I want to talk about a 2-part interview with Reader B about how he and his wife earn $360,000 each year in dividends. If you’re interested in learning how Reader B accomplished this, please read both parts of his interview at over at the Tawcan website – part 1 is here and part 2 is here. If you’re seriously interested in dividend investing, spend some time on this website. It is one of the best places on the internet to learn about creating a cash flow stream from dividends.
Reader B doesn’t live off his dividends. He and his spouse retired in 2004, and they live off their pension income. They started investing 36 years ago, in 1985. As I understand the article, they eschewed RRSPs and invested solely in Canada. Their portfolio was worth just shy of $1,800,000 when they retired. And because they’ve allowed their dividends to compound since retirement in 2004, their portfolio is now worth over $9,500,000. (You’ll have to read through the interview and the comments on the second part to get the exact numbers.)
That’s pretty damn impressive… Between 2004 and 2021, this couple has increased the size of their portfolio by $8,000,000. Needless to say, this interview has given me some points to ponder. Namely, can I do the same thing?
I started my own dividend investment plan in 2011. Ten years later, I’m on the cusp of earning $30,000 per year in dividends. That’s a decent amount, but it’s not enough to afford me a very comfortable retirement. I’m not comparing myself to Reader B and his wife. Again, their portfolio has been around for 36 years – that’s 26 years longer than mine.
Like the Bs, I’m going to be living on a pension when I retire. That means that I have potential to leave my dividends alone to compound for another couple of decades. I too could see myself with a six-figure annual dividend payment if I don’t use any of my portfolio’s returns during the first chunk of my retirement.
Also like Reader B and Spouse, I don’t have any kids. There are no tuition bills, weddings (other than my own, which at this point is a statistical improbability), house down payments or significant graduation gifts to fund. My pension will be sufficient to keep me in the same lifestyle that I’m enjoying now. Spending the dividends each year will be an option, not a necessity.
The question I have to ask myself is…
… do I want to have a large annual dividend payment if I’m not going to spend it?
Don’t get me wrong! I am utterly fascinating by what the Bs have accomplished, and I will be re-reading their interview to learn more. My question for myself is what is the point of having that much money rolling in if it’s not to be spent at some point?
The 2-part interview was on the mechanics of this extremely successful dividend portfolio. There wasn’t a lot of philosophical discussion about the uses of money, or how the Bs intend to distribute their money once they’re gone. For my part, I think one of the best reasons to emulate the Bs’ strategy is to have funds on hand to pay for my nursing care if I live to be too old to care for myself. Even after inflation is factored in, I’m hoping that $360,000 per year is sufficient to hire a competent and kind nurse who’ll help me with the un-mentionable tasks that come with having an aged body.
Beyond my considerations of future nursing care, I’m at a bit of a loss to imagine how I would benefit from $360K each year if I wasn’t spending it. Again, the Reader B didn’t talk about his intentions for his money. He didn’t discuss how he and his wife feel about their passive income stream. For all I know, the Bs are planning to create a sustainable scholarship fund for their favorite post-secondary institution. Maybe their dividend portfolio will be left in a trust to fund animal sanctuaries. I really don’t know what their plans are, and it’s none of my business.
I’m just thinking about what I would do.
Like the title of this post say, there are no guarantees.
Some of you may remember that I’ve switched my investment plan. As of October 2020, all of my investing contributions have been going into VXC instead of into XDV and VDY. I’d been faithfully investing in my dividend ETFs since 2011. Again, that investment has resulted in a good-sized annual dividend payment. After the market rebounded in 2020 from the pandemic, I wanted to take advantage of the growth in equity. In hindsight, I made the right decision. My portfolio has more than recovered all that it had lost from February 2020 to March 2020.
Now that I’ve digested Reader B’s interview, I have to wonder if I made the right choice. According to his interview, the Bs never deviated from their dividend investing strategy. Did I make a mistake in October 2020? Should I have continued funnelling new money into my dividend ETFs? Should I go back to my former strategy? How will I know if I made the right choice?
There’s simply no way to know the answers to these questions in advance. I’m going to trust the choices I’ve made thus far and I’m going to stick to what’s been working for me. Fortunately, my decisions to date have not led me off course. Having confidence in my own choices doesn’t stop me from learning about the paths to financial success taken by others, assessing their methods, and considering whether to incorporate them into my own.
So I thank Reader B for sharing his story with the world. His decision to tell the world about his dividend investing strategy means that I have another example to ponder. And, even though there are no guarantees, there’s absolutely nothing wrong with considering different options!