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?