September 2012 Dividend Income Update

Last month, I wrote that many Canadians are quick to loathe our banking system, for their service fees and various surcharges.  Love ‘em or hate ‘em banks are good for our Canadian economy and great for my dividend portfolio.  In my portfolio, there are four Canadian banks that pay regular quarterly dividends.  My yield for this sector of my portfolio is about 4.5%; steady passive income.  I’d like to own a couple more banks eventually but I don’t find the prices for Canadian banks very attractive right now.  Come to think of it, I don’t see many good “deals” in the Canadian stock market right now.  For many of the companies I’m following, prices are close to their 52-week highs.  It wouldn’t make much sense to buy stocks at those levels.  As an investor, there are few things you can control but I believe your behaviour must be the most important one.

So, based on that, I’ve recently made a few minor changes to how I manage my dividend income portfolio, compromised of 25 Canadian companies.  I’ve decided to “turn off” dividend reinvestment plans (DRIPs) for a couple of companies I own and collect the cash paid from dividends instead.  This way, I can keep the funds in my account or use the money to make a lump sum on my mortgage, the latter which I am leaning towards.  Paying down our mortgage is a guaranteed rate of return and with mortgage debt that’s into the 6-figures, paying down debt is always a great option for us.

Even with some of the dividend reinvestment plans (DRIPs) now closed for business, my dividend income increased over last month thanks to some DRIPs that continue to run along.  Besides, I’m overweight in Canadian financials and I’d like to build my portfolio in other sectors.  I’d like to model my Canadian dividend portfolio similar to the sector breakdown in the *iShares S&P/TSX Capped Composite Index Fund (XIC):

*image courtesy of iShares site.

At the end of last month, I calculated we’re on pace to earn just over $6,150 in dividend income this calendar year, an increase of ~ 1% over August without making any stock purchases other than letting existing companies buy more stock with dividends paid.

Month by month, we are inching closer to our retirement dreams by having a paid off home and steady passive dividend income to complement our other investments.  This portfolio takes some work but the journey is rewarding.

How is your portfolio coming along?  How are you reaching for your retirement dreams?

24 Responses to "September 2012 Dividend Income Update"

  1. What tools are you using to track your returns? I recall MoneySense had an online tool?

    Edited the block quote, hopefully I did it correct, but to answer the question that is my next project, just started looking for some online tools. I thought of using just excel but if I add any money during the year it would mess up my simple calculations so I’m looking for an online one.

    Also I’m doing David Stanley’s Beating the TSX so I can track his returns and see how I do. I’ll update later once I find something suitable

  2. My Own Advisor :
    Hey Rob,
    Good call…switching. I finally closed all my DRIPs with Transfer Agents this year and now have everything with brokerage. This has simplified my life.
    I still DRIP many holdings, but over time, I’m turning off some DRIP taps. I will keep some running, because for some of these companies, it makes sense (like SLF and MFC) IMO for dollar cost averaging.

    I keep Emmra on DRIP only because I don’t have enough to justify moving it yet. Hopefully next year.

  3. Sometimes, you don’t have to DRIP. because dripping may buy you shares when the price is not favourable, ie too high for a particular counter (say, approaching the 52-week high figure). I don’t DRIP.

    I queue in counters with favourable prices using what they call stick bids, mostly dividend stocks and if the price that I wanted came along, the purchase would have been made. This purchase is made by ‘spilling over into the margin account’.

    The catch here is I must always choose stocks that pays me a higher dividend rate than the margin rate that I’ll have to pay. Then I’m still in a net positive position. From there, whenever any dividend comes in, it will automatically offset the outstanding margin that I still owe !

    With the above technique, I get to select the shares that I wanted to buy without being locked-into the shares that paid me the dividend. I am willing to sacrifice the discount that I may get by participating in the DRIP program.

    1. Thanks for your comment, and for sure, that is the danger….DRIPping when the price is not favourable.

      That said, there are many companies worth DRIPping. Bank stocks and insurance companies of late come to mind.

  4. A second point I’m bring up with various bloggers is the fact that almost nobody shows there actual performance, loads of people talk about back testing and wonderful theories and even how much they earned in dividends (which is great) but other than a few bloggers (correction only two bloggers as far as I know) almost nobody talks about how the portfolio did overall.

