Why living off dividends still works for me – The Dividend Guy
Passionate fans of this site know I’m a huge fan of dividend income.
I post monthly updates on this site, like this one, to keep me motivated and inspired about this part of our financial plan.
….and maybe you can see why. Between January and December, January results were already well ahead of where we were just this past December 2018:
Onwards and upwards we go…my dream to live off dividends to some degree remains alive and well!
More dreams are alive and well
Similar dividend income dreams exist for many other dividend investors I know, even though other investors disagree with our dividend investing philosophies and approaches.
This means the debates associated with focusing on income from your portfolio vs. a total return/draw down approach with a mix of stocks and bonds will rage on I’m sure.
I recently profiled one dividend investor, Bob Lai, who is close to realizing his dream already, in his 30s.
A few years back, I asked Mike Heroux from The Dividend Guy Blog about his approach to live off dividends as well – while growing his online, website businesses.
Like Bob Lai, I wanted to catch up to see where Mike is at – and highlight what plans he has for his financial future. Read on!
- Hey Mike – what has changed since 2015 (since our post together)?
First off Mark, I wanted to mention how fun it was to read my answers from 2015!
At that time, I was working full-time as a private banker and planning a 1-year RV trip across North and Central America. I ended-up taking my sabbatical, and I left with my family on June 11, 2016 for a lifetime adventure.
We drove through Western Canada, then the U.S. and we crossed Mexico. We drove down to Costa Rica where we lived for 3 months before coming back.
This is my family doing volcano boarding on Cerro Negro Volcano, Nicaragua.
When I came back (to Canada) in July 2017, I quit my job and officially “retired” from the corporate world to build my own business; Dividend Stocks Rock (DSR), an investing platform helping Canadians and Americans investing their money in dividend stocks. I can now go with my real name in running that site; Mike Heroux (I used to write under Mike McNeil to not mix my clients from my bank job with my online business).
I was fortunate – my investing membership site generated enough income to travel for a full year, it now pays all the bills for my family.
Since 2015, I’ve radically changed my way of living as I don’t need stuff anymore. I rarely buy things (outside clothing for children because they grow too fast!) and being more cognizant of what I buy, has really enabled me with a lot more flexibility. Back in 2015, I wrote that I might retire at the age of 35. According to my definition of retirement (having the ability to do what I want, when I want), I am retired. I’m planning to travel to Asia for a month or two in 2020.
- So Mike, so how is your portfolio constructed now? What do you own? What accounts are you investing in?
When I quit my job, I had the opportunity to manage my pension plan (it was a defined pension plan). When I left I received $108K as the commuted value of my pension plan. It was a bit frightening to have all this money to invest while we were at an all-time market high (I received the cheque in September 2017).
My investing strategy has always been about investing money on hand to build a dividend growth portfolio – I know Mark is a fan of this approach as well.
To be honest, I used all the tools I developed for my Dividend Stocks Rock (DSR) site to build my portfolio and invest the full amount in dividend paying stocks (about 60% in US and 40% in Canadian companies).
I kept the same focus I had back in 2015: investing in strong dividend growth stocks.
I own a few selected low-yielding-fast-growth companies such as Andrew Peller (ADW.A.TO), Alimentation Couche-Tard (ATD.B.TO), Visa (V), Microsoft (MSFT) and Starbucks (SBUX).
I also have higher yielding stocks such as Enbridge (ENB.TO), Fortis (FTS.TO), Intertape Polymer (ITP.TO) and Lazard (LAZ).
Interesting enough, I didn’t have to modify my strategy or make any trades during the 2018 turmoil – when prices were tanking. I finished the year with a 5.5% return. My portfolio growth came from strong Canadian picks, dividend payments and favorable currency exchange from my U.S. holdings.
Each month, I report my dividend income like Mark does. I discuss my holdings, my trades and how they have reacted to the market. You can read my latest portfolio report here.
3. So given you invested your commuted pension value, how close are you to achieving your dividend income goal?
My goal is not to build the largest stream of income or to achieve the fastest growth. I focus on total return by investing in dividend growth paying stocks. Now that I’ve changed my way of living, I don’t aspire to retire early by becoming financially independent as fast as possible like some bloggers might want to do.
I like what I do, and I would do it even if I was making $50K/year with my dividend income!
My goal is now to build a strong dividend growth portfolio.
My portfolio should the $1M invested mark before I turn 60. That would be a nice milestone!
