Is dividend investing the play for you?
Welcome to the second installation of our interview series here on The Financial Scoop where we interview other financial writers, investors, entrepreneurs, professionals and more! Within these series you will get a direct look into the minds of successful and clever individuals who are making things happen. Apply their wisdom, learn from their mistakes and see if you are also making smart money moves!
We are excited to continue the series with well known blogger, and dividend investor The Dividend Earner. Who has written about dividend investing over at The Dividend Earner blog for a number of years. He is walked the walk and is turning a nice monthly profit from his dividend investments. Let’s begin.
Dividend Earner, can you tell us a bit more about yourself? Where are you from, what do you do with your time when you are not writing, what’s your primary source of income, etc.
Hello and thank you for the opportunity to share my story. I am from the Vancouver region in Canada and I am fully employed in the software development industry. I still heavily rely on my employment income.
When did you first get introduced and serious about investing?
I was always serious about investing I would say but lacked knowledge and that’s why for about 10 years, my lost years, I was investing in mutual funds. Once I educated myself more, I decided to take control of my portfolio and focus on dividend stocks.
My initial focus was probably mis-guided (see my top learnings) where I looked for good high yield stocks in Canada but over time I switched to focus on dividend growth with two criteria; 10/10 growth and the Chowder Rule.
Why is dividend investing your favorite route of investing?
There is a certain peace of mind to be able to live of a dividend portfolio without withdrawing from it. The freedom can bring opportunities as well to splurge during some years in retirement since you could always decide to withdraw from your portfolio.
It also provides a good filter to avoid chasing IPOs and the hot stock in the press. Any investing strategy that can take away emotions in the investing process will usually win in the long term.
Overall, my dividend strategy has provided me with a model that can beat the index. With an annual average rate of return of 10.44% since 2009, I have a growth rate that I am happy with to meet my goals of retirement. When compared with a 4.45% performance of a blended 50/50 indexed portfolio (my portfolio is 50% Canadian and 50% US), my strategy has done well.
Is dividend investing your primary investment strategy? Or do you have other investment routes as well.
I have only one strategy and it’s dividend investing. I did focus on income once and that was a big mistake. Retirees tend to switch to income when they retire and I am not sure I will. The growth rate of a strong dividend growth stock far outperform a high dividend yield stock.
These days, I consider a bank or telecom with a 4% yield a high dividend stocks that I can trust. I will avoid those with 6% or so.
What’s the worst investment mistake you’ve ever made?
Crocks is by far the biggest mistake in 2007 I made from a stock picking perspective otherwise, I sold my Apple stocks that I bought at $90 in 2007 way too early …
What’s the best investment you’ve ever made?
What are the 3 most important components to successful, long term investing, in your opinion?
Start early, invest regularly and stick to your strategy. Those are the pillars of the wealth triangle.
- Starting early allows you to put time to work. The stock market goes up over time. That’s something we know and it’s not a zero-sum game. Compound growth for wealth generation is a very powerful concept and time is one of the variables.
- Invest regularly means that you should put as much money away as you can in order to have time do its magic.
- Your strategy will be important as it will define the rate of return you are seeking. If you are conservative, you may have a 4% rate of return and if you are a bit more aggressive, you may have a 10% rate of return. Your strategy will answer the rate of return at which your money will grow.
Any closing remarks or tips for new or hopeful investors?
There are many dividend investors all with different strategy, if you are young, focus on dividend growth and total returns, if you are retiring, be careful of high yield stocks for income as you lose growth along the way.
Thanks so much Dividend Earner!
It is clear that this style of investing is a great play for long term success. And a return rate of +10% over the last decade, head over to his website to learn more about dividend investing.