Dividend Growth Investor Q&A series – Dividend Boomer

We had our financial epiphany in 2011 and started getting serious about building our dividend portfolio. Back then we had limited knowledge of dividend growth investing. As a result, both Mrs. T and I started reading many investing related books and blogs to become more investing savvy.

One of the reasons why I started this blog is to share my knowledge with fellow investors and chronicle our financial independence journey with the goal of becoming financially independent via dividend income by 2025. 

Thanks to this blog I have had many opportunities to connect with many like-minded people around the globe. I am forever thankful for having such opportunities to learn from like-minded people and share our investing and FIRE journey. 

Some readers may recall that a few years ago I had the chance to interview Reader B whose dividend portfolio generated $360,000 per year at the time of the interview. Like many readers, I learned a lot through that awesome interview with Reader B.

Since then, I’ve wanted to do more Q&As with other dividend growth investors and learn from them. 

I recently reached out to a fellow Vancouverite Dividend Boomer on X (formerly Twitter) and he agreed to do a Q&A and share his knowledge. 

Q1: First of all, welcome to the blog DividendBoomer, can you tell us a little bit about yourself? 

A1: I’m a 62 y/o married father of two. I grew up in Vancouver, as did my wife, and have always lived here. My parents grew up here as well so we have good roots and lots of family in town and I don’t see myself ever moving away full time.

I have two degrees from UBC, Commerce and Law, finishing up in 1987.

We are in the lumber business and the real estate development and holding business.

Q2: You have been investing in dividend paying stocks for a long time now. What got you started originally? 

A2: I don’t remember exactly how/when I started stock investing, but I’m pretty sure it would have been with my RRSP contributions. I have maxed those out for decades now. I also opened up two separate taxable accounts a long time ago as well. All 3 of those portfolios are managed by separate brokers, two of whom are long time friends. They’ve all done well, so I have kept my accounts with those brokers.

I originally got started after I bought my first home when I was 29, Vancouver was still affordable then. My first investing account was my RRSP which was set up at Wood Gundy via my bankers at CIBC. I only send one contribution per year to the RRSP account, whatever my max limit amount is. 

I opened the other two taxable accounts in my 30s or 40s and while I used to send money to those brokers, I now contribute instead to an account on Questrade that I run.

Q3: Your dividend portfolio currently generates $120k in dividend income annually, can you share with us your holdings? 

A3: I have a lot of holdings, because I have 3 brokers and they all invest independently. From the beginning I have never told any of them what to invest in, for a specific reason, to make them fully accountable for the performance of the accounts. When they call for trade authorization I always say yes.

The majority of those holdings are TSX60 blue chip stocks; all 6 banks, major utilities, pipelines/energy, insurance and the phone/cable companies etc. but I honestly don’t know exactly what they hold. 

I don’t really care any longer, as I trust the guys running the accounts. I get my monthly statements, print them out, and file them and only really look at the $$ total.

The three brokers are all somewhat different in their approaches, one is almost fully Canadian blue chips, one is about 50/50 between Canadian and US major companies, and one is invested in much smaller VSE type companies, mining, energy, pharma. 

None of them have ever been told to focus on dividends, but major Canadian companies generally are dividend stocks.

My self-administered account tends to be more dividend focussed, and I have been running it since mid 2017. My first dividend there was $90 from BMO in Sept/2017. 

I was investing mostly in major TSX60 companies until this year when I also started putting money into S&P ETFs (on the TSX) and also directly into US stocks by funding the account with some US money. 

This account generated 24k in dividends in 2022 and will bring in about $45k in dividends this year and even more next year as I have added about $600,000 to it throughout 2023. 

I’ve never put anything near that amount into the market in one year, but we’re at a state in our property development cycle where money is flowing to us, as opposed to being invested into projects. This has put a lot of cash in my hands this year.

By investing more into the S&P, I hope for better growth and better geographical diversification, while knowing the yield will come down as yields in the US are typically not as high as they are in Canada. This doesn’t concern me as I don’t take out the dividend income and I don’t live off of my investment returns. They are just a bonus.

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

A4: Buying into good companies will provide a person with a solid, safe dividend portfolio. Don’t choose your holdings by their yield, but instead choose companies that you think are going to continually grow and be needed by their customer base. 

Canadian banks are an example of this, their stock prices will have ups and downs, but they are not going anywhere. I believe pretty much any of the dividend aristocrat stocks are good holdings.

I also think younger folks shouldn’t focus on dividends at all, especially if they aren’t pulling money out. Growth is good. Buy good companies and hold them. Some will pay dividends and some won’t, but good companies will make you money in the long run.

Q5: You have achieved financial independence yet you won’t retire any time yet. Why is that?

A5: I run a business with a couple of partners (family members) and we all enjoy what we do and will keep doing it. The business generates income so we will keep paying ourselves salaries and extra cash distributions. My dividend income is just a happy coincidence of having invested over many years. It never was, and still isn’t the goal.

One thing we are doing is structuring our business to be less hands on and easier to run as we get older. We already don’t work, or need to work, eight hour days. Any of us can take time off when we want to. So we have a great set up now.

