Approximately 30 Canadian and U.S. dividend stocks such as Bank of Nova Scotia, BCE Inc., Fortis Inc., Coca-Cola Co. and Johnson & Johnson; also, exchange-traded funds such as iShares Dow Jones Canada Select Dividend Index Fund.
Since appearing in Me and My Money in July, 2010, Mr. Seed's portfolio "has returned about 8 per cent annualized." Over the same period, the S&P/TSX 60 index has earned about 5 per cent a year.
The portfolio's annual dividends will total nearly $11,500 in 2015, as Mr. Seed reports on his blog (myownadvisor.ca). If he and his wife maintain their "strong savings rate" and reinvest dividends, the income stream will grow at a pace that will allow them to retire early in about 10 years.
How he invests
Mr. Seed is a "dividend investor who invests in established companies that have a history of paying dividends." A key aspect for him is reinvesting through full dividend reinvestment programs, which allow the purchase of "partial stock shares each quarter the dividends are paid."
But he has "definitely embraced indexing more over the last five years" by putting money into ETFs inside his registered retirement saving plan. What he particularly likes about it is that he does not have to spend a lot of time researching companies. "I've learned to appreciate the lazy but effective approach of indexing … you don't need to monitor your portfolio very much."
His portfolio has also become more diversified. He has "gravitated more to U.S. and international assets, which make a great fit inside an RRSP because you avoid withholding taxes on U.S.-listed ETFs and dividend-paying stocks."
Some investors worry interest rates could rise and lure money away from dividend stocks back into bonds and other fixed-income securities. Not Mr. Seed.
We don't know when and by how much interest rates will again become competitive, he says. Some say they are going up and others say they will stay low. What we do know is "staying invested and diversified are what works over the long term."
Even if rates do rise, many dividend stocks should still be fine – for example, in past cycles, the banks enjoyed better margins on their loans and insurers earned higher income on their bond holdings. Dividend stocks that decline can be acquired at better prices.
"Enbridge … I believe my total return is close to 100 per cent."
"I owned TransAlta, but then the stock dove and the dividend was cut. I ditched it soon after. High-yield stocks can be a trap. I focus on dividend growth now."
"Investing requires patience to the point of boring, but boring works very well when it comes to money management."