Welcome to my final dividend income update for 2014. 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 Exchange Traded Funds (ETFs), and how reinvesting the dividends and distributions paid from these holdings are helping me reach financial freedom. You can check out my previous dividend income update here.
For the year that was:
- The S&P/TSX Composite Index ended the year at 14,632.44, up about 7.5%. Not bad considering the selloff in oil and gas stocks before Christmas.
- South of the Border, the Dow Jones Industrial Average and the S&P 500 set new records although they ended the year down from their all-time highs. The Dow ended the year at 17,823.07, up 7.5%. The S&P 500 ended 2014 at 2,058.90, up 11.4%.
How does this relate to our portfolio?
- We index a portion of our portfolio, so whatever the returns the Canadian equity market provided in 2014, we got those returns less minuscule money management fees.
- We also own a number of blue-chip Canadian stocks, even some of those oil and gas stocks that dove in share price and remain at depressed prices. When prices dropped, it was an opportunity to buy more shares of some companies AND get companies at cheaper prices thanks to our Dividend Reinvestment Plans (DRIPs) running with those companies.
- We own a few U.S. stocks and U.S.-listed ETFs although we don’t include them as part of these reports since this report focuses on passive income from Canadian holdings.
What does this all mean for dividend income earned in calendar year 2014? Thanks to Canadian companies that pay regular dividends, and Canadian-listed ETFs that pay distributions, we earned $9,550 from our investments in tax-efficient and tax-free accounts. Compare that to my December 2013 report ($7,645) and it was a significant jump forward for us.
With 2015 TFSA contribution room now available our hope is to maximize contributions to those accounts this year. That should increase our passive income (some of it tax-free income) as we work towards this retirement financial goal.
Our financial plan is to diversify more in 2015, adding more cash to indexed ETFs throughout the year to offset the risks we’ve been taking owning individual stocks. My hope is that in the years to come, our passive income can be derived from a more balanced (say 50/50) blend of stocks and equity ETFs.
Next month I’ll try and answer some reader questions I’ve been getting about this approach. Until then, I will stay the course: continue to hold the companies and ETFs we currently have and reinvest all dividends and distributions paid. Thanks for reading.
Are you tracking your progress to financial independence? If so, how is your progress coming along? Got any comments or questions for my plan for my article next month?