These days, it feels like everyone is making a killing with stocks. Whether it’s cryptocurrency or Tesla or some other high flying tech stock.
While you may be tempted by the high-flying stocks, it’s important to stick to your strategy. If you feel like it, use a tiny percentage to swing for the fences but don’t forget your strategy. Hopefully, your strategy is dividend growth investing.
One thing is for sure, when it comes to stocks the wind can always blow in a different direction but fundamentaly strong companies will harness the wind regardless. That’s the business part, or qualitative part, of investing.
As an example, I kept Disney after the dividend cut simply because it was re-inventing itself as a content streaming service that can compete with Netflix.
As I mentioned, Algonquin Power saw the wind blow back and I could not pass on the opportunity.
I sold my recently acquired Manulife shares and bought more Algonquin Power shares. Investors simply did not like the additional shares issued and the debt but it should get over that and the yield was similar to Manulife (at the time).
Now it doesn’t mean I don’t like Manulife, it’s just how the wind blows to keep up with the analogy. It’s on my buy list, especially for dividend income.
Retirement, or more specifically, financial independence is on my mind these days. Effectively, I would like to slow down work and be ready to live from my portfolio.
As I think about living from the income of my portfolio, I plan to initially focus on my non-registered account to generate dividend income. I will not hold high yield stocks but solid dividend income stocks with a 4% yield and a decent dividend growth to beat inflation. Think of the banks in general.
For now, I will keep my TFSA and RRSP in strong dividend growth stocks which implies a low yield and if you look at my holdings, they are usually around 1%. I will shift my holdings to match the intent.
From a strategy perspective, I am going to break down my approach by account as they have difference tax and withdrawal considerations. The first one being the tax difference between TFSA and RRSP and the second being the long term need to draw down the RRSP.
To be confortable with financial independance, I need to generate $80,000 to $100,000 per year for the family. I don’t have a fixed date but I suspect in a few years I might start the transition away from full-time. That gives me enough time to build cash on hand as part of the retirement strategy.
I admit that I am torn with selling my high dividend growth stocks. They make me so much more money than the banks and utilities. In fact, it’s 2 times more and with a 25+% return from those stocks. I am going to run a scenario where I sell 4% of my high dividend growth stocks for income as an example to see if I stay ahead… (Anyone done that?)
To really understand my angle, you need to track your portfolio performance and have an accurate rate of return on your portfolio, account and individual stocks.
My October 2021 dividend income is $863. Nothing impressive here. The monthly income distribution pattern for my portfolio is like a roller coaster now.
Most of it is from my non-registered account and I don’t DRIP in that account anymore. I let it reach $700 and I buy shares of a select stock from my existing holdings. It’s akin to a DRIP but it’s more selective.