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me and my money

Bob Gibb

Bob Gibb

Occupation

Semi-retired (works part-time as a tour guide and provider of contract services to insurance companies)

The portfolio

More than two dozen Canadian and U.S. stocks, including BCE Inc., Bank of Nova Scotia, Enbridge Inc., Imperial Oil Ltd., RioCan Real Estate Investment Trust, Telus Corp., Abbott Laboratories, Johnson & Johnson, Bank of America Corp. and Coca-Cola Co.

The investor

Bob Gibb was featured in a Me and My Money column in March, 2009, at the very bottom of the last bear market and financial crisis. He seemed unperturbed by the atmosphere of fear and panic back then. Perhaps it had something to do with his investment approach.

How he invests

Since the mid-1990s, Mr. Gibb has set aside 20 per cent of his income to accumulate quality dividend stocks. His focus is on building up a stream of dividend income over time, so stock-market tumbles are not something to fear but an opportunity to purchase dividends more cheaply.

By 2009, the dividend income from his portfolio was "well into five figures." Now, it's "at least 50 per cent higher." Key aspects of his investment approach are:

  • use of company dividend reinvestment plans (DRIPs) and share purchase plans (SPPs);
  • purchase of stocks through SPPs, which allow investors to buy without commissions and at discounts up to 5 per cent off the stock’s price on the stock exchange; and
  • rather than reinvesting dividends in the companies that paid them out, Mr. Gibb often pools them to buy shares in undervalued companies through their SPPs. The compounding effect of reinvesting dividends and minimizing costs has provided a nice boost to his returns.

As Mr. Gibb reports: "I recently analyzed the long-term returns … of the first two DRIPs I started in 1998. Enbridge has averaged 18.9 per cent a year while Telus has averaged 14.5 per cent a year. Enbridge was no surprise, but Telus itself only averaged about 4.4 per cent annually. Making use of the SPP during pullbacks in Telus worked wonders."

Having just turned 65, Mr. Gibb is about to turn off the DRIPs and begin taking his dividends in cash. It's time to enjoy the fruits of his "get rich eventually" investing approach.

Best move

"Maximizing my TFSA."

Worst move

"I'll let you know when it happens."

Advice

"I know lots of well-off people who still use DRIPs and SPPs. Sure, they're boring, but if you're a small investor with time, you can build your own mutual fund and pay the [management fees] to yourself. No one will look after your money better than you will. If you are interested in DRIPs and SPPs, the "hobbyist website at dripinvesting.org is helpful."

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