Investors can really be irrational. One day it’s gloom and doom and the other it’s all positive after some earnings and federal news …
That’s investing for you. None of that has changed how the businesses you invest in operate with the exception of the interest rate impact to borrowing.
Be Clear & With Intent
I find many investors aren’t sure about their investment decisions. Part of it is due to a lack of understanding of the investment and its purpose. Here are methods I have identified over the years that help me invest with confidence.
- Understand the market cap of your individual stocks as it speaks to the business. I am now sharing this data point in my portfolio.
- Understand the dividend yield and dividend growth relationship. Build a table as seen below.
- Identify the yield ratios you need in your portfolio and in your accounts. High yield doesn’t have growth and won’t keep up with inflation. The mapping is important to ensure your portfolio keeps up with inflation.
| wdt_ID | Dividend | No Growth | < 6% Growth | > 6% Growth | > 10% Growth |
|---|---|---|---|---|---|
| 2 | None | 7.10 | 0.00 | 0.00 | 0.00 |
| 3 | Yield < 2% | 3.28 | 0.00 | 12.06 | 36.75 |
| 4 | Yield > 2% | 0.00 | 0.00 | 3.70 | 5.43 |
| 5 | Yield > 4% | 0.00 | 0.00 | 26.45 | 0.00 |
| 7 | Yield > 6% | 0.00 | 0.00 | 4.93 | 0.00 |
One word of caution for DIY investors is that investing on your own doesn’t mean you obsess on doing it for free. There are data points such as the dividend growth and the Chowder Score that you cannot get for free anywhere. Getting access to investment data is going to make a big difference.
The above view on your investments are portfolio management tool. They are meant to help you select the right investments to meet your goals and assess your risks.
Stock Trades
I have no cash on the side, everything is invested.
Here is how I view my accounts.
- Non-registered is a Dividend Income Account
- RRSP is a Dividend Growth Account
- TFSA is a Dividend Growth Account
For the record, my TFSA account is usually full and my RRSP account is also full through my employer plan. I only can add to my taxable account. I also technically cannot add to my spouse’s account …
Income Account Trades
The focus of this account is to have a yield above 4% with moderate dividend growth.
- I added Emera from dividend received.
- I added TD Bank from dividend received.
- I took an opportunistic position in Algonquin Power & Utilities Corp.
I do not have DRIP shares anymore in this account. I let the cash add up to $1,000 and then I add shares to the investment of my choosing.
No fancy strategy here and I cannot tell you if it’s better to DRIP or not … Part of my reason is to not let the banks grow too much as I have quite a bit in the banks.
Dividend Growth Account Trades
These accounts are more focus on total returns while leveraging dividend growth investing as a strategy.
- I invested dividends received into XQQ ETF in my RRSP account. XQQ is the NASDAQ 100.
Portfolio Management
While I do track my sector allocation, the industry exposure is what I look at. For more on sector diversification, read my thinking on it here.
It should be telling what my exposure to the Canadian market is, and it’s invested in 12 stocks. Yes, 12 Canadian dividend stocks make up my portfolio, and a lot of it is in the financial sector.
The intention of the charts below is not only to show my exposure to industry and sectors but to show the country the investments come from as well.
Dividend Income
My November 2022 dividend income is $3,823.
The year is almost done and so far this year I have earned $28,740 in dividend income. Here is what the annual breakdown looks like with December’s estimated
| Spouse A | Spouse B | |
| RBC Taxable | $21,176 | $193 |
| RRSP | $8,093 | $4,455 |
| TFSA | $2,260 | $3,586 |
| Total | $31,529 | $8,234 |
Don’t spend time balancing your monthly income. It should not matter as you should have a year in cash as a safety net. Plan your retirement safely as not having cash on hand can have a major impact on your retirement.
If you don’t plan to have some cash then you have to be ok with potentially selling shares. It’s OK too as some people use the 4% withdrawal approach and do just that.
