Dividend Growth Investor Q&A series – Brian from Labour to Leisure

Long time readers will know that we are at a point where our annual dividend income can pay for our core expenses. However, core expenses do not include expenses like eating out, entertainment, vacation, charitable donations, gifts, and other non-necessity expenses. Although we aren’t at the point of living off dividends completely yet, we should be able to cover all our annual expenses if we rely on our dividend income and supplement the difference with part-time income. 

It is extremely comforting to know that we have options and we are financially sound. 

At the beginning of last year, I started the Dividend Growth Investor Q&A series to interview different dividend investors and get their perspectives on dividend investing. So far, I have exclusively interviewed fellow Canadian dividend investors due to questions related to RRSP, early withdrawal strategies, and tax efficiency. 

Today I asked Brian from Labour to Leisure to share his dividend investing story and pick his brain about his financial independence journey. 

Q1: Welcome to the blog Brian. Please tell us a little bit about yourself.

Hey Bob, first off I would like to say thank you for inviting me to share my investing story. I’m 41 years old, and I just celebrated my 13th wedding anniversary. I have two beautiful kids, 12 (girl) and 8 (boy). I have a full time job with a corporation that I have been at for 18 years, my favourite activities are playing golf, hockey, and coaching minor league for my little man.

Tawcan: You and I share a lot of similarities. 

Q2: What originally sparked your interest in investing? What got you started on your financial independence journey? 

As a young adult at around 23 I really felt like I needed to find something that financially could help me on a better path. At the time I had little to no money, multiple roommates and was just struggling to get by. You could say I hit a roadblock in life and needed to find something more meaningful. 

My next step is odd but I walked into the restaurant I was working at and gave my notice. They asked me where I was going and I responded that I wasn’t sure yet. For the first time since 13 years old, I was jobless. I started to put resumes in at multiple places in the oil and gas industry while picking up a part time delivery job. A few weeks later I found a job that turned out to be one of the best decisions I made. 

Next, I went to a bookstore and bought a few different books which included Rich Dad Poor Dad and The Wealthy Barber. These books paid dividends to my life by teaching me small habits I could make in my day-to-day life to keep more money in my pocket. 

It wasn’t until 2016 at the age of 34 that I really got interested in investing. At first, like many, I was trying to trade my way to wealth. Lets just say that was completely a dive and I had to figure out what the best strategy was for me personally. Having a full-time job, and one kid with one on the way, it had to be something that didn’t control my life and my mood for that matter. This is when I came across learning about dividends.

At first, I was doing it all wrong and was chasing these high yield companies and it didn’t take me too long to realize this strategy was not performing all that well. 

It took me a couple of years to shift to a dividend growth strategy where I really started to see the benefits. The portfolio started to be built with many blue chip companies in sectors such as The Financial Sector, Utilities, Oil & Gas and Consumer Defensive to name a few. The rest is history.

Q3: Over the years, you have built a home based business in the Health and Wellness sector. How has having a small business helped with your financial independence journey?

The business for us has been life changing. 

First off it allowed my wife to be able to work from home and raise our children without child care. Most importantly it provided us the education to take Health seriously and take better care of ourselves. 

The people we have met along the way are the icing on the cake. The income from this really helped fund our investment accounts such as the TFSA’s and much of our family vacations.

Q4: If you were to summarize your philosophy of dividend investing, what would that be?

First off I would say it creates a steady income stream that if done correctly not only grows but eventually can fund the lifestyle you’re striving for. 

Next, I would say it’s a long term strategy that allows you to avoid in most cases short term market movements that seem to happen quite often these days. 

Q5: Why dividend investing over indexing? What are some key factors that made you like dividend investing over different investing strategies?

I still find enjoyment in learning about different companies, understanding metrics and buying the ones that work for my strategy. I’d be lying if I didn’t consider indexes but overall I like that I can move on from a name when it no longer serves my portfolio. Index funds just don’t allow that until they are sold off and replaced. 

I tried day trading and mentally I just couldn’t handle it. Having a young family it just felt like you’re taking too much risk and my family doesn’t need that. They need me to make smart choices that can better them in the future. 

Dividend investing such as high yielding companies may pay you decently but usually there is little to no growth and if things get bad, say goodbye to that nice yield. 

I have thought about real estate over and over but at this time I really don’t know enough about it yet but eventually, I could see this being part of our future.

Q6: How much dividend income does your dividend portfolio generate each year? Can you share with us your holdings?

