November 2016 Dividend Income Update

How many stocks should I own?

How many do you own?

Those are investing questions that I receive often.

I’ll tackle those questions again today along with this new one from a reader.

“Hi, I’m moving towards a dividend portfolio, have enjoyed your site. I was curious if/how you review your dividend stocks to determine if they are still the best candidates for your portfolio. Thanks.”

Good questions readers, keep them coming.  Here are my answers.

Reader: How many stocks should I own?

Probably as many as possible.

In The Investor’s Manifesto author William Bernstein wrote: “since we cannot predict in advance which stock and bond asset classes will perform the best, we diversify.”

This means investors can reduce the risks that come with individual stock ownership by owing the whole market not just a few select companies.

I do that, somewhat.

Canadian equities

When it comes to buying and holding Canadian equities, I feel our market is not very diverse.  You have financials, you have energy; you have the materials sector and then you have a bunch of everything else.  The Canadian market is tilted, not always in a good way.  This is why I’ve decided to own many Canadian stocks directly, own what I want, what I consider dividend studs and avoid others.  The dividend studs are Canadian blue-chip companies that have rising cash flows who increase their dividends over time, usually every year.  I believe investors, investing in the Canadian market, can consider unbundling their Canadian Exchange Traded Fund (ETF) for income – eventually.

U.S. and international equities

The story is different here.  U.S. and international markets are HUGE, much larger than Canada on the world stage.  (Recall Canada makes up something like 4% of all markets).  Outside some U.S. dividend aristocrats we index invest a good part of our portfolio for capital appreciation.

So back to the question – how many stocks should you own?  Only you can decide but the above approach works for us. Your mileage may vary.

Reader: How many stocks do you own?

We currently own about 30 Canadian stocks.  We also own about 10 U.S. stocks.   We own a few indexed ETFs.   That’s about it.

Reader:  How do you review your dividend stocks to determine if they are still the best candidates for your portfolio?

I actually don’t review my portfolio very much.  It’s really hands-off-the-steering-wheel.  If the company continues to pay me a dividend and that company has increased their dividend within the last year or so, then I continue to own it.  I don’t worry about company/market noise; I don’t worry about doomsday news.   As long as the companies we own continue to pay dividends and ideally, those companies increase their dividends every year –  they stay in the portfolio.  If there is no dividend increase over a period of one or two years, or certainly there is a dividend cut, then I examine a company much more closely.

Thanks to our boring plan of buying and holding Canadian companies that pay dividends we’re on pace to earn almost $13,200 this calendar year from dividends – a part time job I don’t have to show up for.  Our goal is to earn about $15,000 by this time next year.  I look forward to seeing how we do.

Thanks for your questions and reading.

19 Responses to "November 2016 Dividend Income Update"

  1. Hi Mark
    I enjoy your blog very much. Thank you for all the useful info. I’m curious. How much do you and your wife save monthly to buy stocks with?
    I’m 45 and have a dividend portfolio with my wife that is around 230k and we save about 20k per year. Do you feel that is enough to reach financial independence by 65?
    Our house will be paid in 3.8 years. Our yearly dividends are around $6800.

    1. Thanks for reading and being a fan of the site Robin.

      We save a good portion of our income for (early) retirement purposes – we try and max out our TFSAs every year (now $11k per year) and we try and max out our RRSPs as well. That’s another chunk of change. I prefer not to disclose those details but it’s a decent amount as well.

      Kudos with your investment portfolio so far – that’s great work by you and your wife.

      I can’t speak to your investing goals but some quick math tells me this, with a few assumptions:

      $230k invested today;
      $20k invested inside tax-deferred (RRSP) or tax-free (TFSA) accounts per year; for the next 20 years without fail;
      at 6% rate of return on average over those 20 years =

      $1.5 M at age 65.

      I can’t speak for your tax rate or spending habits or other factors such as inflation – but $1.5 M should allow you to withdraw 4-5% of that ($60,000 – $75,000) every year in future dollars without putting a huge dent into your capital. You should also have CPP and OAS to live from, which can likely offset any tax paid on that income every year. Just be mindful $1.5 M today is likely worth about $1 M in future 20-year-dollars (inflation is the silent portfolio killer).

      Overall, a very healthy nest egg if you can do it debt free. Having $1 M in the bank (in 2036 dollars) and being debt-free in retirement PLUS government benefits (CPP and OAS) is going to put in great place financially at age 65.

  2. it is quite remarkable to watch your progress mark. you and your wife are going to have a fabulous retirement. perhaps this forum will transition into a retirement journey. i hope i’m around if it does. (:

  3. Mark, re your American stocks, to reduce the withholding taxes, have you done the W8BEN form thing. I ask because I haven’t done so as yet and believe I should. I think its the Investor who has to expedite .. TD Direct Investing gave me varied opinions but eventually I reached a manager who said “yes, you should do one”. But I can’t quite figure out who gets it and what the process is. Any contribution you might have on this rather vague topic, my many thanks.

    1. “Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) Give this form to the withholding agent or payer if you are a foreign person and you are the beneficial owner of an amount subject to withholding.”

      Never heard of it, but it clearly applies to US individuals only.

    2. Yes, my brokerage has done the form/paperwork for me.

      You should be able to contact your discount brokerage and tell them what securities should not have withholding taxes – based on your understanding – that is, U.S.-listed stocks and U.S-listed ETFs inside your RRSP.

      Ask to speak to a manager if you don’t get the correct support from the front-line.

      You shouldn’t have to complete any paperwork yourself since all your holdings are in the street-name, the brokerage.

      Good luck Darrell and let me know how that goes.

  4. Ans I third that! Looks like your dividend portfolio is firing on all cylinders. As you mentioned, it’s like a part time job you don’t have to show up for. Isn’t passive income great? Thanks for sharing.

  5. “It’s really hands-off-the-steering-wheel. If the company continues to pay me a dividend and that company has increased their dividend within the last year or so, then I continue to own it. I don’t worry about company/market noise;”

    Second that!!!


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