    To me the acid test is did you beat the index, sure getting dividends is nice but what good is it if you’re under-performing the market.

    To set the bar high the few bloggers (actually only one Andrew Hallam) tracks their performance. And none of this is back tested, all real in the trenches investing

    Here’s what I found

    Andrew Hallman 11.9% or 200% or a decade
    David Stanley Beating the TSX 11.79% over 26 years
    Contra the Herd 15.3% over 15 years

    Now to be fair I honestly can’t tell you how I did over the past years, I simply sent in my cheques every so often and let the dividends compound. So one of the reasons for the switch was to track how I’m doing, if I’m under-performing than I’m doing something wrong and I need to change

    Any thoughts?


    1. How did I know you were coming for a second point? 🙂

      Kidding aside, what is important is overall returns, yes but don’t you feel that if you own a diversified portfolio stocks (say 20-25 in Canada) and hold these stocks for the long-term that a dividend investor should mirror the broad index? I believe so, at least in Canada.

      That said, there is little point in owning dividend stocks if you are always under-performing the market.

      I recall many of my stocks have clobbered the market in recent years, REI.UN and BNS are a couple because of the prices I paid for these holdings. That said, there are a few that have underperformed the index, SLF and TA come to mind!

      Overall, I’m probably getting about 6% return over the last 3-5 years….most of that from dividend yield and not so much capital apperciation. I think XIC would be returning less than that.

      I am going to try for 2013, start tracking my returns much more diligently and see where I end up in another few years 🙂

      What tools are you using to track your returns? I recall MoneySense had an online tool?

  5. I recently switched from a straight DRIP to having all my stocks in a brokerage account and I must say that it is a strange feeling indeed to login and see money there you didn’t earn! Yes I earned money DRIPing but I focused more on how many shares I had. Currently I’m not reinvesting rather letting the money build up and investing when one of my stocks dips down.

    1. Hey Rob,

      Good call…switching. I finally closed all my DRIPs with Transfer Agents this year and now have everything with brokerage. This has simplified my life.

      I still DRIP many holdings, but over time, I’m turning off some DRIP taps. I will keep some running, because for some of these companies, it makes sense (like SLF and MFC) IMO for dollar cost averaging.

  6. $6 grand is AMAZING for somebody as young as you and your partner. Awesome job. That $500+ a month is gonna be a positive spiral (the opposite of a debt spiral) cause it’ll keep compounding tax-efficiently. Dividend stocks are king because cash is king.

    1. Good point about the yields being higher than your mortgage. I think I’ve only stopped about 3 DRIPs out of the 20 stocks I can DRIP with. I want to keep most of the taps wide open and reinvest everything I can. Get money making money 🙂

      Thanks for the support Calgary Girl. Great to have your support on my journey from someone who is following the same path!

  7. Looking Good, Mark!

    I’m waiting for another dip in the market before making another purchase. By the end of the year I will only own 3 Canadian banks. I don’t want to be too heavy in the financials and would rather spread the weight around in other sectors.

  8. Thanks for your interesting blog. Can you expand on your comment that some DRIPs are now closed? Which ones? Is this a trend and should one be cautious about stopping if the chance to get back in might disappear?

    1. Thanks Pursuit! Yes, I can comment on that – some of my DRIPs are closed. Have you seen this page on my site yet?

      Please have a read when you can and come back and ask more questions. I’d be happy to answer anything for you.

      The short answer is, I reinvest almost every dividend paid. This way, I get my money making money. I can start OR stop by reinvestment plans with almost any stock I own anytime I want. I just have to make a phone call and tell my discount broker what to do 😉

  9. Good for you that’s a great dividend income to get each year. I don’t know much about investing on my own in Canada but I’m learning. Everyone has to start somewhere. How long have you been investing on your own and how did you learn to do it? Mr.CBB

    1. Thanks CBB. Everyone has to start somewhere is right. I learn more about my investing approach and behaviour every month. My plan is to always “get better”. I think I’m on that track now!

      I have been investing on my own, for about 5 years now. I don’t ever look back.

      I learned to do it by asking other DIY investors who have been there, done that with successful dividend investing and indexing approaches, reading and making a few mistakes along the way. You are welcome to email me any questions!



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