In Investing, Money

Mini Money Project: Dividend Investing

I sort of talked about this a bit on and off in my Budget Roundup posts, but until recently I have not dedicated an OUNCE of time towards thinking about it seriously.

A lot of my stocks pay out SOME dividends.

I mean, some index funds I am invested in, have dividends built into its returns. It may not say that it is returning X% of money as dividends, but it is there in the profits at the end of the day (how could it not? a lot of companies pay out dividends and surely make up a chunk of these index funds).

So, I am not talking about dividends in that sense.

I am referring to stocks that are specifically meant to (A) grow in capital and (B) yield a regular dividend – monthly, quarterly, bi-yearly, yearly..

These are individual stocks that are chosen specifically for its cash (dividend) returns that are paid out to its investors.

So here goes, as a random brain dump from the past month or so in thinking about this:

I ALWAYS DRIP ALL OF MY RETURNS

DRIP = Dividend Re-Investment Plan

This means that any dividends I get, I plow right back into buying more shares.


This is really key because you are essentially taking money that you would have had in your bank account as cash, and deciding to re-invest it back into buying more of the same stock.

A DRIP is an automatic reinvestment of your money, and it also saves you on brokerage / commission fees, as you are saying: Hey, don’t want to take it in cash, just give me more stock.

If you don’t have enough cash to buy the stock at its current market price, the cash sits there (of course), and on the next dividend payout, hopefully you will have enough by then, to buy another share or two.

I LOOK AT CAPITAL GAINS TOO

Never, ever, will I only buy a stock solely for its dividend yield.

A lot of attractive 12%, 25% stocks are out there, enticing you to buy them because they cost only $20 and pay out a large return every quarter.

These stocks are usually riskier.

I am not a fan of high risk. Moderate, sure, why not, but high? No..

I like to set a lot of these stocks and forget it, and as a result I can only really look at stable industries (e.g. banking) and then narrow down between a few choice picks between these stocks to decide the right balance between growth, viability of the company and dividend payout.

WHAT IS MY CURRENT DIVIDEND INCOME HISTORY?

Over the years, I sort of started in 2013, and then it peaked in 2015.

I stopped working and had to sell off a lot of my stocks to pay for my life – I had put every penny into the market thinking I had another 6 months to a year at a client but they chopped my contract short. :-\ (so.. lesson learned don’t count your chickens until the eggs have hatched … and all that).

Anyway, this is what it looks like visually:

It sort of plateaued last year to this year, but I would like to (at the end of the year of course), plow about another $20,000 specifically into buying dividend-paying stocks. We will see.

WHAT IS MY BREAKDOWN?

  • Real Estate: 15%
  • Energy: 68%
  • Banking: 28.4%

I am heavily, HEAVILY invested in Energy – obviously.

I have been waiting for gas prices to go up since forever, but… politics, economy… everything is working against me. *sigh*

As for banking, it is a solid bet for dividends. Low payout (3%-ish is the highest you will get) but at least they won’t be out of business any time soon.

HOW MUCH DO I HAVE INVESTED?

About $130,000 to get about $4500 of dividends a year, give or take.

My dividend yield is about 3.46%… which is a good, safe range to be in. Some stocks are lower in yield, some are higher.


Some stocks, I bought for CAPITAL gain (see: energy stocks) and less for dividends…. so while I am counting in the dividends I do get, it isn’t the main purpose of that stock for me.

WHAT IS MY DIVIDEND INVESTING GOAL?

I would like to throw $20,000 by the end of this year into buying more stocks. I will probably choose a 4th industry to look into.

Haven’t researched or done anything in this regard.

As a dollar goal, as I want it to be a tertiary source of income, I want to have at least $3000 every quarter in dividends.

I am only at about $400 dividends, so I have $2600 to go per quarter.

If we assume a 3% average dividend yield I need about an additional $260,000 invested SOLELY in dividend stocks.

$20,000 down this year, another $240,000 to go, then!

ARE YOU DOING THIS TOO?


Share Tweet Pin It +1

Sherry of Save. Spend. Splurge.

I got out of $60,000 of debt in 18 months using TheBudgetingTool.com. Since then, I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K (savings rate = 85%). I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I also post daily on Instagram @saverspender.

You may also like

Why the rich marry … rich

Posted on March 25, 2019

Previous PostAsk Sherry: Where do I thrift in Toronto and Montreal?
Next PostThe Ideal Style Wardrobe: 5 of your Wild Card Pieces

12 Comments

  1. P
    PF Blog Round Up: Aloha Edition - Genymoney.ca

    […] from Save Spend Splurge shares her mini-money project:  Dividend investing and shares her dividend income over the years and also her dividend income goal (which is $20,000 […]

    Reply
  2. GYM

    Great post Sherry!

    Have you looked into Fortis and other Utilities? Fortis is one of my fave dividend stocks.

    My goal is to get around 20,000 of dividend income too (and stretch goal is 35,000)

    I’ll be selling my condo next year and plowing more money into dividend stocks so that should get me closer to my goal.

    Reply
    1. Sherry of Save. Spend. Splurge.

      I looked into Fortis but haven’t checked their stats yet. They do look good.. and banks too.

      Reply
      1. Financial Orchid

        I was in utilities for several years but lost patience with the low growth. Dividends are stable tho

        Reply
  3. l
    liteadventurer

    My goal is to avoid dividends as much as possible and focus on total returns. Dividends are taxed at much higher rates than long term capital gains, which for most people in the US are taxed at a rate of zero.

    Reply
    1. Sherry of Save. Spend. Splurge.

      For Canadians we are taxed on 50% of the capital gain (25%) but dividends can be near free if done right. Funny!!!!!

      Reply
  4. Financial Orchid

    Yes, I am. I haven’t put in time to research much, so I just buy preferred shares index fund with about 4% yield and reduces the rate reset risk for my dividend portfolio. I live off of passive income entirely; however, some big trip expenses in the upcoming future will put me just a few thousand over my passive income. So it’s fair to say I’m living 95% passive income.

    Reply
    1. Sherry of Save. Spend. Splurge.

      It is a side project on top of other investments. Diversify!!!

      Reply
      1. Financial Orchid

        It holds 200 Canadian stocks 🙂
        Any foreign dividend ETF will result in significant with holding tax

        Reply
        1. Sherry of Save. Spend. Splurge.

          Not if held under RRSP if it is a a U.S. stock.

          Reply
          1. Financial Orchid

            Oh yes, your statement is correct. But I am using the dividend as monthly income in non registered account 🙂 I thought I was going to get kicked to the curb this yr.

Leave a Reply