Income Investing Explained – Interview and Giveaway
“Dividends matter, because they support my plan, just like capital gains matter, share buybacks matter, paying down significant amounts of debt to increase shareholder value matter, and so on.” – My Own Advisor
I know for other investors, dividends and the income derived from their portfolio matters as well but there is never a one-size fits all strategy when it comes to investing.
“In most cases, there is never one answer which suits all situations, but hopefully the explanations within this book will make investing easier for the beginner, and provide some clarification to the more experienced investor. It is best to be as prepared and informed as you can, and I hope my book will add to your knowledge and confidence when it comes to your individual investment decisions.” – Henry Mah, author, Income Investing Explained.
The premise of income investing
Henry Mah (cannew by name from this site as a frequent contributor) is back, with a new book, which answers a number of reader questions as a follow-up to his previous books – profiled on my site:
Your TFSA Compounder – Work Your TFSA Harder So You Can Retire Sooner
There is certainly an allure to income investing, an approach Henry is very fond of:
“I’m suggesting that there are about 40 Canadian and 50 U.S. companies that possess the qualities of a good dividend growth stock.”
Henry’s latest book highlights some of those stocks and goes even further to suggest you have a clear process to identify them. In his words: “take the time to apply the analysis, which I’ve explained in great detail in my earlier books, to narrow your selection.”
I got a chance to chat with Henry again, including asking him a number of questions about his book for readers of my site that might be interesting in learning more about how Henry invests and more importantly, why.
Henry, welcome back to the site! I see you’ve been busy writing again!
As always, I really appreciate that you’ve honored me by reviewing my books and your insightful questions.
So, let’s dive in. What makes this book different from your previous books? What additional details do you share for readers?
My first book, Your Ever Growing Income, was intended to explain, in full, the income investing strategy and teach readers how to find, evaluate and develop what I call a “List of Stocks to Consider”.
Based on that, I feel the list you develop should become just those stocks you might consider buying, ignoring any stock not on that list.
The second book Your TFSA Compounder, was to show how one might achieve financial independence by investing in a TFSA and following an income investing strategy.
This book, Income Investing Explained, answers questions about how to make investing decisions, once you’ve developed your “List of Stocks to Consider”, given different market conditions. It started out with a simple concept of answering questions from readers, but became an opportunity to share more of my philosophy around investing, and educate people in general about this approach and investing. The more you know the better your decisions will be.
I know your book goes into great details on this, but can you share your five guiding rules for owning income paying stocks? Why are they important for investors to consider?
Initially I listed four rules:
- Don’t consider any stock which has cut their dividend in the past 10 years.
- A company must have paid a dividend for at least 10 years.
- A company should have raised their dividend for the past 10 years.
- The dividend paid should have increased by at least 75% over the past 10 years.
In my third book I added a fifth rule. Even though it is not set in stone, I think it gives a clearer and more current status of a stock’s dividend.
- Avoid stocks which have not raised their dividend by at least 3% over the past three years.
I believe these five rules provide a simple, easy and quick method of screening dividend growth stocks, with the objective of finding a select few dividend growth stocks to own for growing income. The intent is not to find the most dividend growth stocks, just the ones you feel best to suit your investing objectives.
I believe you have shared part of your portfolio with me before, but for new readers to this site – how do you invest and “do you eat your own cooking?”
I have always tried to buy stocks at a reasonable price, ones which have paid and grown their dividend. I’m often asked which stocks we own. But, there are probably 30 Canadian dividend growth stocks, which if invested in by following the income strategy I enjoy, would provide anyone with the same income growth we’ve achieved, if not more. Initially we held about 50 stocks within our portfolios, but gradually we reduced the number of company shares, to a few we felt comfortable with. Currently we own just 10 Canadian dividend paying company stocks within our RRIFs, TFSAs and non-registered accounts. Our experience has shown me that one does not need to own a large number of stocks to generate a significant amount of growing income, even in retirement.