Here’s our dividend income history since 2016:

• 2016: $735
• 2017: $1,091
• 2018: $1,951
• 2019: $2,523
• 2020: $3,165
• 2021: $3,869
• 2022: $5,366
• 2023: $6,386
• 2024: ~$8,300

Names I currently own are as follows: TD, ENB, MFC, POW, SU, SIS, EIF, RY, CNQ, CM, BMO, FTS, ENGH, ATD, T, QBR, BEPC, EQB, GRT.UN, RCI.B, TRP

US names include: MDT, TGT, SBUX, DIS

We also hold cash in CASH and HSUV

Tawcan: a solid list of names you hold and not surprisingly, we share many same names. 

Q7: You and your wife are accelerating your mortgage by making 26 payments a year vs. the typical monthly or bi-weekly payments. Doing so you will pay off your mortgage by about 3.5 years earlier. Why are you trying to become mortgage free earlier? Is Smith Manoeuvre not attractive at all?

We did the acceleration so that our mortgage would be fully paid off before I reach the age of 50. Only last year did I learn about the Smith Maneuver. If only I knew about this strategy when we went through some of the lowest interest rates in our time. As interest rates lower and our mortgage comes up for renewal next year we will be weighing the Smith Maneuver and giving it some huge consideration.

Q8: Like us, you have been investing for many years but are not quite ready to live off dividends yet. Why is the investing journey a marathon rather than a sprint? What would you say to other investors that aren’t as patient? 

For me personally I tried to sprint and I fell on my face. I just didn’t have the time and the emotional discipline to invest that way. 

If we look around at life itself the answer is right in front of us. Imagine planting a tiny apple seed in your backyard. You water it, nurture it, and patiently wait. Years pass, and that little seed grows into a magnificent apple tree. Its branches stretch toward the sky, beautiful with lush green leaves. Then one beautiful fall day, you notice something. Juicy apples hanging from the branches. Investing is not much different other than the apples are a form of dividend or capital gain.

Tawcan: I love the apple tree reference!

Q9: Tell me about some of your investing mistakes. What have you learned from these mistakes?

I got a good one for you. When I was about 25, I invested money into a real estate company where you placed your hard earned money into different real estate deals around the world. The goal was for the rentals to pay you a monthly income stream and eventually, they would sell the property at a higher price where you would lock in the capital gains. 

Well, the company ended up going bankrupt as 10% went directly to the CEO of the company. This was a $50,000 mistake but likely one of the best mistakes I could have made at such a young age. It allowed me to learn and think for myself.

The other one that comes to mind was when I first started purchasing stocks I bought into a company I was told about that had a Patent that would cure brain cancer. Well, they were underfunded and claimed bankruptcy.

Before you invest your hard earned money into anything consider the following. Building a 1, 5 and 10 year plan. I personally wouldn’t go further than that at first. 

Q10: Has your investing strategy evolved over the years? What are some of the challenges you have faced? Do you see your investing strategy evolve moving forward? 

At first the strategy was just starting an investment account. I really just had no idea what I was trying to accomplish, it was overwhelming. The amount of companies out there that you can invest into is wild. One of my biggest struggles was looking at other sectors other than Oil & Gas as I work in that industry. Once I got past this roadblock I ran into others. 

Probably the most challenging thing that not enough people talk about is keeping a good head space when things aren’t going your way. An example would be when the market just drops out of nowhere, you watch many of the companies you own take a 20% haircut. At first, you panic and your brain starts telling you to sell. You may not even sleep at night as you start to think about how you don’t want to let your family down. That likely depends on you to make good choices.

Over the past few years, my investment strategy has had a good structure to it. Some of the focuses include funding the accounts consistently, continuously reinvesting dividends back into the portfolio, researching companies and sectors, creating watch lists and most importantly looking back at some of the choices I made that turned out really good and understanding why some decisions did not turn out the way you thought they would.  If we don’t learn from our mistakes we are likely to make some of those same decisions in the future.

Q11: Tax planning is very important when you start living off dividends or start withdrawing from your investment portfolio. What’s your withdrawal strategy to minimize taxes? Do you have an early withdrawal RRSP strategy? 

This is a topic that I have a lot to learn about. I really didn’t have any RRSPs until around 7-8 years ago. Right now the focus is to take advantage of company matched RRSP contributions and additional purchases into my self directed RRSP for tax break opportunities as I’m in a higher tax bracket. Those rebates are then reallocated back into either RRSP or TFSA accounts for reinvestment. 

By the age of around 50, I would like to have my tax strategy in place. As you know there are a few really good investors such as Mark Seed that write on the subject which is where I would start.

Tawcan: check out my Dividend Growth Investor Q&A with Mark here. 

Q12: There are a lot of debates on which is superior, dividend investing vs. index investing and living off dividends vs. 4% withdrawals. What are your thoughts on this topic? 

I think every investor needs to find what strategy works for them. If you just want to get money working for you without too much time investment then likely Index funds are a good choice for you.

