Dividend Investing Investing Made Easy Tips

Building my dividend city

When I was younger, I loved playing SimCity. I imagined what it would be like to build my own city and all the things I would do with my city. From time to time, I would draw out my city designs on paper and try to construct my different designs in SimCity.

As you may know by now, my wife and I have been building our dividend portfolio, with the goal that one day our portfolio can generate passive income that exceeds our expenses. When I view our dividend portfolio, I like to imagine that I am building a virtual dividend city, just like when I was playing SimCity.

When building this virtual dividend city, I ask myself one question and one question only.

What do I need in my dividend city?

 

Building my dividend city

Imagine I have already built a house with nothing else around it for miles around. First, how do I make sure I can live comfortably in my house? Second, how do I establish a city?

Well, I need gas and electricity to live comfortably in my house. This leads me to invest in dividend stocks like Fortis, Emera, and Hydro One.

Being warm in the house and having electricity is great, but I need food and other basic items. This leads me to invest in dividend stocks like Walmart, Target, Metro, Costco, Saputo, General Mills, and Procter & Gamble.

Although we are practicing frugality and reducing our consumption to save the environment, we will still produce garbage. We can’t just leave garbage in our own house or dump it in the empty land next door. We need someone to collect and dispose all the garbage properly. This leads me to invest in a dividend stock like Waste Management.

Now that I have taken care most of our needs in the house, I need to start looking outside of our house.

To build a dividend “city”, we need more than just one house. This means having a community that people can live in, with roads, stores, banks, schools, hospitals, and other important services. This leads to me investing in dividend stocks like Johnson & Johnson, RioCan, H&R REIT, Royal Bank, TD, Omega Healthcare, and AbbView.

Although the city is now set up, I need to look after people in my city. People need jobs and my dividend city needs to be able to import and export goods and services. People also need to go from my dividend city to other cities. Therefore, this leads me to invest in dividend stocks like Enbridge, Canadian National Railway, Suncor, WestJet, Domtar Corp, Magna International, Intel, Apple, Qualcomm, and Exco Technologies.

Last but not least, people in my dividend city need to be able to communicate with each other and get information. With this in mind, this leads me to invest in dividend stocks like Telus, BCE, AT&T, and Rogers.

Can I more things/dividend stocks to my city? Of course, but adding more things/dividend stocks may not necessarily lead to a better city. As the “mayor” of the city, I need to determine the right amount for my own city.

Therefore, my dividend city will look different than yours. Each dividend city is unique in its own way.

 

Keeping it simple

Although each dividend city is unique in each own way, building a dividend city doesn’t need to be a complicated process.

All you have to do is…

Keep it simple!!!

It comes down to determine products that you need and use on a daily basis and buy companies that produce these products. There is no need to write up an elaborated buying thesis, or rationalize why you should pick company A over company B. If you use a product every day, find yourself dependent on it, and find it extremely difficult to switch to another brand, chances are, you are not the only one that feels this way. And given the choice, why not own both company A and B to capture all the opportunities?

For example, how many people do you know actually switch banks regularly? If you have been using Royal Bank, there is a very high chance you will stick with Royal Bank for the foreseeable future. Similarly, if you are using Telus as your cellphone provider, there is a high chance you will stick around with Telus. Even if you find an appealing deal at Rogers, chances are Telus will be able to offer similar deals to retain you as a customer if you speak to someone at Telus’ customer loyalty department.

However, owning Royal Bank does not exclude you from owning other banks like TD, Bank of Nova Scotia, Bank of Montreal, or National Bank. Similarly, owning Telus does not exlude you from owning other telecommunication companies like Rogers and BCE.

Building a dividend city, or rather, a dividend portfolio, can be a straight forward process if you imagine that you are building a dividend city.

Dear readers, what does your dividend city look like?

 

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23 Comments

  • Reply
    MrSLM
    December 14, 2017 at 6:44 pm

    Sounds like our cities have the same power source 🙂

    • Reply
      Team CF
      December 14, 2017 at 11:20 pm

      We second (or third?) that!

    • Reply
      Tawcan
      December 15, 2017 at 10:53 am

      Haha too bad BC Hydro isn’t publicly traded.

