I enjoyed this quote from David Chilton in Jonathan Chevreau’s recent article so much I figured I’d lead off with it for this month’s dividend income update.
“Invariably, Chilton told me, the portfolios that had done the best over the long haul were of individual blue-chip Canadian stocks bought a long time ago and never sold. More often than not, they simply reinvested the dividends into more of the same stock.”
Jonathan Chevreau went on to write:
“I was reminded of this conversation a few weeks ago when an investor who had read one of my online pieces emailed me to remind me of the virtues of DRIPs, or dividend reinvestment plans. Not that I needed reminding. I use DRIPs in my own portfolio, both for individual stocks and for some ETFs. They’re practically idiot-proof, automatic, and cost-effective, since you incur no trading costs when the dividends are reinvested.”
Same approach here Jon…
For the past few years, I’ve bought and held many Canadian companies but only those companies (outside of owning Exchange Traded Funds (ETFs)) that pay dividends.
The result of these purchases, letting companies do the work in our investing accounts is this: we’re on pace to earn $9,175 this calendar year as part of our retirement fund. This will occur if we continue to reinvest the dividends paid by the Canadian companies we own, if these companies don’t cut or eliminate their dividends entirely, along with reinvesting the distributions paid from a couple of ETFs in our portfolio. You might recall this is our long-term goal.
Using Dividend Reinvestment Plans (DRIPs) for most of our investments is a plan that’s working for us but this approach is not without risks. Individual companies first of all can go belly-up, probably the worst-case scenario. Individual companies can also cut their dividend or eliminate their dividend entirely; hopefully this does not happen to any of our holdings going-forward. These real-life risks are just some of the reasons why we’re indexing the rest of our portfolio now and we’ll index invest more going-forward – it will reduce our risks and the tempting rewards that individual stocks present to investors, including me.
There is no such thing as a risk-free investment. I do however expect this dull, downright boring approach to reinvesting dividends paid from many Canadian dividend paying stocks will yield the income we require years down the road to fund our part of retirement. Stay tuned for updates next month.
Cool post and good work. One step closer toward financial freedom.
“There is no such thing as a risk-free investment.”
True words.
Keep it up!
We’re trying! How is your journey coming along? I recall you’re saving for FF (Financial Freedom) as well still?
It is coming good, since I’m a bit ahead the 2014 objective in term of revenues.
I made some mistakes this year, but at least I will not repeat them.
It is one of the way to learn, as long the losses are fairly small 🙂
Cheers!
Nice, care to share? You can always send me an email.
I hear you about mistakes, I have some time to crystallize a small loss, might do it this year or next to offset some capital gains.
I made my first experience with a Chinese merger which seemed to be OK on a valuation basis…
But these kind of companies, for too many of them, are a trap.
Too bad, I learned about them only after the loss.
I have been out on time before a infinite halting by the TSX and the Canadian representatives left the boat. It was a dividend stock from a company operating since some years…
Also I experimented outside the value investing by getting into a venture… But I bought too early and too high without monitoring it for a while before to pull the trigger.
The second venture that I tried is now better than this petty failure of mine.
I know, that’s nothing to do with value investing, or at least it is more difficult to do with a youg company, but it is always good to experiment some other ways.
“Also I experimented outside the value investing by getting into a venture…”
Haven’t gone there yet…too risky for me. I’m a rather conservative investor, so just dividend stocks and ETFs for me.
Great job Mark. I agree that no investment is safe no matter where money is invested hence that balance you and I have both talked about in the past paying down the mortgage and investing. I always enjoy this little update.. inspiring.
Thanks Mr. CBB. There is absolutely a balance for us, focusing on (killing) debt while investing.
Almost at the $10k mark, that’s awesome Mark! I’ve been thinking if I should do more index investing to compliment my dividend investments. I guess that’s what you’re doing too?
Yes, as time goes on, getting more “core” for my existing “explore” if you will.
This way, instead of searching for new stocks and trying to hit a home run with them, continue holding many existing CDN and US blue-chip stocks and then getting the additional medium and small caps via broad market equity ETFs.
Congrats that you’re on track for your retirement goal! I’ve been researching about which companies I should invest in that pay dividends and the likeliness that they will constantly increase it as well. You’re right, there’s no such thing as risk-free investment, it’s just a matter of what we’re comfortable with.
Yeah, that’s the trouble…nothing is risk-free and you’re taking on risk with individual stocks for sure. This is why it’s essential to own companies in many sectors and countries if you’re going this route. Even then, it’s probably “not enough”.