 I have read up on the 4% withdrawal system in retirement and it really just doesn’t align with me personally. This strategy only applies to those who likely started young or have done a good job at saving for retirement. If you start way too late the numbers just might not work for you. I understand the thought process behind it though.

Personally, after a few years of starting my investing career dividend investing just spoke to me. It took me a bit to understand just because a company pays a dividend doesn’t necessarily mean they are a good company.

Dividend investing strategy is wide ranged and could mean many different things. Some will invest into high yield companies with little to no growth in either the stock price or dividend moving forward, some will focus on companies that raise the dividend every single year. For the last several years I really focused on the dividend growth strategy and my portfolio has thanked me.

Tawcan: so very true that there’s no one-size-fits-all investing strategy. You need to find what works for you. 

Q13: You started working out weekly at the beginning of this year. What made you do that? What are some lessons you have learned from working out regularly? 

For many years I wanted to be in better shape but like many you get married, have kids and it seems time gets away from you. I made every excuse in the book as to why it couldn’t be done.

I decided to call myself out. Instead of making excuses, I thought of why I wanted to do this. The list was long and included: For me, I want to look in the mirror and be proud of what I see physically which in turn is positive for me mentally, my Wife does a great job at putting the time in to look good for herself/me so I want to return the favour, I want to participate in my kids’ athletic interests as they grow older and most importantly I want my kids to see that both their parents take very good care of themselves in the hope they create good healthy habits as they grow up.

For the first 8 months, I worked out at home with a mixture of different dumbbells. Most recently I have now joined a gym as I got to a point that it’s much easier to have all options for weights/machines etc… Some of the things I have noticed since going down this road are an overall improvement in my mind, confidence, my body feels really good and most recently my wife told me that I’m nicer to be around, but I hope I wasn’t that bad before.

Q14: So the Edmonton Oilers made it to the Stanley Cup finals last year. Do you think they’ll win the cup this year and finally bring it back to Canada? What are some things the Oilers need to do to get back to the finals?

As a hockey fan, I can speak for many Canadians, it’s been a very long time since Canada has seen the Stanley Cup. Last year we saw the Oilers go through some ups and downs, including losing in game 7 of the finals. As a passionate player at one point to a fan today I couldn’t imagine sitting in that dressing room afterwards.

During the offseason, we saw some slight changes to the roster, including some players taking a discount to stay with the group. They have their top 5 guys locked for many years aside from the promising extension for McDavid I believe this team has what it takes not only to win this year but multiple championships over the next several years.

It’s early in the season but the only changes I see would be an upgrade to the defense. If they can improve that I’m confident they will get it done this year and bring the cup back to Canada.

Tawcan: I want to see the Stanley Cup coming back to Canada too! It’s been too long. 

Q15: Since this is a dividend Q&A, what are five dividend stocks you believe you can hold forever? 

This is such a good question and also hard to answer as the world is always evolving and forever is a long time. However, there are companies that just seem to evolve with the times and create improvements to continue to deliver for their shareholders year after year.

• Canadian Natural Resources Limited (CNQ)
• Alimentation Couche-Tard Inc. (ATD)
• Fortis Inc. (FTS)
• Brookfield Corporation (BN)
• Microsoft Corporation (MSFT)
• Amazon Inc (AMZN)

All these companies have one thing in common, absolutely solid leadership that has shown they can evolve with the ever changing world. Hard to pick 5 as there are some solid banks, insurance companies, technology and pipelines that could easily make the list.

Q16: Do you have any advice for someone who is just starting their dividend investing journey or someone like us who is planning to live off dividends one day? 

Learn everything you possibly can about dividend investing but make sure you start as soon as possible. 

If you’re not sure what to buy, my advice would be to open an investment account and start funding it just in cash while you learn. 

If I could go back I would have started by buying solid blue chip companies first that have proven success before looking into more small cap companies. This will be the foundation of your portfolio for years to come, trust me. When you first start it feels like the growth is slow however once you hit like the 7 year mark you will start seeing compounding start to do the heavy lifting and the returns can be life changing.

Q17: Any final comments you’d like to share with us to wrap up this Q&A? 

I would just like to sincerely thank Bob for reaching out and providing me with the opportunity to be part of “The Dividend Growth Investor Q&A series”. 

For many years I have been following, listening and learning from like minded dividend investors such as yourself that has really provided me a road map to get me well on my way to financial success. Consistency and motivation come in many ways but having a great community makes it so much easier.

Dividend Growth Investor Q&A series – Wrapping it up 

Thank you Brian for taking the time to answer all the questions. It’s always nice to connect with other like-minded people and learn from them, no matter where they are on their investing and financial independence journey. 

Stay tuned for more Q&As with other dividend growth investors.