Thursday, March 6, 2008

the silver lining

Anyone happen to notice how bad the stock markets have been? The markets are falling hard, financial stocks are circling the drain, banking and insurance will cease to exist, nobody can afford to drive anymore, the end of the world is near...oh sorry..I got carried away there...

The S&P 500 index is down 11.2% year to date. Personally, I am down 11.8% in our non-registered portfolio since January 1, 2008. Ya, on paper I've lost about $4,500 in 66 days. That is a rate of about $68/day including weekends. Very strong emphasis though on the term 'on paper' as I have no intention of selling any of our investments over the next 10 years.

On the dividend front everything seems to be chugging along as normal. Almost every one of the companies I own have raised their dividend over the past year, some of them like SunLife, IGM and Telus have raised dividends very recently. We are still getting paid more and more money each month for just holding these stocks, this is the silver lining.
  • Back on Halloween of 2007, our portfolio was actually worth more than it is worth today and we were receiving $1,249 annually in dividends and distributions.
  • Today we are receiving $1,590 annually in dividends and distributions; that's 27% more passive income.
  • I've been throwing thousands of dollars at our portfolio since October, and it's value has flat lined. My favourite graph on the other hand, just keeps rising...and I really like that.

So while 'on paper' we've lost $68/day so far in 2008, in reality we are now getting paid $4.35 /day. This $4.35 is just getting plowed right back into this awful market, after it builds up in my brokerage account. All the little '$4.35's' are buying more chunks of companies that are paying dividends, so in essence the '$4.35's' are multiplying. Some of them are doing this more efficiently by directly going into shares of the companies that spit them out. Royal Bank (RY), Johnson & Johnson (JNJ), Manulife Financial (MFC), and Telus (T.A) are self-multiplying in Dividend Re-Investment Plans (DRIPs).

My portfolio is now yielding 4.7%. Several of the stocks I own currently, are trading at levels where I would gladly add to them. I can now buy more dividends for every dollar I invest. This is the type of market that a dividend growth investor lives for.


Middle Class Millionaire said...

I agree. With a long term perspective it's not as important if you buy it 5 or 10% cheaper than it is now. What's important is that you bought anywhere in these big dips. I'm guessing that in ten years time this dramatic selloff will look like nothing more than a little blip on the chart.

dividend growth said...

As long as your stocks don't start cutting their dividend payments you shouldn't be selling them. The biggest fortunes are made when the rest of the speculators start dumping anything because they smell "recession".

Tax Resource said...

The funny thing about down markets is that they will eventually go back up. If you look at historical charts, there is up and down but overall the line moves up.

Take a down market as an opportunity to dump poor quality companies that will probably go bankrupt and pick up quality companies that have just been caught with the rest of the market.