Welcome to another dividend income update. 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 some Exchange Traded Funds (ETFs) to help reach financial freedom. There is more to my portfolio beyond these investments but this is a big part of it. You can check out my previous dividend income update here.
Last month, I wrote about my simple approach to dividend investing:
- I only buy established companies that have a history of paying dividends.
- I reinvest the dividends paid by these companies whenever possible to make my portfolio grow faster.
- I buy ETFs for extra diversification.
- I diversify my stock holdings across companies and sectors.
I now own about 30 Canadian dividend paying stocks.
My plan is simple but not foolproof because my behaviour gets in the way every few months. I’m fighting this behaviour by (to borrow a title from a recent MoneySense magazine article) training my investing brain. This training includes:
- Automating my investment decisions as much as possible (via dividend reinvestment).
- Avoiding recency bias (by making long-term investment decisions – buying only stocks with established dividend histories).
- Accepting market ambiguity (stay with investments regardless of market highs and lows).
There is more to training my investing brain but this work at the mental gym is helping. I’ve been pleased with my Canadian portfolio of dividend-growing banks, utilities, pipelines and more over the last few years but I know at any moment equity markets can change, bad company news will be reported and some sectors of our economy will be in a rut. I need to be patient. With more mental training, and thanks to Canadian companies (and Exchange Traded Funds (ETFs)) that pay regular dividends and distributions we’re on pace to earn $8,325 this calendar year in passive income. Good investment decisions supported by good long-term behaviours should be our path to financial freedom in another 15 years or so as long as the mortgage is gone. That’s the plan. I’ll keep you updated.
How is your financial plan coming along? Are you investing and paying off some fat mortgage debt like we are? Investing only? Stop by and add a comment.
Why don’t you list your investments and their weightings? It would be interesting to see your choices and how they have performed
I suppose the reason I don’t is I feel I disclose quite a bit on this site and don’t wish to reveal too much more. Thanks for understanding that James.
That said, my direct stock holdings over the last 5 years include many of the top holdings listed in the ETF XIU. I don’t intend to sell any of those stocks and will continue to collect and reinvest dividends from those companies for the foreseeable future.
Way to go…$8,325 in annual dividends is great. I bet you are really starting to see the compounding effect work. I know your goal is $30K, but with compounding on your side, I’m pretty sure the needle is moving a much quicker speed than it did when you first began. Good luck in your journey!
Yes, the goal is $30k and it’s coming along but hopefully sticking to the plan and saving diligently, we’ll get there. Thanks for the encouragement.
That’s a pretty impressive number. Every time I read your dividend updates it motivates me a bit more to invest more. I would love to get to that point eventually!
Mark, $8k per year is great. I also like your ‘mental gym’ part. It’s easy to get caught up in the short term stuff but the long term is what really counts
Thanks Dan. I figure I need to get to $30k per year, plus the pension, to retire comfortably. Still a long ways to go but the reinvested dividends are helping.
Avoiding recency bias is definitely important when your investment strategy is to have dividend income. Impressive that you’re on your way to get more thank 8k in dividend income this year!
Thanks Poor Student. I still need a bunch of work to train my investing brain. Dan’s article (from MoneySense magazine) was excellent.
Over $8k in dividend income is fantastic. I’ve got a long way to catch up to that, so I appreciate you inspiring me to keep reaching ever higher. 🙂
Keep up the great work, bud.
I recall I’ve got a few years on you…so I need to put the investing pedal down or you’re going to blow by me very soon. Thanks for the positive comment.
Congrats on the dividend income, Mark.
All very important points that you’ve listed to not fall into the trap when it comes to investing.
Those points and more R2R. I’ve definitely made my investing mistakes but trying to make up for it! Thanks for the support.