from the U.S., you get capital appreciation and income.

    For non-retirement accounts, here in Canada, as Calgary Girl referenced us Canadians can get hit with taxes because we own U.S. stocks.

    Click here to learn more:

    On that page, I said I keep U.S. dividend paying stocks in my RRSP. Why? U.S-dividend paying stocks do not recieve any favourable tax treatment from our government. So, by keeping U.S. stocks inside an RRSP I avoid paying withholding taxes. Canadians get killed on owning U.S. stocks in non-registered accounts.

    The Canadian RRSP is equivalent to your US 401(k). Key similarities: Money in these accounts are considered pre-tax which means that you are taxed at marginal rates upon withdrawal and there is no taxation on capital gains, dividends, interest etc.

    As a general rule, tax on capital gains is more favourable than taxes on dividends which is more favourable than income tax.

  3. @My Own Advisor No, too busy focusing on paying off our monster mortgage so we don’t have any extra money to play with :-(. We’d like to get the mortgage monkey off our backs in another 6 years by the time our fixed term is up for renewal. As of right now, the DRIPs are running every month but we’re not adding any new money to the account.

    1. Yeah, well, we still have a monster mortgage as well. That’s really stopping me from accelerating my dividend income and retirement date. We did it to ourselves and love this home though.

      We figure we have 9 years left on our mortgage.

      DRIPs are running for me as well, as you know. How many CDN companies do you guys own again? Over 20? Over 30?

      Continued success on your investing and killing the mortgage beast!

  4. I’m just looking for the starting point Mark. I hope I can lean on you for support when it comes time. I know that you are one heck of an inspiration to me and why I keep coming back for more here at My Own Advisor. What I like is that you spell it out easily for those, like myself who aren’t familiar with where to begin. Explaining, like baby steps for those learning is a great way to grab followers who want to know more. Well done with your investments and I’m sure you will celebrate the fruits of your labour one day! Cheers mate

    1. Of course you can lean on this site for support. It’s why I run it. I needed to learn and start somewhere as well… don’t we all?

      I’m trying to write my posts straightforward but I can always be more clear and articulate.

      Do you have any particular suggestions for what I should write about? Do respond when you can and I’ll do my best to get started on a few in that direction, if you feel it would benefit you and many others. Only happy to share what I know and in other cases, what I certainly don’t 😉



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