Welcome to my popular Dividends page.
This page is a primer for all DIY investors to learn about our approach to dividend investing.
It also contains some key Q&As associated with our monthly dividend income updates!
Read on…and how dividends might help you too!
Q&A with Mark: Why do companies pay dividends?
When a corporation declares a dividend, the company’s retained earnings decrease and its current liabilities increase.
When the cash dividend is paid, the corporation’s cash account decreases. So, dividends are not magical and never have been.
Owning stocks that pay more, less or no dividends at all may or may not be better for your long-term returns.
Some dividend stocks may beat the index, other stocks might lag the index.
Dividends are not free. Dividends don’t fall from the sky. It’s a forced sale on your behalf by the Board of Directors. Yada, yada, yada. Etc.
You can of course make your own dividends.
But…usually…stable, well-established companies that make higher profits over time tend to make regular dividend payments to shareholders. I like that.
Companies use dividends to pass on their profits directly to shareholders. A few reasons come to mind for me and why I / we been investing this way since 2008:
- Reason #1 – it is core to company strategy. Potentially there are no current companies to acquire, maybe company debt is under control, and/or there is already a healthy stream of cash to begin funding new company products or services. Thus, as part of company strategy to reward shareholders – the board of directors feels it’s simply one of the best things to do with company profits over time. It can be a strategic decision to pay a dividend (or not).
- Reason #2 – the company is on sound financial ground. Most companies that pay a dividend, especially long-term (as in decades) have a stable business model. Companies that grow their dividend tend to have great, rising cashflow. As an investor, it can be to your advantage to own shares in a company that makes large profits, consistently, with time. A reliable dividend is essentially one very good sign of business strength. This is because unstable companies cannot divert profits directly to shareholders for very long.
- Reason #3 – they want to attract investors. This is akin to company strategy. Some investors are more speculative and like risks (note: this is not me). Dividend-paying companies can attract a certain type of investor; one who prefers cash in hand versus the hope of capital gains. Such investors like the idea of earning income from their investments the same way people go to work to earn an income – it’s more dependable vs. making your own dividends. Over time the income is generated by your portfolio. The portfolio will pay out MORE income over time if you reinvest dividends and/or you hold such dividend paying companies long enough whereby dividends are increased by the company every year or so.
- Reason #4 – companies know investors like optionality. You see, in a perfect world, all businesses would allocate capital in a way to perfectly maximize the return on that capital. This would be done so reinvested money would go back into the business in way that pays off immensely for the shareholder (by increasing returns over time AND by continually reducing the company’s tax burden). But you should know by now we don’t live in a perfect world. This means shareholders have over time demanded a dividend – for the purposes of “optionality”. Shareholders like optionality – and dividends provide that optionality – to give investors the choice to increase or decrease their exposure to the business. Reinvested dividends take advantage of that optionality, to increase exposure. Dividends taken as cash, do not.
Dividends (and distributions) are therefore one very important part of an investor’s total return.
Source: Honestmath.com
An investor could technically create their own dividend income stream by simply timing the sale of their stock shares. There is nothing wrong with that. You will need to figure out that timing though.
Q&A with Mark: Why do you love dividends so much?
A few reasons come to mind:
1. There is optionality – I / we can reinvest the dividends and/or distributions as we wish or just take the cash for spending. Simple.
2. Canadian dividends are farily tax-efficient in a non-registered account, to a point. This makes our taxable accounts a great home for our Canadian stocks.
3. “Living off dividends” can help reduce some of my income worries about when to sell shares. (i.e., I / we can avoid selling more shares during any market downturn of 10% or 20% or even 30% since the dividends are forced sales anyhow. You can of course make your own dividend income stream by selling your assets – up to you!)
4. Earning dividends complements my low-cost ETF investing approach that focuses on growth. I / we started buying ETFs in 2008. I’m biased based on my success to date but I feel my “hybrid investing” approach captures the best of both worlds:
- Own dividend stocks that pay dividends to reinvest or spend as we please.
- Own equity ETFs for diversified growth.
Q&A with Mark: Do you have a dividend income goal?
Long-term, no.
For 2026 dividend and distribution income earned however, we might get close to $90,000 per year.
I’ll keep you posted via my monthly income updates.
Q&A with Mark: What is your dividend drawdown plan?
Our order is “NRT” and I think most retirees should consider the same.
Why and what does that mean?
N – Use non-registered accounts and corporation assets, first.
- We will “live off dividends” to some degree while selling assets over time to be tax-efficient.
R – Registered accounts (RRSPs/RRIFs and LIRAs converted to LIFs), second.
- We will spend the dividends and distributions inside these registered accounts, next.
- In our 50s and 60s, we’re going to do something unconventional (that some financial experts don’t suggest!) – we’ll start withdrawing our RRSP/RRIF assets, slowly.
- This will help us:
- 1. meet our income needs,
- 2. smooth out taxes over time, while
- 3. reducing any taxation on the estate inside registered accounts. Besides, whatever we don’t need for spending we’ll move to MAX out our TFSAs every year. On that note…
- This will help us:
T – Tax-Free Savings Accounts (TFSAs), will be our final account.
- Inside our TFSAs, our mix of stocks and ETFs should double in value every 10 years or so if left alone. Why interrupt tax-free compounding power???
Q&A with Mark: What individual Canadian stocks do you own?
As of 2025, I no longer share my entire portfolio for privacy reasons (including becoming a trolling target in recent years by some individuals including some financial professionals online, sadly – some evidence is here.)
I can say that my/our portfolio holds many of the same Canadian top-stocks the big Canadian ETFs own including the top stocks in the TSX 60:
Q&A with Mark: What individual U.S. stocks do you own?
Zero. Nada. We don’t own any individual U.S. stocks.
As of summer 2025, I sold off all our individual U.S. stocks. We own 0 individual U.S. stocks.
We moved all proceeds into low-cost, diversified ETFs for simplicity and extra diversification beyond Canadian stocks.
Looking for more dividend inspiration?
For years, I’ve been inspired by one of Canada’s oldest and most trusted dividend investing sites, Million Dollar Journey. Check out that resource for the best dividend stocks to own and how dividend investing can be part of your get wealth eventually strategy like mine.
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