Dividend income growth... 16 months in review.

If you follow any of my previous posts, you know I am a believer in dividend growth investing.  We've consistently been able to achieve an increase of our portfolio's annual dividend income since we started using this strategy with the lowest annual portfolio dividend income increase of approximately 5%.  We grow our dividend income through dividend reinvestment, new monies added to the pot, and from dividend increases.  This year and a half has been a bit of a special case from past years because we have added NO NEW MONIES to our investment pot.  Therefor the increases over the past 16 months are solely from the pooling of dividends and then reinvesting them, and from dividend increases which have been plentiful this year.   I've also incorporated some covered call writing in our RRSPs to add a little extra cash-flow but those are really small potatoes compared to effect of the reinvestment and increases of the existing dividends.  From July1 2013 to October 30 of 2014 we have increased our dividend income by a compounded rate of 17.5% over those 16 months.. or just over 1% per month.  Our portfolio currently yields about 4.5%, so over the 16 months about 6% of the growth came from reinvestment and the remaining 11.5% is from dividend increases.  This represents an annual dividend growth rate of about 8.6%. Not too shabby.

The following chart shows the increase to our annual dividend income for each month, which includes both reinvestment and dividend increases.

Note that every month there was an increase in our total dividend income.  Every month had some form of increase and there were no decreases.  In order to give this chart a bit more meaning, lets assume that July 1st 2013, we made $10000 a year in dividend income.  The monthly increases to that amount would look like this:

... to the point where $10000 in dividend income turns into $11749, 16 months later.

If you've been watching the stock market over any period of time, you know that we always see increases and decreases in stock prices, usually by the second during market hours sometimes with big swings to the upside and the downside.  This watching of the market go up an down can rattle some people as they watch their portfolio value increase or decrease by up to double digit swings within short periods of time.  The above chart is the kind of chart I like.  Our dividend income continues to rise month after month.  Some months we had dividend increases and other months we deployed some of the dividend monies that had built up and bought some more stock.. usually ones that we thought were depressed. on sale, or were due for a sustainable dividend hike in the future.

Rule #35 The Main Goal is Financial Independence, Not Retirement

"Let your money work for you. You don't work for money. That is exactly what Financial Freedom is..."

-Manoj Arora, From the Rat Race to Financial Freedom

My father asked me last month if I was retired for good.  Recently I started using the term 'retired' when people ask me what it is that I 'do".  I find it hard to answer the question to most people as I am not employed and I am not looking for work.  I have extended family members who, every time we meet, ask me if I've found work yet.  When I remind them that I'm not looking for work I get the feeling that they feel sorry me.  They shouldn't.  I quit my Professional Geologist career almost 3 years ago, at first to take a break from working as I was feeling a little burnt out, and then while off I decided I wanted to try something else... something with a slower pace.  I've taken up part-time Stay-at-Home-Dad and part-time Options Trader as my new vocations.  One doesn't pay well (at all!) and the other is an "Eat what you kill" type of income generation.  Both are certainly not as well paying or as predictable in their pay-out as my previous career.  While I do not have traditional work or income, I do have some growing dividend income and I can generate a modest return on my Options Trading account.  That coupled with Kim's paycheque provides a pretty good living for our family as it still allows us to save and grow our "save for later" investments.  With that said, we've never been focused on retiring in the traditional sense. We have no intention of working at the same job or career for 30-40 years and then stop working forever and spend our days golfing.  Thats just not what we want.  We've both taken mini-retirements to be home with our boys and we wouldn't have been able to do that if we socked all our money away for retirement at age 60.

Our focus rather, has always been on Financial Independence.  We define Financial Independence as having enough passive income now to cover a lifestyle that we are happy with without having to go to work for someone else.  We actually don't plan to stop "working" once we reach Financial Independence, but rather we will work when when want, where we want, and if we want as opposed to having to work to sustain a certain lifestyle.  Our plan is to have our investments pay our way.  This is in contrast to the typical pension most people strive for.  In order to get a standard retiree pension, employees are generally required to work for decades, in sometimes soul-crushing work, in order to get a pension for the last third of their lives.  By focusing on cash-flow producing assets such as dividend paying stocks in place of a pension, we do not need to wait til age 55-65 to turn a lump sum investment into a pension.  We've been building our non-employment cash-flow each year by buying what we sometimes refer to as "mini pensions" that we can turn on right now.   Since we've been aggressively saving and investing for over a decade now, we're well on our way to our goal and we hope to meet that goal at or ahead of schedule even as I pare back my employment income.  By aggressively saving and investing early, along with living on only one salary for over a decade, it has allowed us to transition from working for a living to working when we like.