My wife and I were daydreaming about retirement the other day when the subject of dividends and distributions came up. In looking at our current monthly expenses and thinking ahead here are some things that dividends might eventually pay for.
VOIP home phone
We avoid spending any dividend income earned today from our investments because we remain in savings mode; we need to build assets for our future selves. Daydreaming ahead paying for our VOIP home phone could easily be covered by some dividend income in the future, it’s only a few bucks per month.
There are more and better reasons to own telecommunications stocks than this but this is one reason: might as well own what we consume. Our internet bill in the future might be covered by the dividend income we earn from the telco stocks.
Gas and insurance for our cars
We have two cars now, this old clunker and a newer 3-year-old vehicle. We’ve been talking and we’re thinking we might only need one car years down the road so working towards that. Back to my point, cars need some form of energy to run on. By investing in energy companies that pay dividends I figure we can eventually use the income generated from these energy stocks to pay for gas, insurance and maybe even the maintenance for at least one car.
Canadian bank stocks have a long, established history of paying dividends and increasing their dividends regularly. I figure property taxes are a similar constant. Property taxes also have only one direction to go I think, so owning Canadian banks that raise their dividends could be a nice inflation-fighter. Some of our dividend income in the future could pay for our property taxes year after year without touching the capital.
Dividends (and distributions from Exchange Traded Funds (ETFs) for that matter) are not everything but they are tangible for the patient investor and very real in the bank account. Even though I will index invest more going forward hopefully a good portion of our retirement expenses can be derived from the income generated by our investments. This way our capital can remain intact for an unknown and ever-changing future.
What might dividends pay for in your life?
Glad I am not the only one that day dreams about what my dividend income payments will one day be able to purchase. Hopefully it will be able to purchase everything and fund my financial independence lifestyle. I plan to continue to go the index route even though the dividend yield is generally lower than a lot of the dividend portfolios amongst the online community.
Thanks for sharing
Mr. Captain Cash
Nothing wrong with indexing, we will be doing that more in 2015 ourselves, starting with all RRSP contributions.
This is the second time I’ve read this. I like the idea of matching dividends with consumption although I’m pretty sure both you and I will be using dividends for alternate expenses as some types of companies (utilities; pipelines etc) pay higher dividends than others (Apple.)
This second time, though, I was feeling old and musing on the list. VOIP? Is that like the hard-wired phone that my parents probably thought they would use in retirement?
“Internet” what will replace that 30 years from now? It was NOTHING like it is today 30 years ago.
Cars? With global warming? Will we still have personal vehicles? Will we have something personal that’s totally better? Will we finally get a Star Trek transporter that won’t beam us into a wall?
The only thing I’m fairly confident about is that there will still be banks. We may be e-depositing our bitcoins or putting our chunks of rare earth metals into vaults, but there will likely be some kind of place to deposit our wealth to keep other people from taking it from us.
No matter, I think investments that pay income, dividends or distributions will be useful.
🙂 I hope with the transponder I will purchase in 2016, we’re saving for it now, that the income produced from TransCanada People stock will pay for the maintenance of the transponder.
Hard to say what the future will hold and your point is well taken tongue-in-cheek that we have no idea what the future holds, including for the well-known companies that pay dividends today. I am fairly confident however banks, energy companies and some consumer products will remain necessities of life.
Thanks for your comment Bet!
Paying your bank charges through bank stock dividends is easy – as long as your wife worked for a bank and gets free banking 🙂
I have had similar dreams of enjoying dividends appropriately. It is just a dream really, RDS pays a good dividend, but I would need to buy an aweful lot of shares to cover the cost of a tankful of gas each week. Same goes for supermarkets and the weekly shopping bill.
Even though I cant cover all costs, that quarterly treat, paid for by those dividends is a good feelng.
Good one Richard.
Yeah, I figure we need to own about 1,000 shares of Enbridge and other companies to cover our expenses. It’s not out of reach though and we’ll see how the journey goes. I hope to also cover expenses with low-cost ETFs, distributions from those, to hedge any individual stock risk.