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.
Although I’m a fan of low-cost Exchange Traded Funds (ETFs) to diversify my portfolio more going forward, I focus on holding and DRIPping dozens of brand name Canadian companies in our non-registered accounts and Tax Free Savings Accounts (TFSAs).
To recap, here is our simple approach to dividend investing:
- We only buy established companies that have a modest to long history of paying dividends. Many of the stocks we own have paid dividends for over 100 years.
- We reinvest all the dividends paid by these companies so whenever possible, so money that makes money will make retirement money.
- We diversify our stock holdings by buying new companies.
Here is our simple approach to indexing:
- We only buy established indexed Exchange Traded Funds (ETFs). VTI is an example.
- We reinvest all the distributions paid by our ETFs whenever possible.
- As new money is added to our investing accounts, we buy more ETF units a few times during the year.
There’s little else to the story. Investing does not need to be complicated…
About this time last year I reported this about our passive income journey:
“Regardless of what the market does I’m finding buying and holding established Canadian companies that pay dividends and increasing my position in a couple of indexed products using Exchange Traded Funds (ETFs) is paying off, literally. At the end of last month, I’ve calculated we’re on pace to earn about $9,100 in dividend income this calendar year from the stocks and ETFs we own, as long as the companies we own continue to pay dividends at the same rate.”
Thanks to Canadian companies that continue to reward shareholders like myself and give us a raise now and then, we’re on pace to earn almost $11,300 one year later. We are only one-third along our journey to meet this retirement goal but I’m confident with more DRIPping and more saving in 2016, we’ll get there eventually and be able to leave the workforce behind in another decade or so.
Not every investor is comfortable with owning individual companies, I’m not. This is why Exchange Traded Funds (ETFs) that focus on capital appreciation complement the existing dividend stocks we own. Come back in a month (or sooner) and find out where we are.
How are your retirement plans coming along? What are you investing in for cash flow?