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 focusing on dividend paying stocks and how reinvesting the dividends paid from the Canadian companies we own are helping us reach financial freedom. You can read more about that game plan here.
For this month’s update, I thought I’d revisit some of my favourite dividend investing tips. Here are some things that stick in my mind:
- Start investing early in life. It has been said the second best time to plant a tree was yesterday. The same goes with investing, start early if you can.
- To invest, live on less than you make (and keep doing that).
- Forget about watching your portfolio constantly. If you select a sound financial plan, you don’t have to do this.
- Who is interested in your investment success more than you? You know the answer…
- Time is a HUGE factor above your rate of return. A 10% annual return over a 20 year period generates more wealth than a 20% return over 10 years. Time does magical things when it comes to compounding.
- You can’t control how your investments will perform, so focus on what you can control, your investing behaviour, keeping your costs low and keeping your portfolio tax efficient.
It has been said a good portfolio is like a good garden. Sure, it takes some work to get going, and some attention to detail, but the garden should ultimately take care of itself over the years with some occasional pruning. Our dividend investing plan is similar. It took some work to diversify our investments early on, and we’ve performed some pruning over the years, but now we’re reaping the benefits of our investing garden planted years ago. We hold 30+ blue chip Canadian companies that pay dividends (and increase dividends) for passive income that is snowballing our way to an early retirement. We do not need our dividends for income today but we will need them in another 10 years. So, all dividends paid in our portfolio are reinvested to buy more shares every month and quarter. My spreadsheet from this boring plan tells us we’re on pace to earn close to $12,350 this calendar year in dividend income. That’s $600 more than the end of December 2015, just a few months ago, and about $1,500 more annual income since this time last year.
We haven’t reached our early retirement goal yet but we’re now 42% of the way there. Time in the market and ignoring market noise remains our investing friends.