Great job you guys! I, on the other hand am that crazy guy you talk of… Invested in stocks, small caps, growth/momentum chasing… It may not be for everyone, but there does seem to be money to be made. For example, my TFSA is up because of 2 particular stocks, one of which I picked doubled up on in February, DHX (+66%) which has been on fire this year as has SYZ (+65%). In my TFSA I will typically be holding between 2 and 5 stocks depending on what I find… In my RRSP I hold about 15 stocks, which are small companies (CCT, CSU, HCG, KEY, PBH, RRX, etc…) and a few blue chips (BNS, T, DH) to offset some of the risk. In the investment account, well it is no holds barred I might hold a stock I intend to keep anywhere from a couple of days to years, it just depends on what I see in how the company moves… I’m not boasting, as yes I have had my fair share of duds too (AVO, CMG, NTG, XX, BDI), but I’m again just trying to highlight, there are ways to beat the market… consistently. My 2 best performers so far this year are PYR, which I have bought and sold completely now twice this year for +150% gain, and PHO, which I have held since late last year (+86%). Just remember there are always great investment choices to be found, but it takes research and an eye for watching the micro and macro trends and knowing what that might bring. – Cheers.
It’s coming along Phil, thanks!
Ha, the “crazy guy you talk of…”
I think you can now ‘afford” the risk, given what you’ve been able to accumulate and earn Phil and I think contrary to most investors, you know, you understand and you accept the risks. Would that be a fair statement? I certainly don’t see you as an average investor – far from it.
Going-forward, I will continue to own the stocks I do but will index invest more. It’s making more sense than ever before. Although I am looking at LRE as a stock. Thoughts on that one Phil?
Afford the risk… Humm, isn’t one of the rules of investing, only invest what you can afford to lose? As to LRE, it hasn’t and still doesn’t meet my cut. I currently hold KEY, SGY, RRX, TOU, VET and WCP… With the exception of RRX, all have been reasonably kind to me… Research, research, research and a pinch of luck 😉 – Cheers
“…isn’t one of the rules of investing, only invest what you can afford to lose?”
I recall that might be one. You don’t index invest at all?
Research and lucky definitely help Phil – seems you’re very good at both! Thanks for writing back.
Mark
Nope… no indexing… I’ve thought about it, but I enjoy the thrill of the chase and the accomplishment of trumping the benchmark. My wife’s RRSP’s are all in 1 mutual fund, Bissett Cdn Equity, which arguably is pretty close, but because the MER is low, we just keep it there. everything else is in stock- Cheers
I think the Bissett CDN Equity is a good product:
https://www.franklintempleton.ca/en-ca/public/funds/performance/2541
Although the fee is rather high though (? MER = 2.46%) the long-term performance has been good. Unless I linked to the wrong fund Phil?
For series A, yes, but we own series F… which I believe is 1.18%… We opened it in 1997, and as such when Bissett was bought-out/merged with Franklin Templeton we managed to have it kept as series F. Fund code is TML232. Track the pennies as they quickly turn into dimes… – Cheers.
Fee-based version, good. That saves a bit, no trailer fees on those “F-series” I think.
Mark,
Great numbers. You guys are nearing $10k now, which is amazing. What a milestone. Any celebration in mind when you cross it? 🙂
Keep up the great work.
Best regards.
Coming along Mantra, I appreciate the support. Must continue to save each week and not take things for granted as part of the journey though; this you know.
The milestone? Probably a nice dinner out or something, not sure yet actually!
Looking good for the month. You must be an avid moneysense reader like me!! Love Jonathan Chevreau!
Big fan of Jon Chevreau; smart guy, great writer.
Keep in mind that the investing approaches that do best are the ones that take high risk. So, the worst portfolios are also likely to be the ones invested in just one or two stocks that happened to go to zero.
I think this is where some folks got burned with Nortel, JDS, etc., they bought into these giant companies thinking the sky was the limit. If that is all they owned, crash and burn sadly.
I figure I own enough stocks now (30+) whereby most of them can run on autopilot via DRIPs until I need the money in retirement. For what it’s worth, I’m more convinced inside my RRSP and TFSA, indexing is the way to go. As such I will be buying more of my one or two broad ETF products in those accounts in 2015 and beyond. Need to save money this fall for the Jan. 2015 contribution room, need to get moving in that direction.
Well done Mark. I’ve also taken a similar approach in that I plan to buy some index funds in the future as my portfolio grows. They’re low cost and it helps to diversify and reduce the risks that come with buying an individual company stock
We think alike. The dividends are nice but individual stock selection is not without risks. Anything you have your eye on?
For individual stocks Id love to pick up JNJ or RY – two Ive had my eye on for a while but they never seem to go down. For index funds I’m leaning towards XIU. I hope to index more and more in the future. How about you?
I like XIU. Sure, not as diversified as XIC (with the smaller caps and more holdings) but the way I see it in Canada, if the biggest 60 companies and arguably the most consistent dividend paying stocks aren’t making money, then nobody is.
Happily DRIPping JNJ and RY and don’t intend to stop until I retire. Would like to own more VTI as well, we’ll see if there is a major correction; hoping so.