“Know what you own, and know why you own it.” – Peter Lynch, American business icon.
A new year brings new opportunities. Opportunities to reflect but also plan forward. In that sense, I’ve taken a few weeks to review my dividend stock portfolio to better understand what I own and why I own it. What is the outcome of my review?
I think I’m in good shape.
I own companies that have been paying dividends for over 100 years. I own companies that demonstrate an ability to increase their dividends over time, even when the stock market is sideways or just plain chaotic. Is my portfolio perfect? No, there are some risks associated with some of my holdings and I need to monitor them. Is my dividend stock portfolio set-up for increasing income this year? Absolutely.
For retirement expenses and to fight inflation down the road, I believe steady income and more importantly rising income is the key. Retirement expert Daryl Diamond thinks so as well and recently eluded to the beauty of sustainable income in retirement in a recent Globe and Mail article, saying:
“You don’t have to get up and see what the stock market is doing in the morning because it’s not based on the value of your account.”
In that article, there was an option presented to readers to use monthly income funds available by the hundreds (if not thousands) from the mutual fund and exchange-traded worlds to establish your income machine. These funds typically hold a mix of dividend stocks, government, corporate and high-yield bonds and, sometimes, preferred shares. While this approach might work for some, I prefer to own any companies in these big mutual funds or ETFs outright where I can. This way, in my taxable account, I can take advantage of the Canadian dividend tax credit to be more tax-efficient. If I want to own different companies or low cost funds that distribute interest income, dividends, return of capital and capital gains I can use my TFSA for that.
So, where does this leave me?
After last month’s portfolio review, I decided to change, well, nothing. In January, I let the dividends come in and they were reinvested as per usual. Rather boring actually. Yet boring is working quite nicely since I’m up about $100 over December’s dividend income update.
Since a new year allows me to look ahead, I’ve forecasted my dividend income by the end of this calendar year will be close to $7,500. That’s a long ways from my ultimate goal but that goal is getting closer every month I stick to my plan.
I look forward to another year of sharing my portfolio updates with you.
How is your income portfolio coming along for retirement? Are you in retirement, and using a dividend income portfolio to help fund your retirement?
Great job Mark! Soon you’ll be earning 5 figures annually in dividends!!
Baby steps. Dividend investing is a long-term process, and it sounds like you are on the right track.
That’s the plan….5 figures in CDN dividend income is going to be great! This will hopefully happen sometime in late-2014.
Good job as always Mark!
Thanks for the support! Next month, I hope to crack $6,600.
@My Own Advisor
I guess that’s what we’ll have to do: identify an opportunity to buy something that should grow BEFORE we sell anything. Good point!
Great job man. Getting to $7,500 in annual dividends is huge. I hope to be able to hit that kind of passive income within a few years. Keep up the great work!
Thanks Mantra! I’m still a long ways off from my goal but the plan is now in place and it’s nice to see it working 🙂
Interesting point Steve makes and one I thought of before. How much does one have to invest to get such yearly dividends? Since I want to start to dabble investing on my own I was always curious about how much .
Most of my CDN stocks yield in the 3-5% range. I don’t count my US stocks in this update.
I figure I’ll need close to a $1M CDN dividend portfolio to retire in addition to a paid off home. The house should happen in 9 years and the portfolio will hopefully happen in 15 years.
To earn $4k per year, with 4% portfolio yield you’d need to have $100k invested.
Yes it’s a bit sad but with a good dividend portfolio you often don’t need to make any changes. I find some of the div payers have had some really big capital appreciations lately, though. Do you ever take part profits on the cap gains and re-invest in another div paying stock that looks like it has more room to grow than the original one? I haven’t quite decided what to do about that. Some stocks have grown 45% in 2 years!
Yes, some have risen a bunch so you make a good point….when to sell. Some of my holdings are up 20, 30 and even 40% since I bought them.
I’ll probably hold all the winners for now, but the thing is, if I sell, what am I going to buy instead? Another high priced winner?
Great job Mark!
You must be really pumping in the funds for that kind of growth!
Thanks Steve! Most of my portfolio is on autopilot now…with dividends being reinvested all the time 🙂
$7,500 in dividend income is great! I can’t wait until my passive income streams get that high. Keep up the good work.
That’s the indirect goal for 2013…we’ll see 🙂
That’s pretty awesome to be earning $7500 from dividends. I know this is possible to do this kind of stuff but I’ve never really looked into.
Thanks Chris! The retirement plan is coming together…month by month.