May 2011 Dividend Income Update

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
  • CIBC
  • Fortis
  • Power Financial
  • Sun Life
  • And More! 

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!

7 Responses to "May 2011 Dividend Income Update"

  1. Keyera Corp.’s stock price is up 49.5% in the last 12 months, (a good sign for a company I think!) so you are right but comparison with other such companies in its sector it appears to be fairly valued. I was overweighted in oil/gas companies so I sold it (and some others) just as it recently converted to a corporation and made a good profit. I am going to wait until the dog days of summer to buy it again hoping the share price will decrease a bit but analysts are positive that its earnings momentum is such that the share price will likely rise but one can easily hold it for the dividend which if looking at the cash flow/share this is very positive going forward.

  2. I am thinking of getting into Shaw Comm. as well as Keyera.
    I’ve been impressed with the recent success of Shaw’s ‘bundling’ packages in the Vancouver area where I live. I think their stock is poised to move up as even the analysts have taken notice moving up the target price for the stock. I’ve always loved Keyera and have had success with it in the past when it was a trust. Going forward I think it should do well as the Alberta economy is revving up.

    1. Hey Jon,

      Shaw is one I’d like to own eventually, nice yield for one. Keyera, don’t know much about them other than an independent NG company. I like that their yield is also monthly but Keyera’s stock price has appreciated significantly over the last year or so…wow.

  3. “Sell in May and go away!” – I think there is some truth to that Jon.

    Other than a few DRIPs running now, I’m not really looking at buying anything at the moment. My DRIPs will buy my stocks cheap for me.

    What are you looking to buy?

  4. “Sell in May and go away!” sums up the stock market. Traditionally markets correct at this time of the year although this spring has seen a more bearish one……hey even Apple has dropped 10% and is still falling!! But it’s the time to buy but I may wait until the dog days of summer to jump in again. The reputable George Vasic of UBS AG thinks that the Canada Stock Index may Surge 17% after the summer valuation drop and that’s good news! By then things in Greece should settle down too! Anyone jumping into small cap dividend stocks?

  5. Great job on the dividend income. $4,500 is a big number, and best of all it’s completely passive. Sitting back and collecting checks is very hard work!

    I’m not panicking about sliding markets either. I’m a net buyer of stocks, so sliding or sideways markets are good news to me. I’m always more excited when my favorite equities are on sale.


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