  • Reply
    Dividend Diplomats
    December 14, 2017 at 9:22 pm

    Isn’t it great how a diversified portfolio of great dividend paying stocks could supply your city and give you everything you need. If I wanted to, I’m sure I could only shop or receive services from companies that I own and live just fine 🙂

    Bert

    • Reply
      Tawcan
      December 15, 2017 at 10:54 am

      It makes the idea of building a dividend portfolio a simple one when you think of it as building a city of your own. 🙂

  • Reply
    Mr. Tako
    December 14, 2017 at 10:33 pm

    Interesting idea Tawcan! I never thought of my dividend portfolio as a “city” before.

    I guess I hold a few of the big industries: Energy & Chemicals, Transportation, Banking, and Housing in my ‘city’. They all pay out good dividends.

    Generally don’t go in for ‘consumer goods’ companies.

    • Reply
      Tawcan
      December 15, 2017 at 10:55 am

      I try to diversify as much as possible, only own a few consumer goods companies. I’m happy with owning Canadian banks.

  • Reply
    Lady Dividend
    December 15, 2017 at 4:03 am

    Hmmm…. this is good food for thought. I have purchased some etf funds but I’m not happy with them as some support developments which are against my values, like pipelines.

    I’ve been sitting on cash savings and trying to figure out what to do with it. This is getting the wheels turning in terms of customizing a portfolio which aligns with my values.

    • Reply
      Tawcan
      December 15, 2017 at 10:55 am

      It’s never too late to get started. 🙂

  • Reply
    Tom @ Dividends Diversify
    December 15, 2017 at 7:43 am

    Hi Tawcan, I like the way you put it here. I had never thought of it like that, but build my portfolio with the concept in mind. I love companies that provide essential services and products that we need to live our lives. They rarely go out of style and have a recession proof nature about them. Makes for good dividend paying investments. Tom

    • Reply
      Tawcan
      December 15, 2017 at 10:56 am

      Exactly, that’s why I like dividend paying companies so much. They provide essential services and products. Often people are loyal to these services and products.

  • Reply
    Dividend Income Stocks
    December 15, 2017 at 9:01 pm

    Your city is awesome! I have a similar investment approach.

    • Reply
      Tawcan
      December 18, 2017 at 11:15 am

      Good to know!

  • Reply
    Enoch@SavvyNewCanadians
    December 16, 2017 at 12:00 pm

    A very practical and interesting way to look at picking stocks for your dividend portfolio. I like it!

    • Reply
      Tawcan
      December 18, 2017 at 11:18 am

      Thank you, glad you think it’s practical and interesting too.

  • Reply
    Sascha
    December 17, 2017 at 5:59 am

    with the limited div stocks in Canada, I think we are building a small empire all us div players together. Nice write up, Tawcan.

    • Reply
      Tawcan
      December 18, 2017 at 11:18 am

      You’re absolutely right, we certainly don’t have as many choices when it comes to dividend stocks here in Canada.

  • Reply
    Dividend Reaper
    December 17, 2017 at 4:00 pm

    Tawcan,
    It’s a simple concept but it really works. I also was a fan of Sim City growing up. My favorite part was when Bowser showed up and destroyed all my hard work (not!). But it also works for personal finance in a strangely sensible way. Always love reading your articles. Keep it up, my friend.

    • Reply
      Tawcan
      December 18, 2017 at 11:19 am

      Haha on the Bowser reference. 🙂

  • Reply
    Passivecanadianincome
    December 20, 2017 at 7:44 pm

    Whats with all these wayback playbacks? Haha. The other day I read a similar concept about investing with starcraft. Both great games that i played all the time. Never drew a city diagram up though. Haha guess i had to much access to the Nintendo!
    Cheers man.
    Great city but wheres the launch arcos? =)

    • Reply
      Tawcan
      December 21, 2017 at 8:11 am

      Haha I don’t know why I’ve been referencing these old games lately. Funny how games you play when you’re younger turn out to provide good lessons in life rather than a completely waste of time. :p

  • Reply
    Journal Club 12-21-17 | Passive Income M.D.
    December 21, 2017 at 3:01 am

    […] I love this post from Tawcan, where he shares a simple, creative and practical way to build your dividend portfolio. See how he’s doing it in “Building My Dividend City” […]

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