The Real Power of Dividends

Vacation Footwear for Ireland in October!?!

There are some strong opinions out there on which investing strategy is best. Over time, & from a pure numbers perspective, the only thing that really matters is total return. It doesn’t matter whether you get that return from capital gains, dividends, some other kind of distribution, or any combination of those. I suggest to my kids that they invest in low-cost, market index ETFs. They’ve got the time to make that work. No guarantees, of course. Going forward, maybe the American & Canadian markets will do what the Japanese market has been doing since 1989. That might not be a great outcome for them come retirement day.

The closer I get to retirement, the more I worry about running out of money during retirement. Any simulation I run with the 4% withdrawal “rule” always has a few chart lines that wipe out early. And I’m not even planning for an extravagant retirement lifestyle. Not only do I not want to run out of money during retirement, I’d like to think there would be enough left over for my kids to take my ashes back to Ireland when my time is done!

I started out with mutual funds way back. When I realised how much I was paying for underperformance, I got out of those. Then I tried picking growth stocks. I wasn’t very good at that & I lost some money. On the bright side, I didn’t have much money to begin with, so there wasn’t much to lose! Professional money managers were up next. Since I didn’t know what I was doing, I figured they would. Turns out they weren’t keeping pace with the market either & I was paying extra for that underperformance. Though I don’t blame the pros, they were creating portfolios based on my risk aversion. And I was pretty risk averse after getting burned by my own poor stock selections. With the benefit of hindsight, had I gone into index funds from the get-go, I would have fared far better. Despite the risks, that’s why I recommend index-tracking ETFs for my kids.

Now that I’m much closer to retirement, I have a different outlook. While I’m a hybrid investor now, investing in both stocks & ETFs, I have a leaning towards dividend-growth investing. It started with those 4% withdrawal simulations. If 4% was enough to live on, why not just have a portfolio that generates distributions of 4% annually? Rather than have to sell shares for income, couldn’t I just live on the dividends & distributions? Of course, you need a portfolio big enough to make that work. But that’s a whole other story! After years of messing around with the dividend-growth strategy, I finally got around to moving towards that approach a few years back. Now, instead of retiring at 83, I might be able to get out at 79! I’m kidding.

I hope! 😜

The anti-dividend lobby tell me it’s the wrong approach. But if I were already retired, selling shares of those beaten down index funds this year would give me some serious grief. While my dividend-focused portfolio is down year to date, it’s ahead of the market by more than 13%. And that comes with my bond allocation having the worst year in the history of the bond market too. That’s not too shabby. Moreover, those dividends are on synthetic DRIP (dividends are automatically reinvested in more shares of the same equity) so that my share count is increasing at an even faster rate, as the share prices get beaten down.

While the year-to-date market-beating performance is meaningless over such a short spell, I’m more focused on the dividends than the share price. A stock down 50% is buying twice the number of shares than before the downturn. So long as the dividends aren’t cut, I’m happy picking up more shares when things are on sale. While the dividend-growth stocks may not match the long term total return of an index fund, the real power of the dividend-growth strategy is psychological!

I’m off to Ireland for a long-overdue vacation today. I have no idea what I’m hoping the market will do while I’m away. But I’m praying I’ll get there, & back, safely. And that my portfolio keeps on chugging out those dividends while I’m gone. 🇮🇪☘️🍻

Important – this is not investing advice, it is for entertainment & educational purposes only. Do your own due diligence & seek professional advice before investing your money.

Market Crash Lessons

What Next?

I’m trying to encourage my kids to save & invest while they are young. As usual, Dad’s advice turns to muck pretty much right off the bat. The markets tanked. I tell them, with great confidence & authority, that it’s just noise. To keep on saving & investing. That they’re just buying the good stuff on sale now. Listen to Dad.

There are lots of experts out there with advice on how to handle market losses. I must admit, I’m not one of them. I failed my biggest test back during the dot-com crash. I sold off all but one of my holdings then. The only one I held onto went to zero. All the stocks I sold would have made me money. Had I held onto them! What do you think I learned from that experience?

Stay out of the market, it’s just a lottery? Yeah, I did that for a while. Too long a while. But no, that’s not it … the lesson I seem to have learned is to be afraid of selling anything!

