Hard to believe it’s already been a month since my last net worth update but alas, here I am. I don’t know where you live in our fabulous country, but it’s been pretty hot in the Capital lately. I wish I could say the same thing about my investment portfolio (hot like the weather) but it’s down; probably like your investments. In reading some personal finance and investing forums and blogs over the last week or so, I’ve seen the word “panic” crop up a few times during the recent market slide.
“Panic” about the stock market? Really? Why?
I guess if you owned a basket of high-fee equity mutual funds that might be some cause for concern. Those funds are supposed to beat the market and if they’re not, you’re losing money rather quickly via paying fat management expenses. I also think if you owned a few stocks that didn’t pay dividends and you were counting on those stocks (like Research in Motion (RIM)) for capital appreciation you might be a little worried as well.
To be honest, I don’t care much about the performance of the markets lately and if anything, I’m happy to see them slide. Rather than “panic” I’m “excited”.
You see, I have about 25 years until I retire. During this time, my wife and I are slowly building a modest RRSP nest-egg while still contributing to a defined contribution (hers) and a defined benefit (mine) pension plan at work. If you’ve been reading my blog, you know that is just part of our financial equation. We’re anticipating we’ll need more than some RRSP funds and our pensions from work to retire on comfortably. If we want to retire early, that’s another need altogether.
To do the latter, we’ll need income replacement, significant amounts. Our plan is not to work 40 hours per week for the next 25 years, so we’ll need to ween ourselves off the Monday to Friday thing and replace our existing employment income with something else. This is where our dividend income journey fits in. That is our strategy with dividend-paying stocks. As markets bounce all over the place, and potentially go lower this summer, we’ll automatically buy more of the following dividend-paying stocks via our dividend reinvestment plans (DRIPs) at lower prices:
Bell Canada, Bank of Montreal, Bank of Nova Scotia, CML Healthcare, CIBC, Fortis, Husky, Power Financial, Sun Life and TransCanada Pipelines.
With lower equity markets of late we’re able to scoop up more equities cheaper. Remember buy low, sell high? Well, what about buy lower and never sell?
Last month, I started a small position in another Canadian dividend-paying company, Rogers. I figure while we’re getting gauged every month to enjoy our HD cable; watching the Canucks lose The Stanley Cup, I figure I might as well get something back back in return – dividends. Rogers (RCI.B) has been a consistent dividend payer for many years now and has raised their dividend multiple times over the last 5 years. The stock now yields about 4%. I not only use Rogers services (which is not a stock purchase prerequisite mind you but this is similar to other stocks I own (Enbridge, CIBC for example)) but I understand this company. This is something I always try to do: buy what I undertand. Going forward, I’ll add more Rogers stock to my portfolio when a) I have the money (???) and b) the price is comfortable for me.
Thanks to the power of compounding and holding companies like Rogers that reward you for being an owner in their business, I am happy to announce we’re on pace to earn just over $4,500 in total income from our Canadian dividend-paying stocks for the entire 2011 calendar year (if dividends were paid out in cash). That’s an increase of almost $300 over the last six months! Sure, my new position in Rogers is small but it’s a start; just like I did with many other companies.
Over the last month, I never panicked about the market slide. If anything, I got rather excited because it allowed me to buy more stock or new stocks at lower stock prices. More stock means more dividends and more dividends can be reinvested to buy more stock next month. Month by month, increasing dividend income will be our key vehicle to drive down the financial independence road. Regardless if there is a hot equity market, great companies pay, literally. My dividend reinvestment plans (DRIPs) are on, the taps are open for business even if the stock markets say otherwise 😉
What about you – are you panicking about the equity markets of late?
Share your thoughts!