A Dividend Reinvestment Millionaire In The Making
Welcome back to the second in our series about dividend investing success stories.
I started the dividend investing success stories series early in 2020. And, you may wonder how it got started? So, let me tell you…
Trent, a Dividends Diversify reader, reached out to me about dividend investing for beginners. One thing led to another and Trent and I worked up a great article about dividend investing.
He explained exactly how he is going about implementing his dividend investing strategy. And I am positive that Trent will become a dividend reinvestment millionaire in the not too distant future.
But today, we will continue looking at how to achieve dividend investing success. This time, we will talk with an experienced and successful dividend investor, Mark Seed. He is another dividend reinvestment millionaire in the making!
Mark is also the blogger behind the popular personal finance and investing blog, My Own Advisor.
And, Mark was gracious enough to engage in a Q&A session with me about his dividend investing successes.
Hello Mark. Welcome to Dividends Diversify and our series on Dividend Investing Success stories.
The stage is yours…
Please tell our readers a little about yourself.
Thanks for the invite, Tom!
My wife and I live in Ottawa, Ontario, Canada. I work as a project manager for a national, not-for-profit company. Although I enjoy running the blog and having fun with it, it’s not my only passion.
I also enjoy cycling, hiking and a few rounds of golf in the summer. And love to travel and drink craft beer, sometimes at the same time!
I got seriously interested in personal finance and investing after the tech bubble crashed at the turn of the millennium. It was a wake-up call for me as a young 20-something to get a better handle on my money. I figured then, as I do now, nobody cares about your financial well-being more than you.
When did your dividend investing success story start? Why?
I probably got very serious about carving out my investing path during The Great Recession. As stocks went down, I wondered why on earth my investments were tanking so much when I was supposed to be invested in moderate-risk mutual funds.
So, I started digging deeper. And I found out I didn’t know as much as I thought I did.
I started reading investing books and blogs, and pretty much anything about personal finance I could get my hands and eyes on at the time. What I quickly learned was, investing does not have to be difficult and you do not need to be perfect at it. You do however need to follow a few simple steps and remain disciplined over time.
To be a successful dividend investor, I believe you need to follow these basic but critical behavioral steps:
- Save early
- Save often
- Keep your money management fees low
- Diversify your investments across different companies and countries
- Maximize contributions to your registered accounts as much as possible
- Stay the course, even when the sky is falling.
I think if most investors can do these six things more often than not, financial well-being should follow in time.
What was the first share of stock you invested in?
And what made you believe it would lead to dividend investing success?
Yes, I do recall my first share of stock. It was Enbridge. I’ve written about that company a few times on my site.
Read more at My Own Advisor: Enbridge – Then and Now
I invested in this company largely based on its established dividend payment history and based on the fact that I used those services to heat and cool my home. I figured I might as well be an owner of what I and millions of other customers consume.
So far, so good with this investment. Although your readers should know that no single investment has any long-term guarantees. Enbridge now pays me enough in dividends each year to cover my utility bills.
What is your approach to successful dividend investing?
To be honest, I try not to overthink it. Sure, there are some stock metrics I follow like dividend payout ratio and earnings per share growth. But the reality is I tend to buy well-known established companies that have a history of rewarding investors via dividend payments in both good times and in bad.
I buy and hold those companies and reinvest the dividends paid, to increase my future cash flow.
In terms of company stocks that I buy and hold and then buy some more of:
- I figure people will continue to buy real estate or get various loans, so I own financial companies.
- Those same people enjoy heating and cooling their homes, so I buy energy and utility companies.
- I know people want to live longer, and they need various medicines to do so, so I buy healthcare companies.
You get the idea. I like investing in companies that provide essential services and products.
Has your dividend investing approach evolved?
If yes, please explain how the changes have contributed to your dividend investing success.
It has, a bit.
I mean, I was bent on buying and owning just dividend-paying stocks for many years. But, over time, I’ve matured my thinking. I’ve realized I can own companies that deliver dividends AND growth.
While I own about 30-40 Canadian and some U.S. dividend-paying stocks for growing income (and I probably always will…), I’ve gravitated to owning more low-cost U.S. exchange-traded funds (ETFs) for extra stock market diversification and long-term growth.
Some of my favourite low-cost ETFs to invest in the U.S. market include but are not limited to ITOT, VTI, VOO, IVV, PFM, and a few others.
Also, I’m a fan of some low-cost dividend ETFs. I believe you can invest in these funds and earn cash for life thanks to their distributions.
Read more at My Own Advisor: Get cash for life from some top dividend-paying ETFs
Has the market volatility we have had in recent weeks changed your dividend investing approach?
I would be lying if I didn’t say “yes”.
I mean, this is wild. And for people out there just striving to get by in these trying economic times, my heart goes out to them.
