Dividend Growth Investor Q&A series – Rob from Passive Canadian Income

Personal finance is personal so I believe there’s no one size fits all solution when it comes to investing. You need to build your investment strategy based on your needs and goals. While index investing can work for many people, there are some benefits to building your investment portfolio with individual dividend stocks. 

I started the Dividend Growth Investor Q&A series with the goal to interview different investors and get their perspectives on their investing journey, more specifically, why using dividend stocks. 

Today I asked Rob from Passive Canadian Income to share his dividend investing story.

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

A1: Hey Bob, Thanks for having me on this series. I’ve always enjoyed reading them. I’m a 41 year old, living in Ontario, Canada, and married with 2 kids, 11 and 6. I’ve been a landscaper since I was 15 and this year I took over the company. 

I’m an avid Toronto Maple Leafs fan – go Leafs! 

I also love going camping, hiking, and fishing.

Tawcan: Go Canucks go! 

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

A2: As Dave Ramsey says I think I just got to the point of being sick and tired of being sick and tired. I have been making good money ever since I was a kid. Back then I would blow my money on expensive clothes and a great lifestyle. No one really ever talked to me about money, I took a business class in high school and that touched on money a bit but it didn’t stick at the time.

Sometime in 2011 things changed though, I was with my girlfriend back then (now wife) and we bought a house. We continued to live like average people, going on cruises on credit cards, eating out, etc, but at the end of the day, there was not much extra money. My dad and sister ended up going to some financial courses and one of the recommended reads was Dave Ramsey’s Total Money Makeover. 

Somehow that got brought up in conversation and I thought I would give it a read. (At the time I never really read books, Dave’s Book changed both my finances and reading habits)

I got the book and devoured it, honestly, I think I read it in like a day or 2. I was hooked, I drank the juice man! I told my wife she needed to read it as well and the journey began. After writing down all our consumer debts we were shocked to see we owed north of 60 thousand dollars in cars, line of credit, school debts, and credit cards. Our minimum payments on all those loans cost us $1,600 a month. It was a real eye-opener.

Right then and there I started working 7 days a week, no joke 7 days! 

I was doing side jobs for clients and my wife even came out on the odd Sunday to weed people’s gardens. We started paying off the debts one by one and basically only going out to eat whenever we cancelled one debt.

 At the same time, I was consuming as many finance books as I could. This was a whole new world for us and in particular me. One of the best books which I still recommend to everyone is The original Wealthy Barber. Such a good book but one particular line stood out – Pay yourself first.

So simple and yet so powerful. I was torn on whether we focus on paying our debt off or start investing. 

Daves’s cult was too powerful though. I was listening to his podcasts as well and hearing people screaming WE’RE DEBT FREE kept us on track.

I think in 2 years we paid off that debt. It was an awesome feeling. But at the same time, I asked my wife to marry me. It was now time to pay for this damn wedding. My wife is Filipino and let’s be honest, family is everything. Everyone has to come, some of her cousins had 600 people at their weddings. We knocked that number down to 250, so yeah this was yet another big expense.

During this time though, I came across your blog, My Own Advisor by Mark Seed, and Million Dollar Journey. I put down Dave’s juice and started drinking the sweet nectar of the dividend juice. 

Money doing nothing? 

Why hasn’t anyone told me about this? 

Dividend growth investing got me fired up! Kinda like those pills you can get at the convenience stores – Rhino pills, I think? Haha

Steve Jobs has that great quote:

“You can’t connect the dots looking forward; you can only connect them looking backward. So you have to trust that the dots will somehow connect in your future”

And here we are… already feeling the effects of more financial freedom

Tawcan: Love you had a financial epiphany similar to ours to get you started on the financial independence journey. 

Q3: Can you provide a detailed breakdown across non-registered and registered accounts? Which dividend stocks do you own in your portfolio?

A3: I actually am extremely transparent in this regard. Our entire portfolio can be found on the website.

Note 1: Rob has taken down his site since the Q&A).

Note 2: here’s a screenshot of Ron’s portfolio.

Reading other bloggers’ journeys and seeing their holdings helped me when I was getting started tremendously. I really try my best to pay it forward by sharing ours in hopes that it may help others as they start their journey.

Q4: For your portfolio, I believe you’re pretty balanced across the different sectors. Is that planned or just happened? Walk me through your asset diversification plans.

A4: I really try to stay diversified across all sectors. And when I make purchases now I try to actually buy in one of my 3 lowest sectors. 

This generally also means I’m increasing my holdings in some of our smallest holdings which is also good in my opinion. I do find certain sectors are better from a dividend growth perspective but still try to stay relatively balanced. 

Although I really have cut back on our REIT holdings drastically. Sure they offer nice yields but their capital appreciation and dividend raises are really lackluster.

Our current sector allocation looks like this: 

Industrials	14.60%
Energy	14.10%
Consumer Cyclical	12.00%
Utilities	9.90%
Technology	8.90%
Health Care	8.70%
Financial Services	8.20%
Communication Services	7.60%
Basic Materials	7.40%
Consumer Defensive	6.90%
Real Estate	1.60%

I’d like to get more tech exposure but at the same time, I think we need to be cautious in this market with current prices. 