4. Are you going to do anything differently going forward to help you realize your goal?
You know Mark, when I used my own investing strategy to start DSR, many investors told me it was easy to post solid returns during a bull market. I couldn’t really prove that my dividend growth investing plan was working during down markets as I shifted my strategy in 2010 and created DSR in 2013.
While I was confident, I was happy to see how my portfolio reacted through the latest market correction (no, I don’t even consider that a bear market last year). Therefore, I don’t expect to make any changes in my portfolio going forward besides following each company on a quarterly basis to make sure they all stick to my investment thesis.
5. Lastly, what do you think the biggest factor will be in helping you realize your goal?
In one word: consistency.
There are many ways to successfully build a portfolio and make your money grow.
Some investors do it through low-cost ETFs – like the ones you have on your ETFs page.
Some do it through ETFs, via specific sectors, where they have stronger investing knowledge.
Still others, like me, might achieve their goal with dividend growth stocks.
All strategies could work, the key is always to stick to it.
I don’t try to time the market, to guess the outcome of any commercial war or what the next potential U.S. shutdown might bring. Instead, I stick to my investing strategy no matter if it’s sunny or stormy outside. I know there will be great companies growing their dividends in 5, 10, 20 years from now. I just have to get some of them in my portfolio and wait!
Mike’s approach to investing is to perform some research and based on that research, buy and hold quality companies for growing dividends; through any market calamity. This approach might not work for everyone but it definitely seems like it’s working for him. I want to thank Mike for sharing his update and how he’s investing today. See you on the site Mike and best wishes for your financial future too!
Other investors striving to live off dividends…friends and prominent bloggers:
Tawcan – updated in 2019 here!
What do you make of Mike’s portfolio and choices? What would you do differently, if you were Mike?
At 130 grand, Mike has hardly any skin in the game. Might has well be a paper portfolio. I am actually more interesting in his travelling experience (particularly taking children out of school).
Hello Kelaa, if you read my blog, you will notice I keep track of this portfolio on a monthly basis. This would be a lot if work for a fake portfolio. This is my pension account, I have a total of 250k invest right now. I may be not enough for you, but keep in mind I have other priorities (spending time with my wife and three children) than saving all my money. I think I’m not too bad for someone under 40.
Taking children out of school was easy. Once you leavec yout province, they have no jurisdiction;). When we came back, Amy and William didn’t have to do any exams to get back. In fact they were good at school and they are now even bettre (avg of 90% in most classes). They learned about life and increased their adaptability skills during the trip.
Thanks for the reply, Mike. My understanding is that your pension portfolio which your blog is about is about 130k. Can you comment on what yours strategy for the investments outside your pension account?
Anyways, the way I read your blog was that the dividend flow is actually maybe only 10% of a living income. Not exactly someone living up to their moniker.
Did your children have any anxieties leaving their friends? Did you? Did you try to have any “curriculum” while you were away? If you have written about this in your existing blog or plan on this for future blogs, I’d like to read it.
That is correct, my pension account and my RRSP together worth about 230K (I have another 21K in a RESP for my children). All my accounts are invested the very same way (all oriented toward dividend growth stocks).
The dividend generated by this portfolio is definitely not enough to allow someone to retire. Keep in mind I’m 37… therefore I’m very far away from retirement. In fact, I don’t plan on retire ever. As long as I can, I will keep working online. It’s just so much fun :-). This money is likely to all go to my three children at one point. Nonetheless, I should easily reach 1M$ by the age of 60.
We were all scared to leave for different reason (my oldest son was afraid to lose his friend, my daughter was unsure about homeschooling and my third kid was just happy to leave (he was 4). We took 2 years to prepare the trip. Therefore, we had plenty of time to address each concerns. On my side, I was more worried about my family safety while crossing some borders in Central America. In the end, you realize that what you see on TV isn’t the real world.
You can read about our trip here:
Just a comment. I have followed Mike and his DSR journey for a few months now. I have subscribed to his pro service which includes quarterly updates on my holdings. (His opinions as well as some valuable fundamental info). He has a great website and a number of helpful recorded webinars.
Thanks to both of you for your valuable insight
Keep it up!
Thanks Chuck. Great to hear from you and I appreciate all feedback. I’m sure Mike does too!
Wow Chuck! thank you so much for your kind words.
My team and I are working hard to build this service and we take great pride in helping investors!
This is a great series. Perhaps you can find some new people to interview about their dividends when you are done the updates.
I can certainly try Beth! Thanks for the feedback.