The longer we followed the strategy of investing for income, the more we recognized that, being able to live off our investment income was a real possibility. Once we achieved that goal, the income just continued to grow.
I’ve included a list of 45 Canadian dividend growth stocks to begin your screening, in the book.
Is there ever a time to sell an income stock and if so, when? (I believe some investors might have been very tempted and potentially did sell many stocks when the COVID-19 pandemic hit.)
It is my personal opinion to never sell a stock which continues to pay and grow your income, at a reasonable rate. My third book is a much more in-depth look into the income investment strategy, not just when to buy, but when to divest yourself of underperforming stocks. It’s difficult to list specifics in a few lines, because even a dividend cut may not be a reason to sell a particular stock. What I suggest is that one look for markers, that will indicate which companies might cut possibly their dividend and allow one to take action before a cut occurs.
I’ve seen some of your posts on that Mark!
Fair point Henry! OK, your book highlights some unconventional wisdom when it comes to holding more bonds as you age – why?
I don’t believe an investor, regardless of their age, should hold ANY bonds, or fixed assets, in their investment accounts. (Mark – wow! Why is that?) Mark, once I found dividend growth investing, I always tried to maximize the income our investments generated. Fixed assets are recommended to cushion market fluctuations and limit potential capital losses, if one had to sell shares for income during market corrections. But, I wanted our income to grow continuously, whether the market was up or down, and not be subject to the ravages of inflation. Fixed assets just didn’t fit into that plan.
Investments are not savings or monies set aside for emergencies, which certainly can be fixed assets or cash. I firmly believe that if your emphasis is a growing income (which mine is), then fixed assets don’t provide significant income, or specifically, any growth of income, which is essential as one ages.
(Mark – that is controversial for sure. I intend to hold this much cash in semi-retirement because I’m far more comfortable with that.)
Finally, given the market turmoil right now, what key takeaways do you have for aspiring retirees who may want to build an income portfolio? What big risks should they be mindful of when it comes to income investing?
Your question relates to those close to or in retirement, but I believe any investor, even those up to age 80 and every age in between, would be best served by sticking with dividend growth stocks. The key is to be very selective in your choices and to seek only the best dividend growth stocks to invest in, at the time.
For those at retirement age like me who have been through several market corrections over their lifetime, they should ask themselves: how might their portfolio have fared, had they not bought or invested in mutual funds, ETFs, REITs, growth stocks and higher yielding stocks, but stuck with a few of the best dividend growth stocks?
In each of my books I’ve tried to stress that one should try to find, through simple evaluation and analysis, the best stocks they can find and the ones they feel most comfortable with. By doing so, they will likely be buying slower growing stocks and possibly ones that could be more expensive at any given time, but in the long-run they will likely turn out to be the most dependable by delivering growing income.
Thanks Henry.
Even though Henry and I invest differently (I own low-cost ETFs, he does not), you can see he has passion and conviction for his income choices. Henry has found an investing approach that meets his needs and passes his risk tolerance test.
I encourage all investors to understand their biases when it comes to investing and ensure you are not taking on any investment risk more than you can handle.
Now, for a giveaway, I am happy to select one lucky reader at random who will be provided a copy of Henry’s new book Income Investing Explained. Enter to win and good luck!
Got questions for Henry? Leave a comment. Henry (or cannew) is always good to respond as best he can.
Thanks for reading,
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
After reading this article and all the comments, I feel inspired and encouraged to keep investing. I’m still going through Henry’s 2nd book right now so I better get moving on it so that I can get right into book #3! I have only started DIY in 2018 after taking over from a managed portfolio. So glad I found Mark’s site through HowToSaveMoney which lead me to Henry and the rest of many, many resources. I guess it’s better late than never, but I realize I need to keep working until the very end in order to have the funds to invest; even then it still won’t reach any significant goal due to the short time frame.
Thanks to Mark and Henry for sharing all the helpful information.
Thanks Sharon. Getting started can often be the hardest part of the journey, but I feel you are making a good start.