Industrials are definitely my favourite sector to invest in. So many good companies in this sector with great dividend histories

Q5: If you were to summarize your philosophy of dividend investing, what would that be?

This is a long term plan, keep adding to positions you like. I’m a big fan of letting them ride and compound. The drip program is absolutely amazing and I use it as best I can, letting my dividends buy more shares, whenever they can.

Aecon Group Inc can be a good example of this, the stock price took a big hit as it wasn’t as profitable on jobs it quoted before everything skyrocketed. People were dumping it, but I held steady and collected even more drips at those depressed prices. It’s up almost 89% in the last year. 

Now that doesn’t happen to every stock I own though…. AQN…arg!

Tawcan: Don’t remind me about AQN, we made the same mistake with that company too.

Q6: Why dividend investing over indexing? What are some key factors that made you like dividend investing over different investing strategies?

A6: I started by following dividend guys, I guess. Haha 

Seriously though this is the great debate on Twitter ain’t it? 

Do what works for you! 

I was hooked on dividend growth investing from the get go. I wanted to own the individual companies and not everything. 

Indexing has the advantages of diversification which I like, but do I want to pay record PE’s currently or look for a little better value? Do I want to own tobacco stocks? No. Do I want to hold stocks that hold different beliefs or views than I do, not really (i.e. Budweiser).

I like the idea of seeing our income go up with every purchase, DRIP and dividend raise. It makes me and the wife feel good inside. 

Obviously we like seeing our portfolio value in general go up, but that comes naturally with added capital as well. 

The value of the portfolio is something I don’t actually watch too closely and I think that has been a great advantage as I’m not upset if our portfolio is down $5-10k a day or week if the income is still coming. 

Q7: 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? 

A7: I wish them luck. 

No, seriously I do. I hope they hit the next Gamestop, but they got to hit it early. I had one of my good buddies jump into that halfway through, and he was up quite a bit. I told him to sell but what’s that saying? Diamond hands? I think he bought at like 40 and sold sometime last year at 25ish. 

Tony Robbins has a saying that has stuck with me. C.A.N.I – Continuous and non stop improvements.

Slowly but surely. It works, there are a lot of us finance bloggers out here showing that it indeed does. I can see how well it works for you guys. I have clients that have a tonne of money and I now talk about money with them. Lots of them are big time dividend investors.

I actually now try to talk about finances with my employees and offer them money if they show me they invest in some way weekly. 

It’s interesting the different conversations we have. Some have that victim mentality and dont bother, I’ll never own a house etc etc and some take full advantage. One employee just got his first dividend payment from Coca Cola. I think 6 bucks, he was just like me when I got our first dividend payment, amazed to get paid for doing nothing. Probably makes those Coca Colas the clients give us taste better too!

This financial journey is a long term game, but the proof is there every quarter when you see your income go up right in front of your eyes.

Q8: Like us, you own many Canadian banks. Are you concerned that the rising interest rates will cause Canadians to default on mortgages, causing a wave of bad things to happen to Canadian banks? 

A8: I actually sold off a lot of our Canadian banks last year when I focused on paying off a HELOC which we used for investing for this exact reason. Rates just rose way too fast, the writing was and is on the wall. 

I’m a little less worried these days now that we are in lower rates mode. I think this current Canadian government will do whatever they can, to prop up housing.. I disagree with it immensely. Record immigration, first time buyers account (FHSA) and now this 30 year mortgage.. I think housing needs to at the very least come back to pre-pandemic pricing, but looks like it won’t. 

Our kids will be screwed buying a house at this rate.

At the same time, Canada has the highest household debt to disposable income ratio in the G7, at 185% compared with an average of 125% for all G7 countries (taken from Google March 2024). That’s a scary statistic. Debt has become so normalized, just look at all the band new trucks on the roads.

I think in general this market needs a pullback. We live in a time of record stock prices and also record food bank usage, homelessness and increasing unemployment.

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

Mistakes…. We all make and should continue making mistakes in life. Hopefully, they are just little learning lessons. Of course, I’ve made mistakes. When I started investing I chased yield, I still sometimes am guilty of it. Kinda comes with value right? When I look at some of the very first posts on the blog I wonder why I even bought those stocks. They were crap and didn’t have much dividend growth. 

I tried penny stocks once. I think it was a lithium play. One thousand bucks went to 100 real quick..

I still hold AQN, which seems like a mistake. Heck, I think I’ve held for 2-3 dividend cuts. Diamond hands right? 

Will they rebound with the new CEO, who knows? I continue to like the assets but that debt needs to be knocked down. The money from the cuts should help, but I was debating selling and moving the proceeds to Fortis at like 52 bucks. Since then AQN has cut their dividend once again and Fortis has increased theirs.

I used to think Bitcoin was a fad and passed on buying it really cheap. Now I’m really bullish on Bitcoin in this printing press world and continue buying some every week. Would of been amazing if I bought that when it was cheaper.

