Each time I write one of these posts, I reflect upon the positive power that time and sticking with a plan can provide investors.
This month, marks my fourth full year as a dividend investor. My first dividend-paying stock purchase was Enbridge (ENB). I owned a position in this company a few months prior to The Great Recession (2008-2009). In fact, during that period of economic turmoil I did what some financial experts advised investors not to do, I bought stocks, I bought more Enbridge. While it seemed like a big gamble at the time (my stomach churned as equity markets tanked), I got more shares when many investors were selling it.
Looking back, my decision to invest when markets were tumbling, including Enbridge was a good one. Enbridge has not only recovered over the last 3 years it has also increased their dividend numerous times and rewarded shareholders with a 2-for-1 stock split in May 2011.
Maybe I just got lucky with Enbridge. Maybe I haven’t seen enough dividend cuts or companies in my portfolio going under, to make me fearful of dividend-paying stocks and avoid them for good. Maybe I’m due to get burned at some point. Time will tell…
What I do know, and many financial experts and authors have written about this, you will not succeed in investing if you trade a lot. You will succeed if you keep your eyes focused on the future, even with all its unknowns, by making long-term commitments and sticking to a plan. Although 4 years is not a long time horizon, it’s long enough to see that the power of time and sticking with my dividend-investing plan has had a positive impact on my portfolio value.
With most of my RRSP tied up in broad-market ETFs that follow the equity and bond markets passively, I’ve chosen to invest in dividend-paying stocks in other accounts. Over the last 4 years, I’ve saved and built a small dividend-portfolio which continues to grow every month thanks to reinvested dividends paid. Instead of just Enbridge, I now own 20 Canadian dividend-paying stocks. I also own a handful of U.S. stocks as well. For the handful of companies whereby dividends are not reinvested, money accumulates and is used to pay down debt, save and buy new companies or save and invest in existing companies.
Over the last few months, I’ve added Manulife Financial (MFC) and Procter & Gamble (PG:US) to my portfolio – two companies I didn’t own in 2011. Long-term, I’d like to own about 40 Canadian dividend-paying stocks and 10 U.S. dividend-paying stocks that churn out consistent income for daily living expenses. I’d like to see my investments working hard so I don’t have to someday. That’s my approach with buying and holding dividend-paying stocks. The rest of my portfolio will always passively watch the market, so I barely have to look at those broad market ETFs or make any changes to them.
This month, after dividends were paid and dividends reinvested, our dividend income projected for the 2012 calendar year is projected to be $5,400.
I know I won’t succeed if I trade a lot, so I tend to buy and not sell stocks. I also suspect things won’t always be rosy with the companies I own. Dividends may get reduced at some point, the companies may take losses from quarter to quarter. That’s the short-term. Long-term, I expect my investments to tell a much different story – a tale of significant growth and income because of my long-term commitment to established companies. I hope I’m right.