Thanks Ivan!
I enjoyed Henry’s previous two books and wouldn’t mind another! Keep on writing good books Henry!
I would love to have a copy of Henry’s new book
Good luck! 🙂
I need to get myself a copy of all of Henry’s books. I definitely began dividend investing as an uneducated amateur and have paid the price with some poor decisions. While my analysis has improved greatly, I am interested to learn more about the ‘rules’ and back testing my current holdings for to see how well they fair.
Ya, I chased a bit of yield when I was younger but I have since learned to balance out my portfolio with a mix of dividend paying stocks that pay various yields – although now is tough because what was low-yielding stock is now much higher with stock prices tanking. I do like the cash flow and “optionality” dividends provide – they help my plan but dividends are not everything.
I get really tired of advisors and other people painting all investors with the same brush. Dividends are good but total return matters and for the most part my stocks have been in line with CDN ETF XIU so there you go 🙂
Cheers man,
Mark
@M M: Besides pushing the benefits of Income investing, one of the main reasons for writing was to possibly help others avoid making many of the common investing mistakes. Almost anyone who begins investing without knowing what they are getting into, will most likely make many. I certainly have.
@May: You have to access your status, during the growing phase and after, to decide how to invest. I decided to go for income and to try and have it grow as much as possible. Seeing the income results over fixed income I never went back to FI. As I aged I chose my income stocks as safe as possible and now some are almost safer than fixed assets. Each person must make their own choices.
I am back and forth with whether or not Fixed Income should have a place in my portfolio. None of us have a pension, and we will not have full-size OAS. As we plan to retire a little bit early, will have only an average CPP. I always felt more comfortable to have some bonds. But with the interest rate so low right now, I am in doubt whether or not I should continue to hold bonds.
Well, not retired yet, so still some time to settle on a final plan.
I don’t believe there is a right or wrong answer for you May. Same goes with everyone else.
Only you know what matters most to you.
At the end of the day, whether you hold bonds, or cash, or stocks that are dividend payers or non-dividend payers, etc. the only goals that matter are yours. 🙂
Al: Good to hear you’ve started your own path to success. Maybe it’s time for Mark to put thoughts to paper.
Appreciate your comments.
I’m too busy answering reader comments for a book 🙂 LOL.
Thanks Henry.
Mark
I too have read all 3 of Henry’s books. Henry’s plan for evaluating Dividend Growth stocks is very well explained and has many examples to support his investment philosophy. I now follow the stocks on my “stocks to consider” spreadsheet that I created as outlined in Henry’s first book. Thanks Henry for putting your wisdom to print! Any thoughts for a 4th book?
Thanks for your input and feedback Al. As long as you are investing with your goals and risk in mind, that’s the plan and approach that’s most important.
Thanks Steeve and a double + for Tom!
Great interview, thank you both for taking the time to share your thoughts and long time experience. I’ve been following Tom Connolly’s blog for quite a long time, and i had my own spreadsheets/methods to select “winning” stocks, but was investing in both growth and dividend stocks. Reading Henry’s books gave me the opportunity to review (and somewhat revalidate) my own strategy. My CAN strategy was pretty much in line with Henry’s, the biggest change was my US versus CAN allocation, and the type of stocks I was invested in. When you apply his model to US market, it becomes clear everything is overpriced south of the border, and with the CAD at 0.75-0.76, long-term opportunities are more likely in CAN stocks. Bottom line – like Henry and Tom I own zero ETF, zero bonds, 100% in stocks, all good dividend payers (with a few exceptions, nobody is perfect). My US stock allocation is down to 30% (from 50%), all in 4 stocks. Fully and happily invested.
I’ve seldom had a problem sleeping at night because of investments mistakes, or down markets. BUT since applying Henry’s approach (5 rules) i have literally slept like a baby. No joke.