I had a stage where I thought the dollar was gonna die and we were buying gold and silver left right and center. Years later I thought it was a mistake as it produced no cash flow and here we are. Doesn’t seem like a mistake now, lucky I didn’t sell. Sometimes mistakes can work out

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: I think it has evolved for the better. At the start, I was hooked on seeing the income go up. I still am but do realize that total return is really what it is all about. Those 4-5% yields are always nice but I love to add the stock with lower yields and higher dividend growths. 

I have a general rule now that I always add to a position after a 10% or higher dividend raise regardless of price. It seems to be working out pretty well. At the end of the day we don’t use any of the income the portfolio generates at the moment, so why chase those high yielding low performers like telcos, REITs.

I’d like to remove one or 2 holdings and replace them with lower yielding higher dividend growth moving forward, slowly but surely.

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? 

A11: This is something I really haven’t given much thought, to be honest. 

I love what I do, the kids are young and retirement isn’t really something I’m gung ho about at the moment. I think Mark (My Own Advisor) has talked about his strategy a couple of times and it seems to be a great plan. 

So I would probably follow that using the RRSPs up before the TFSAs. But as a owner of a corporation now I hope I can grow that and pull even more dividends and income from it as well. 

I’ll let my accountant tell me the most tax efficient strategy once the time comes as I think it’s safe to say the tax code will change in the next 10-20 years.

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? 

A12: I think I kinda touched on this above. 

At the end of the day, who cares? Find a strategy you like and what works for you and stick with it. If you’re someone who wants to just invest and pay no attention to the market then 100% buy index funds.

 At the end of the day if your savings rate is high and you invest regularly you will probably end up wealthy either way. Sometimes I think these arguments are just for show. We now live in a time where people get paid for likes and comments on their posts, so it’s better to be controversial.

Compare your portfolio to the performance of the TSX or S&P 500. If you are constantly underperforming, maybe it’s better to be index investing though.

Q13: Since this is a dividend Q&A, what are five dividend stocks you believe you can hold forever? 

Well CNR is my favorite stock, so I gotta say it. Rails are so important and I don’t see them being replaced at all these days

If Microsoft went down for some reason, there would be massive issues worldwide. So it’s safe to say them. 

Lockheed Martin would probably be my third pick. Unfortunately, war will always be a major concern. Some people may say all they want in the world is world peace and yet we see Harris and the democrats may actually win this next US election while basically having 2 wars going…

Costco – The “pandemic” kinda showed us how important having some kind of grocer was to have in the portfolio. With the snap of their fingers, governments around the world shut down basically everything except healthcare and grocers. Everyone loves Costco. I don’t have a membership because I hate how busy their parking lots are, kinda says a lot. =)

BAM – This stock historically has been fantastic. I hate how they are always changing their divisions etc but they own a lot of critical infrastructure and continue to make great acquisitions.

Q14: Is having a good & trustworthy management team an important investing decision factor? Why or why not?

A14: Yes and no. Of course, you know some CEOs are just amazing and can drastically change things up and improve almost everything. Hunter Harrison comes to mind. As he switched through the rails, he drastically improved things and rewarded shareholders handsomely.

At the same time, when I’m screening for stocks I’m not looking at the management team. I’m looking at the stock price, price to earnings ratio, dividend growth history and payout ratio. Personally, there are some stocks I own which I don’t know much about the management team.

Q15: 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? 

A15: Start now, just start. Dip your toes in, and get them wet. 

My only real regret financially is that I didn’t start earlier. I know everyone says it, but it’s so true. I have a good friend whose dad took half his cheques and invested it when he started working at like 15 or 16. He now has a really big house and seems pretty well off. I can’t even imagine how much further we would be ahead if I started buying Nike stock at 15 vs. buying Nike clothes.

Buy a stock you constantly do business with, it helps with the bills and also should be a pretty good business. Don’t chase yield, mix it up once you start to get the momentum but long term the low yielders will generally have a better total return.

Pay yourself first – You hear it so much. You can’t afford not to pay yourself first, things will only get more expensive as time goes by. As a society we waste so much money every day. Heck, I can go to McDonalds with the 4 of us and I’m lucky if it’s 40 bucks. Cook at home and put that 40 bucks into the market. Once the ball really gets rolling, it adds up fast.

We all start off small. I hear it all the time. Putting 1000 bucks into a 4% yielding stock generating 40 bucks a year isn’t going to change my life.. Do it enough times and it surely will. 

Keep at it!

Q16: Any final comments you’d like to share with us to wrap up this Q&A? 

A16: Save your money but make sure you spend some as well. 

Kids grow fast, those memories you make now can last a lifetime. Camping is cheap and probably gives you the best quality time with the family – off the phone. =)

Dividend Growth Investor Q&A series – Wrapping it up 

Thank you Rob for taking the time to answer all the questions. It’s interesting to learn more about your plan and your financial independence strategy. I’ve enjoyed connecting with like-minded people and learning from them. 

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