To clarify though, the market volatility doesn’t scare me as much as the long-term impacts. I suspect there will be plenty of economic scar tissue to deal with for years to come. It is my hope things will rebound in the coming years, but you never really know.
So, when it comes to my portfolio and how I’m investing, I’ve learned there isn’t any substitute for keeping a good healthy amount of cash along with my equities on hand while staying invested.
I wrote about my long-term plan for how much cash I intend to keep in semi-retirement. After living through just the start of this crisis so far, maybe I need a little bit more cash?
Read more at My Own Advisor: How much cash should you keep on hand?
But in terms of my investing approach, nothing has changed. I buy and hold established dividend-paying stocks for income and growth and I index invest the rest for extra diversification.
I plan on buying more stocks and more low-cost ETF units over time. Collect my regular dividend payments. And, watch my investments grow.
That’s it. Nothing more sophisticated than that.
What are some of your favorite dividend stocks for long-term dividend investing success?
In Canada, I like our big banks like Royal Bank and TD Bank. I also like our major utility companies like Fortis and Emera. The Brookfield set of companies is also very appealing to me.
I also like Enbridge as I mentioned above.
In the U.S., I own several telecommunications, healthcare, and pharmaceutical stocks. For example, I like:
I try to use index funds in the rest of my portfolio for U.S. stock market diversification.
Are there any stocks you do not own today that are on your watch list?
To be honest, not in the short-term. Given that I already own a few U.S. healthcare stocks and telecommunications stocks, I figure that’s probably “enough”.
I’m likely better off long-term owning more units of iShares’ ITOT for diversification. And more shares of Vanguard’s high dividend yield fund (VYM) to be a successful dividend investor without additional individual stock risk.
Is global diversification a key part of your dividend investing success?
It is, to a degree. But I recall even the late Jack Bogle, founder of index investing giant Vanguard, never invested in international companies or international ETFs offered by Vanguard itself.
I recall that he simply didn’t believe the additional diversification was worth it – given how many U.S. multinational companies derive so much of their earnings from around the world.
So, I follow his lead on this.
What were your biggest mistakes en route to achieving dividend investing success?
What did you learn from those mistakes?
I have a few!
For one, don’t chase high dividend yields. I invested in a few higher-yielding stocks in my “early days” and I got burned by several dividend cuts when the market changed. So, I try to avoid owning too many high yield stocks across my portfolio for that reason today.
Second, you can over diversify. I refer to it as “diworsify”. There is little value in buying dozens of stocks in any one sector. You might as well index invest instead.
How do you manage your cash dividends received?
At the core, I’m a pretty straight-forward investor.
I reinvest all dividends paid by the companies I own to buy more shares commission-free. How else would I become a dividend reinvestment millionaire! Also, I enjoy seeing the power of frequent compounding work in my portfolio.
Over time, I save up any leftover cash where dividends cannot be automatically reinvested. With that cash, I buy more shares in the index funds that I own. A few times per year, I make those purchases; usually in U.S. indexed ETFs to further diversify my portfolio. This reduces individual stock risk.
I try and keep things simple.
What does achieving dividend investing success mean to you?
I suspect if I keep up my savings rate, for investment purposes, we should realize our long-term goal of earning about $30,000 per year from a few key investment accounts in the coming 5-10 years. Maybe we can do it sooner.
Read more at My Own Advisor: Building our dividend portfolio
The plan is for that investment income to pay for most of our basic living expenses. Those expenses include property taxes, maintenance fees on our home, and more.
Then, we’ll start working part-time. Once that income goal from our portfolio is achieved.
I can see this goal becoming a true reality at some point since like I mentioned earlier, the dividends paid from our Enbridge stock already cover our utility bills for the year, every year. I think it would be great if all dividends we received eventually cover our taxes, fees, and groceries too!
I’m pretty confident if things continue as they might, those dreams will come true. I just need to stick to my plan and stay the course. That includes staying invested and buying equities when the stock market tanks or corrects.
Wrap Up – Mark’s Dividend Investing Success Story
First of all, I want to thank Mark for participating in the dividend investing success stories series.
As I mentioned at the beginning, Mark Seed owns and operates the blog My Own Advisor. There, he discusses all things related to investing, dividends, ETFs, and much more as he works towards semi-retirement and a dream to “live off dividends” in the coming years.
Be sure to follow Mark’s journey to becoming a dividend reinvestment millionaire at My Own Advisor.
Furthermore, learn more about Mark and subscribe to his email list so you never miss a post right here.
Finally, you can also follow Mark on Twitter where he’s always on top of what’s going on with money, personal finance and dividend investing success!
More Reading To Further Your Dividend Investing Success Story & Become Your Own Dividend Reinvestment Millionaire…
- ETF Review: Vanguard dividend appreciation fund (VIG)
- ETF Review: Vanguard international high dividend ETF (VYMI)
- DIY dividend investing made easy: read my Simply Investing review
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