For all of you coming here and hearing of Henry’s books for the first time, I strongly recommend you buy them. I’ve read so many on trading, stock strategies, dividend investments, etc.: Henry’s are by far the most comprehensive. His model is simple, the rules easy to follow and adaptable to your risk/investment profile.
Cheers, Steeve
Are you part of Henry’s marketing team? 🙂 Kidding, great stuff Steeve and well done with your plan and investments. You seem to have conviction and a game plan for your portfolio, and you understand the risks involved. That’s very good and informed work.
Sleep well!!
Mark
I invest in low-cost ETFs but am interested to learn more about this strategy. Would love to read this book to help out in that process!
@G: Totally agree! Most closer to or in retirement have gained experience and know what suits them. My message is geared more to those still in the accumulation phase and hopefully provides some suggestions so they might avoid some of the mistakes we made. Fixed assets for those who still have a fairly long investment timeframe, might preserve capital, but won’t generate a growing income, It’s the objective we each seek, that should determine the strategy we choose.
Investor know thyself! I have bought all three of Henry’s books and thoroughly enjoyed them. Thank you Henry for the effort and thanks Mark for highlighting his books. His strategy works for him and he has some valuable insights based on experience and results. They may not be appropriate for everyone. As we all move along this financial journey we learn what strategies we like and what works for us. Personally I like his strategy and agree with him and am 100% equity in my holdings. (10 stock + 2 ETF)
One thing to remember is that when we move to retirement and Financial Independence is that we most likely move from one income source to multiple. Look at the security of the income source. Pensions, CPP and OAS I consider fixed income and likely highly secure. I consider them more secure then employment income. In 2019 my retirement income was split 77% fixed income and 23% equity. In a few years that ratio will move to 86% fixed income and 14% equity.
Knowing this allows me to comfortably be a DGI and take a bit more risk, besides I love seeing those dividends flow into my accounts.
All those who have chased yields raise your hand!
I think there is great (income) security when one relies on many income sources (pension and/or create your own), CPP, OAS, other vs. just one.
If you can live off your fixed income (86%) and have the rest for growth and creating another income stream, that sounds very good and healthy.
I too love seeing those dividends flow into my accounts but that approach is not without some risk as you know. Dividend cuts can and do happen!
Great interview Mark and great insight Henry. Interesting take on not investing bonds at any age. Given the current low interest rates environment, I have to agree with you. 🙂
Yes, interesting take for sure given Henry is also in his 70s!
Ha, Closer to 80s Mark.
Thanks Bob.
Nice to hear from you J. and thanks for your praise.
I am still reading Henry’s new book. It is an excellent extension from his previous book “YOUR EVER GROWING INCOME”. Because of this book I am really serious about cleaning up my portfolio and recently made some minor changes to my holdings. I also own some ETF’s VFV.TO, VUN.TO, QQQ. But at the heart of it I am still an income growth investor. These books are really good roadmaps to get your portfolio on track.
Those ETFs are outstanding choices and I wouldn’t stray too far from those if those funds are helping you realize your goals! VFV for growth and QQQ for tech in particular are going to be great to own in the coming decades.
@Martin: Click on “cannew” and it will take you to my blog, or go to: https://risingyieldoninvestments.blogspot.com/
Thanks. I’ll check it out.
Hi Henry, where is your blog. I agree with much of your thinking. As well given the current pandemic, I think it would be foolish to punt a stock just because they’ve had to cut a dividend or are unable to raise it this year (or next). The underlying fundamentals must be understood. It’ll be interesting to see how the market reacts as the economy takes longer to recover as this pandemic isn’t going away in the short to medium term.
I have purchased and enjoyed both of Henry’s books. His TFSA Compunder convinced me to move my entire TFSA portfolio into DG stocks. While we have DG stocks in our RRSPS and Non-registered accounts we made the “mistake” of investing our TFSAs in GICs. No more! I wish I had done it 10 years ago!
I will be heading to Henrys website and buying his newest book asap!
Thanks Henry and Mark!
Chuck: Appreciate your commendation.