Nowadays, rather than chase what’s hot, I buy what’s not. Most of my investments are in bigger, bluer, dividend-growth companies. Or in ETFs that hold companies like that. But that doesn’t make a downward spiral any more enjoyable. Turns out big blue-chips can go down too. I have the same dilemma today: I don’t know if I should sell, hold, or buy more. Not knowing, I do what I do best … nothing! My stocks just sit there, showing red, & I do nothing. The automatic DRIP adds new shares on dividend pay days. I don’t need to do anything with that either.

I have neither the quant skills nor the psychic ability to figure out what happens next in the market. Instead, I’m trying to get more comfortable just doing nothing. It reminds me of the few times in my career where the future of my employment was at risk. When I lost my jobs back then, I had no other sources of income. But I survived. Between the individual stocks & ETFs I own today, I own little pieces of hundreds of companies. What are the chances they’ll all fire me at the same time & kill the dividends? Pretty slim, I think.
What are the chances that they’ll all go to zero? While there are no guarantees, that’s pretty unlikely too.

For a lazy & conflicted investor like me, it was almost a relief when I came round to thinking that doing nothing might be best. I still worry every time I see the market drop further. I wish I could just stop looking. I can’t. But, so far, I’m sticking with the do nothing strategy.

Only time will tell if if I can keep on doing that. And if that was the right thing to do. Especially for the sake of my kids! 😜

Dreams of Being Rich!

Wake up!

Okay, this is just one of those dreams I can’t make sense of. No, not the dream of being rich, but an actual dream I had last night. One that I can’t make sense of. I’m not making this up, I really had this dream last night & I think you’ll be tickled with the kicker at the end of the story.

I like to read my way to sleep but I happened to listen to an audio book last night. It’s a book on a high-yielding, income-fund investing strategy. This is an investing approach that I don’t really buy into. But that’s why I need to learn more about it, I could be wrong. It might work for a chunk of a retiree’s portfolio, so maybe I’ll want to use it down the road. I was pausing the book periodically, to jump over to the browser on my phone. I compared the total returns of some of the recommended funds against those of one of the Canadian banks. And that’s about when I fell asleep …

Now I’m at my dream-desk. I had a list of four funds that I wanted to compare & I was reviewing these on screen when I was introduced to a new employee. Next thing you know, I’m sharing a sheet of paper with the new guy. It started out with the ticker symbols of the four funds on it, but now it is a list of four of my brilliant suggestions for design improvements on a reflow oven. A reflow oven is a big, industrial version of the oven you might find in sub sandwich restaurant. You know the kind with the flat conveyor belt? It toasts those open-faced sandwiches.

Anyhoo, an industrial reflow oven solders electronic components onto printed circuit boards. It’s one of the machines that helps manufacture the electronics inside your phone, TV, laptop, & so on. This machine has been part of my day job for decades already. I probably know more about reflow ovens than I do about investing in high-yielding funds! I’m talking about my brilliant ideas with the new guy & I invite him to join me at a meeting I’ve scheduled to share these suggestions with the engineering department.

Next thing I’m sitting in the meeting room opening up my laptop. The new guy is sitting to my left & … wait for it … Warren Buffett is sitting to my right. I’m not kidding, I dreamed of Mr. Warren Buffett, the Oracle of Omaha himself! We’re all waiting for the design engineer to show up for the meeting. As I open my laptop, I glance out the window. I don’t know why I’m not surprised that the office window is looking out over the park in the small Irish town I grew up in!

The design engineer finally shows up. A tall, smiling man. With his shaven head, he looked more like a martial artist than any design engineer I’d ever worked with. He is 6″ 8″ tall & I have to look up, a lot, as I shake his hand. His name is Do, but pronounced dough! I introduce him to the new guy, whose name I couldn’t drag back from dreamland, but Mr. Buffett needed no introduction. I guess we were used to working together! LOL

I fired up my laptop & was about to review the list of the four items with the group, but then the recollection fades.


After a solid eight hours of sleep, I woke up. Exhausted. I took my morning coffee out to the balcony, in the dark, & tried to gather as many threads of the dream as I could. But, try as I might, I could not remember if The Oracle had passed judgement on the four ticker symbols on my list. I finally gave up & carried on with my daily ritual. I usually play the day’s Wordle® game as I enjoy my coffee.

You won’t believe the word that proved to be today’s solution to the Wordle® puzzle!

And I’m not telling you the answer!
Go to The New York Times Wordle® website & play it yourself.

And then tell me that isn’t just weirdly, wonderfully, mystical … or something.
I don’t know if I’m supposed to buy these funds when the markets open. Or run away screaming!

Okay, if you don’t play the game, just search for Wordle® #337 online for the answer.