September 2018 Dividend Income Update
Will the market correct? If so, when?
Will the nearly decade long market bull run continue to roar ahead? Who knows?!
In terms of answers to these questions and how they affect my investing approach, I’ll be honest, I don’t really care that much. 🙂
Maybe that’s surprising to you as a passionate investor as well. I’m come back to that point in a bit.
For now, the market highs are pretty amazing stuff.
The S&P 500 share index, tracking the 500 biggest public companies in corporate America, has gone nowhere but up over the years. About 3,500 days up in fact – without a fall of 20% or more.
Somewhat mind boggling when you think about the returns over the last decade for the U.S. market – if you were invested that is! Using Vanguard’s VOO S&P 500 ETF as an indicator, you would have tripled your money had you invested in the American market in late-September 2008 and reinvested all dividends paid for a generous total return.
Using our tortoise versus the hare hybrid investing approach – we’ve partially rode the coattails of this massive return since we don’t invest 100% in the U.S. market (too bad in hindsight…), we also invest in Canadian stocks:
- We own 32 established Canadian companies that pay dividends every month or quarter, companies that tend to raise those dividends at least once per year. You can read more about dividends here. 22 of these 32 companies have already increased their dividends this year.
- Beyond some Canadian and U.S. stocks we also own a couple of low-cost Exchange Traded Funds for income (via distributions) and growth. You can read more about ETFs here.
Regardless if the market goes up or down, we save and invest and a couple of times per year we deploy capital into more stocks or low-cost ETFs to grow the retirement nest egg. Admittedly it’s a very boring approach to money management – but the plan is working.
At the time of this post, our spreadsheet tells us our dividend income should be more than $16,750 in tax-free and tax-efficient income this calendar year. This is excluding RRSP assets we’ll draw down in our 50s and 60s. In fact, almost without fail thanks to reinvested dividends every month and quarter our passive dividend income rises by about $50 per month – without any new investments. Pretty cool.
That means at the end of the day, whether the market rises or falls, whether NAFTA talks that influence the market fail or succeed, I’m going to be on my best behaviour and let our investments do their thing. Time in the market remains our friend.
I’m optimistic the companies we hold should survive any major market storm that’s bound to come, and continue to pay out their dividends as they have done so for decades beforehand. Beyond holding a basket of Canadian and U.S. stocks, I also believe our low-cost equity ETFs will continue to grow over time. The combination of both stocks and ETFs that hold stocks across our portfolio should help us realize our financial goals.
I’ll keep you posted on the journey next month.
How do you invest?
How is your income growing to support any retirement dreams? Share in a comment below.