We all live and learn and “mistakes” can and do happen. I think you’re very wise to use the TFSA as a Tax Free Retirement Account in growth!
I also think that is smart Martin. Just because there is a dividend cut doesn’t mean you should automatically kick the stock to the curb. Total returns matter and given dividends are just part of that, there is also the longer-term growth component to consider. There is no value in owning a dividend paying stock when the stock price eventually goes to zero. It will be interesting to see how the market plays these things out long-term!
Hey Mark and Henry,
Continually amazed at the number of differing opinions and strategies people utilize in retirement. Great reading and insight from the two of you. So valuable and ever a reminder that I wish more of this information had been made available to me in my younger years. I’m on the cusp of retirement next year and are finally at the point of looking to start moving into a dividend portfolio which can generate the income flow to support my retirement living. Ha, likely someone will point out that I should have already started this a few years out however I’m a pure equity player, don’t believe in keeping my 6 months of cash reserves not invested in the market and I too likely won’t subscribe to holding bonds and minimal ETF’s primarily as I believe there is continual opportunity to grow my portfolio in retirement by mitigating my risk in the same fashion I have successfully traded individual equities to this point. I love holding great blue chip Canadian companies dollar cost averaging into them by trimming my winnings on my small cap bets. I continually try to make a couple of trades every couple of days and try to enter and exit positions to always maintain a cash trading float in order to take buying advantage of any bad news or negative movement in the market on my basket of high grade stocks that I trade regularly. Holding a complete portfolio of dividend payers I believe you can continually rebalance your portfolio by trimming positions with your winners to either add a cash reserve if required or shift to a new dividend stock that you like. Caveat of retirement will be greater time to manage my investments through research and learning which is an enjoyable activity for me. Double win! Much of investing is a long term approach, staying the course and removing the emotion. Easier said and done with the big drop at the start of the year however proven if you’d simply held your positions. Keep up the great financial topics and looking forward to a read of Henry’s book as it seems to align with my financial goals.
Hi Jeff: You seem like one who enjoy investing, have the time to allocate and willingness to learn and react to various situations, and have made good decisions. At one point in time we tried the same with less success, but once I recognized the potential income growth I could generate by sticking with some of the best stocks, holding them for the growth and totally ignoring what was happening in the market, I totally stopped all other investment activities. With no pension, my goal was enough income to live off. Once there, the portfolio continued all on its own.
That’s one thing I haven’t been able to do. Trade regularly. I just can’t do it and likely won’t. Many of the stocks I own I’ve held or bought more of now – I’ve had for many years. Some >10 years now. I have no intention of selling them unless a dividend cut or other disaster strikes. Then, I may change my mind….
“Holding a complete portfolio of dividend payers I believe you can continually rebalance your portfolio by trimming positions with your winners to either add a cash reserve if required or shift to a new dividend stock that you like.”
Fair. I tend to let many of my winners run. U.S. stocks like JNJ and PG are over 100% returns for me and I wouldn’t think of selling them.
Thanks for your kind words and glad you enjoyed Henry’s interview even if he is more aggressive than I am!!
No bonds at all? Interesting. i’ve been thinking of lowering my bond holding.
@jimmbboe: No fixed assets of any kind in our investments, except I do keep about $50k in our savings account.
Same here. No bonds. Only dividend growth stocks and a bit of cash on the side as cushion.
Hi Henry and Mark. I am a buy and hold primarily quality stock / dividend investor. I absolutely do see the strategy of having quality stocks, in the long term they have been rebounding after recessions, and paying dividends all along. In the meantime I have some bond ETF’s for safety, and over time they have been badly outperformed by those stocks.
But this year for example, I got caught holding SU too long when I saw it was precarious, held, and with dividend cut and then the stock tanking next, there is a long way back.
So, I’d like to just hold about 10 and go over 5-10 percent allocation but what if unexpected happens (company scandal, lawsuit), even if a good company suggest there could be enough sellers to drop the capital badly, impact revenues, and put the dividends on bad footing.
