January 2012 Dividend Income Update
It seems dividend investing is more popular than ever. There could be a few reasons for this.
One, investors are fed up with the miniscule returns that bonds and GICs have been providing in our extended, ultra-low interest rate climate. Two, maybe more investors are going the do-it-yourself (DIY) investing route than ever before, tired of high-priced mutual funds that eat away at investment returns. These DIY investors are leaning towards direct stock ownership more and more. Third, maybe investors are learning to stay the course, sticking with their common stocks and avoiding trading. They are starting to see the rewards of being a long-term investor in the market versus a short-term trader looking for the next big thing. I fall into the latter category for sure. I think established companies that pay dividends make great sense as part of a balanced portfolio.
Why do I say this with confidence?
Over the last couple of years, I’ve seen my dividend income grow. The proof is in my numbers. This past month was another example.
In December 2011, we ended the year with just over $5,200 in dividend income from our unregistered accounts and TFSAs. No doubt it has taken me many transactions and purchases to get this point, and some mistakes along the way, but overall our dividend investing strategy is working for us. This strategy is a great compliment to our passive investing approach using Exchange Traded Funds (ETFs) in our RRSPs. This month, our dividend income for the 2012 calendar year is projected to be $5,300, almost $100 more than last month. Projected, if:
- no companies increase their dividends this year,
- I don’t buy any new dividend-paying stocks, or
- dividends just accumulate as cash.
I’m optimistic none of these things will stay the same. Here’s why.
Our dividend income should grow beyond $5,300 in 2012 thanks in part to recent dividend hikes by the following companies:
- Enbridge (ENB) announced their quarterly dividend will be $0.2825 per common share in March 2012.
- Fortis (FTS), Canada’s only true dividend aristocrat, announced their quarterly dividend will be $0.30 per common share payable in March 2012.
- Bell Canada (BCE) announced their quarterly dividend will be $0.5425 per common share payable in April 2012.
Our income should also grow thanks to synthetic DRIPs. For most of our holdings, when dividends are paid, we reinvest the dividends to buy more whole shares every quarter. There are a few companies we don’t run synthetic DRIPs with, but not very many. More shares over time paying more dividends over time – the magic of compounding. I love this process!
While these posts focus on what’s new with my dividend income, know that you can reinvest distributions paid from mutual funds or Exchange Traded Funds (ETFs) as well. Feel free to ask me any questions about reinvesting and I will do my best to answer them. I firmly believe getting your money working for you is the secret of wealth creation.
Back to dividends and closing out this post, there is no such thing as a free lunch when it comes to dividend investing. Stock prices rise and fall, maybe by 10%, 20% or even more. It takes work to monitor my portfolio. I’m now an avid reader of annual reports! However, I believe in the companies I own and I keep my fingers off the “sell” button as much as possible. This income machine took me years to build is now starting to run along quite nicely.
Our long-term goal is to create about $30,000 in dividend income to fund part of our retirement. It’s a lofty goal for sure. However, we had to start somewhere and like so many things when it comes to investing, patience and time are often the toughest elements to accept but it’s worth the wait when the ingredients start working together 🙂
I hope you continue to follow along and find out where I am with the dividend income next month.
@The Dividend Ninja
Yeah, I thought you’d like that lil’ flowchart. I know I do, when the dividends come in!
Thanks as always for your support Ninja.
Thanks Addicted! 🙂
You won’t care about buying BCE high (now) in another 5 years. You’ll see 🙂
I love your chart, Mark lol.
I started to DRIP BCE in my TFSA to keep the investing costs low but the shares were bought at it’s all time high 🙁
Just my Luck!
MOA great job, I think you will get to $5K easily enough – even if share prices are flat it’s those DRIPs that compound the monthly income 🙂
The best part of the post though was the flow chart of the dividend assembly line, with little Mark at the chalk board!
The Dividend Ninja
Great job MOA! Keep up the fantastic work and I hope you reach your dividend goals for 2012. I’ll be anxiously watching your journey all year.
Great blog – I have learned so much in the month or so I have been reading it. It has been very helpful to clarify the complicated world of investing for a beginner like me.
Your post today was very relevant as I am going to set up ETFs in my RRSP. I have about 50,000$ and would like to do this on my own, online, in a non-managed way, with monthly cash contributions for the smallest fee possible.
I have looked at BMO Investorline, Questrade, TD e-series and others. I realize you may not want to recommend one company over another, but I would be grateful if you could list 2 or 3 that would meet my criteria.