A large part of our business income is from commercial real estate rental properties, and this is very hands off. Property managers take care of the buildings and collect the rent. Easy!

My family’s burn rate is very high, and in many years we haven’t invested anything other than maxing out our RRSP and TFSA accounts. This is a choice that we have consciously made. We are lucky to be in a very good financial position so it doesn’t bother me when I go long periods without investing new funds. 

We spent a lot of money building our home, which is worth much more than our stock accounts and at some point, we will downsize when both kids are out for good. During the saving period for the house and for some time afterward nothing went into the taxable accounts. But a nice house in Vancouver is also a significant investment.

Q6: Do your friends and family know about your dividend income? Do you openly talk about investing and money with them? 

A6: I don’t really talk about investments or dividends with friends or family. I don’t hide it either, if it comes up in conversation then I’m happy to discuss it. I was lucky to have met a really smart and driven group of friends when we were young kids. They are all successful and well off now but we only talk money on rare occasions.

I hardly even discuss my account holdings with my wife; she knows the general amounts of holdings but we don’t talk about it much as it doesn’t impact our day-to-day lives. She has accounts with two of the same brokers as I do, a spousal RRSP and a market account. She also previously worked at a major brokerage house so she understands the investing.

Q7: 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? 

A7: I am not going to be able to have a good strategy for tax planning because I will continue to be in the top tax bracket for, hopefully, the rest of my life. I will need to start withdrawing my RRSP and convert it to a RRIF in nine years unless the age changes before then. So, combining a high salary with mandatory withdrawal is gonna get me whacked with taxes unfortunately. Importantly I don’t plan to ever be living off of dividends, they will just be bonus income.

Part of my going forward plan is to put some future investments into accounts I am creating in my kids’ names. Then they will start receiving the dividend income. They are still high school / university age so they won’t owe much if anything in taxes.

Q8: 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? 

A8: I think for most people, who don’t have the time to study markets, index investing is the way to go. It’s simple and has proven to be very effective. Also, most index funds outperform most dividend funds. And even if you are investing in index funds they will also generate dividends. 

This means that for most people, they will be able to have a blended approach to funding retirement. Dividends, along with some small percentage of withdrawal will probably be sufficient.

Q9: Not an investing related topic, what’s your favourite restaurant in Metro Vancouver? 

A9: We have a few favourite restaurants, depending on the cuisine. We love Vij’s for Indian, Yuwa for Japanese, Sun Sui Wah for Chinese and La Terrazza for Italian. I love all types of food and am happy to eat at very cheap to very expensive restaurants. Ramen Danbo is awesome also, if you’re willing to wait in line for a bowl of (delicious) noodles.

We don’t go to these restaurants very often, if we have restaurant food we usually just pick it up at one of the small restaurants in Point Grey.

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? 

A10: Well my investing has mostly been run by others. My personal investing has only been happening for 6 years, and over that time it has evolved. 

I have decided to bring my yield down by slowly upping my percentage of US holdings. They have proven to outperform the TSX over time and I don’t need the dividends so I have no reason to forego total return to achieve income.

Q11: Are there anything that keeps you up at night when it comes to your investment portfolio? 

A11: I am naturally a bit of a worrier so I do get concerned that the markets will crash, as I have been through three of them in just the past 24 years: the dotcom bubble, the credit crisis and Covid. But as we know, all three led to big rebounds. So it’s probably not a rational worry, but it’s there nonetheless.

What actually concerns me more is that we may get a stagnant, low growth period like in the 1980s. 

From 1980-1984 and from 1987 – 1995 the market was flat. The TSX is essentially flat now over the past two years and with a weak economy we could see this continuing. If this is the case, then dividend stocks have their chance to shine as they will keep producing returns/income even if there is no capital appreciation.

Q12: 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? 

A12: For newcomers my best advice would be to invest regularly and smartly. I recommend index ETFs as they have proven to be excellent products with solid returns. One other thing I would add is that a long time horizon is essential, so starting early and staying invested through good and bad times gives you the benefit and magic of compounding.

If you are planning to live off of dividends then the strategy doesn’t change much unless you get close to retirement and the ETFs aren’t throwing off enough money. Then moving holdings more towards dividend aristocrat stocks with better yields would help boost income while keeping your principal safe. 

A couple can earn a substantial amount of money via eligible dividends and pay no tax at all if this is their only income source. 

Q13 Any final comments you’d like to share with us to wrap up this Q&A? 

A13: I think people who are new to investing should get involved on Twitter/X. There are a lot of accounts providing valuable information and motivation. Staying the course will always be part of the battle and the interaction with other similarly inclined people makes it more fun to invest.

Also, stock market investing and dividend investing are not the only options. I think more people have become millionaires via real estate than through any other means, so keep that in mind as another source of wealth building.

Dividend Growth Investor Q&A series – Wrapping it up 

Thank you again for participating in this Q&A Dividend Boomer. I always enjoy learning from someone ahead of us on the financial independence journey. 

Readers, I hope you enjoyed this Q&A as much as I did. Stay tuned for more Q&As with other dividend growth investors.