So I keep about 17 stocks and those bonds (and 1 year cash) and every recession I consider moving the bonds into stock, for the recovery – but I never do it, as my inner risk voice says no.
Thanks for posting this!
Hi Brad: I’m not suggesting everyone hold 10 stocks, those are just where we ended up. We each have to feel good with our holdings or know why we hold them. We hold about $50k of cash. I’ve built our income by holding reliable growth stocks and can’t imagine selling any of our stocks to buy something that doesn’t continue to grow our income even further, even if we don’t need it. I’m more than happy to be able to pass it along to family or donations, but I’d hate to see things change with rising inflation and then see fixed assets get eroded and we need the money.
Like you maybe Brad, I like my dividend stocks and ETFs for extra diversification. I couldn’t hold just 10 stocks but I know cannew/Henry is comfortable with his plan and risk tolerance. I believe he is very smart to keep his years’-worth of expenses in cash as well. We intend to do the same…about $50K in cash as we enter semi-retirement in the coming years.
I too, hold a few hundred shares of SU but I figure it might come back. Eventually 🙂
I will eventually like to hold an even split of low-cost ETFs (50% of portfolio) + ~ 50% or so in dividend paying stocks + 1-years’ worth in cash. I figure outside of our pensions and part-time work “that should do it”!
Thanks for your readership! You seem to have a great plan yourself!
Mark
@S I: The five rules are intended to be a screening tool to identify stocks to consider buying. They are not intended to be used to determine if you should continue to hold. Company status changes and future prospects change, so you need to try to identify today’s stocks which seem like good ones to buy.
Once you’ve bought, the criteria for continuing to hold is not the same. One might be happy with a lower return for a more secure income, or one might decide to continue hold a stock which cut their dividend, because you believe the company will recover quickly and jump at the chance to buy the shares cheap. As I said there is no one answer for all situations, one has to be flexible. But remember I’m not concerned with capital appreciation in the short-term.
Thanks for your response! For me, deciding when to sell is even tougher than deciding what to buy. I think having rules is definitely important but like you said, you have to be flexible. Personally I’d aim to be as flexible on the buy side as I am on the sell side, but I know I’m just a different investor. Congratulations on your success though, you’re obviously doing many things right and I like the ease of your overall strategy!
@S I: I’m with Mark, that one should maintain a cash or at least a liquid reserve. The amount one should hold will vary and is personal. For my investments I don’t include any fixed assets, because over the years, my income has not been affected by market corrections and I have not needed to sell capital to meet expenses. That’s the objective I suggest; grow your income so one does not need to worry if their holdings drop. Even better, if your income continues to grow when the value of your holdings drops, what is there to worry about?
I understand, but just disagree that fixed income securities are inappropriate for all regardless of age. I feel like I have to defend the asset class a bit here as there are so many different FI options out there that can provide solid regular income consistent with investors’ risk tolerances! They shouldn’t all be labeled as just a hedge against stock market downturns or considered part of an emergency fund.
However not having to worry about capital losses (realized or unrealized) so long as your income is sufficient is an attractive goal. I imagine the general advice is to start young and to stay invested!
Thanks for engaging!
I figure no investor should take on more risk than a) they can handle and b) afford to lose. I believe based on an investor’s tolerance for risk, investing timelines and needs for the money (i.e., to cover near term expenses) then fixed income (beyond cash as an asset class) has a great place in a portfolio.
It doesn’t quite work for me since I’m in my asset accumulation years and I figure my DB pension from work is effectively a bond.
Sufficient income to cover one’s expenses should be the retirement goal of all but there are many roads to Rome! 🙂
Mark
That book sounds very interesting! As Mark has correctly pointed out, Henry seems to have found a strategy which meets his needs and passes his risk tolerance levels, and that’s ultimately what it’s all about.
Perhaps I’m more of a traditional investor but I do question the rule against any fixed income products regardless of age. Even though I’m not of retirement age I know plenty who are and just simply couldn’t tolerate losing so much in a single year and not having the time to recover. A recommendation for most? Perhaps, but not all.
Similarly, I think the hard and fast rules are always troublesome especially during market downturns. I’m particularly interested in learning more about Henry’s approach on when to sell a stock (I know you weren’t able to get to all of it in the article!). My first impression is that if the rules for buying and selling are different, that paves the way for falling into the endowment bias trap. A stock is not worth more just because you own it. If you buy a stock which meets the five criteria, then a few years later you screen again and it doesn’t, why hold it? Curious to learn more! Thanks for posting the interview Mark, and Henry – looking forward to picking up a copy!
Henry and Mark,
I have read Henry’s 1st book twice and found it simple to follow without too much jargon. I would like to win his 3rd book to keep adding to my knowledge for DIY investing.
Henry made a comment:”Currently we own just 10 Canadian dividend paying company stocks within our RRIFs, TFSAs and non-registered accounts.” My question is about rebalancing and keeping less than 5% of your portfolio in any one stock as recommended by the experts. Example: I’ve owned 256 shares of CNR for 10 years or so with ACB $78. As my brokerage does not DRIP dividends on CNR the shares have remained static. However, the unrealized capital gain has blossomed over 70% with the share price at $135 today. CNR now is 12% of my nonreg account. I don’t want to sell any of it just to rebalance under 5% because then I have to offset the capital gain with a loss (selling a loser) at tax time. As I’m retired I am not really adding any new cash to this account and I wait until my cash dividends hit 1k before making a purchase. Do I ignore the “no more than 5% in any one stock” rule?
Hi Bonnie: I must admit that with only 10 holdings we did end up with much more invested in a few of our holdings than we most will feel comfortable with. I don’t like to apply a % to any one holding, because I’ve always felt that as long as the stock provides a reasonable income growth, I never worried about how many shares I owned. What happens is that over time, if the company continues to grow their dividend, then there comes a time, that even a dividend cut would not really hurt, because your earning so much income you’ll still do well. The main issue is, is the company still sound and will it recover. I don’t rebalance, but I do monitor my stocks to ensure I still like them.
Hey Bonnie, I can’t offer direct advice of course but I can say with confidence that I intend don’t intend to sell non-reg. shares until I have to.
CNR should be an outstanding stock to own in the coming decades due to the very high barrier to entry that sector. So, few competitors to come.
I personally don’t like any one stock to be higher than 5% (or so) of my personal portfolio (I recall TD is approaching 6% for me) but there are exceptions and pros and cons to every decision. I wouldn’t sell to realize a gain you don’t need yet. That’s just me and I will continue to let my stocks in my taxable account “run” even if they creep up to 10%.
Great post! The dividend growth strategy is one I follow for my TFSA and NR accounts so that they eventually reach point that they fund a big chunk of my retirement income. My dividends are no where near enough currently so I plan to use most of my RRSP early in retirement (before 65) to fund a sort of early retirement, so I need a certain level of cash or equivalents in the RRSPs. I have been burned chasing yield before so this advice for DG investors is excellent.
I hear ya. Nowhere near retirement income yet for me but getting closer 🙂
Chasing yield is bad but I suspect all DIY investors get burned at one point or another. The challenge is, high yield stocks can happen rather quickly when stock prices tank. It’s not always the fault of the retail investor. It just happens sometimes and catches management teams off guard.
@A: Preferred stocks are basically a fixed income product. Yes, they usually offer a slightly higher yield, but there is no growth. No growth, no interest, at least from me.
Excellent insights from an experienced investor! I wonder what Henry thinks about preferred shares? It seems like they could be a good supplement to a dividend-focused portfolio.
I don’t think he likes them but will let him answer. BTW, I profiled your recent post on my site 🙂
https://www.myownadvisor.ca/weekend-reading-biggest-stocks-and-etfs-oas-4-percent-rule-stay-invested/
Well done!
Hi Joanne: Good to hear from you again, and I suggest you stick with the best stocks you feel good about, before expanding your list. By doing so you’ll eliminate almost all of the risk and generate a better than average income.
Hello, I am new to investing and have been reading Mark’s blog and have read Henry’s books and have emailed him a couple of times on questions. I would love to win this book to further and widen my knowledge of a DYI investing in growth stocks. I am 52 and have started very late and trying to gain enough knowledge to help me start my income growing stick picks. Thank you both for talking about your journey and insite on doing this. Great job!!!
Thanks Joanne! This approach is not without risks mind you, so you need to be very aware of that. Not every DG stock is going to climb through the roof let alone pay dividends as well. Long-term patience is essential since stocks go up and down and up again, only to go down. Best stick to a solid investing plan for stocks and/or also invest in low-cost, diversified ETFs to ensure you’re not missing out on total return and long-term market-like gains.
Food for thought! Thanks for being a fan!
Mark
Hey Mark
Excellent post. That Henry is sure spot on.
As you know, my wife & I have been retired for over 7 years and live off dividend income. Just like Henry, we only invest in Cdn dividend income/growth stocks and don’t have any fixed income or GICs. Our portfolio generates way more dividend income than we need to live off so our portfolio has been growing significantly since retirement.
We have a couple differences from Henry in our investment strategy but I’ve been giving it quite a bit of thought and have decided that I think Henry’s strategy is probably better for most retirees.
Here’s a few of the differences and my thoughts on them:
– we have a full position/set of REITs. I went back over the years and analyzed how we have done. It is actually quite well but it is mainly because of take-overs more than anything. There’s a few that have really worked out well like DIR.UN, GRT.UN, NWH.UN, and SMU.UN (mostly industrials). As I was retiring, I was worried about having enough dividend income and couldn’t resist the high yields. The REITs sure do crank out the income!!
– we own 2 ETFs (FIE and ZWB). I generally don’t like ETFs but these are a bit different in ZWB being a covered call ETF and FIE using extra leverage and holding something a bit different than the rest of our stuff. They have done well enough for us with some capital loss but big divys resulting in an average return over the last 7 years of 3.3% for FIE and 4.5% for ZWB.
– we hold full positions in 4 of the 5 big banks (BMO, BNS, RY, TD), 2 of the main telcos (BCE, T), and the big guys utilities (EMA, FTS) and midstream (ENB, TRP). We also hold some of the minor utils like AQN, BEP.UN, CPX, and NPI which we have done well with and some minor midstream like IPL, KEY, and PPL which have generated some good divsy but have been creamed in stock price. This is the main area where Henry’s approach is way better. ie: sticking to the big guys).
Anyway, we’re going to stick with what we have as it has worked well for us but anyone approaching retirement may want to stick closer to Henry’s approach and stock list.
Ciao
Don
Hi Don: You make a great point, that you’ve understood and looked closely at each of your investments before just jumping in. Too often investors don’t really know why they buy certain investments, they do it for the yield or recommendations of others. That’s when they suffer the most.
Don, you have clearly found a great blend of stocks and ETFs to meet your income needs. Kudos. Lots of information from others to learn from there.
The way I see it, dividends provide “optionality” for income now vs. gains later. Gains sometimes do not occur as you know, so at least I get paid now and I can use some of that total return for my needs/spending needs. I suspect I will always enjoy the joy dividends provide but total income needs and therefore total return ultimately matters.
Industrial REITs seem to be holding up. Thoughts on owning some for the TFSA in 2021? NWH.UN in particular still seems good.
Happy investing!
Congrats on your new book Henry!
I look forward to reading it.
All the best!
Sabrina: Thanks.
I have been following Henry Mah’s blog for a while now. Like Henry, I prefer to own stocks, rather than ETF’s, to minimize my investment fees. His new book sounds interesting!
Good to hear from you Stuart.
I look forward to do more of my own investing!
Brandon: Good.