In this article, you’ll hear directly from Tawcan, who is a dividend growth investor from Canada, and who is writing about personal finance and investing on his website at Tawcan.com. I reached out to him recently and he agreed to answer some of my questions about dividend growth investing. Thanks again Tawcan, and I will stop right here so you can go straight to the interview. Enjoy!
Can you Introduce Yourself and Your Website?
My name is Tawcan. I’m in my 30’s from Vancouver Canada. I write on my personal finance blog named after myself. I write about variety of subjects, such as personal finance, frugality, dividend investing, and having a joyful life.
What Initially Got You in the Field of Dividend Growth Investing?
In my 20’s I purchased some stocks that paid dividend but never really paid attention to dividend investing. It wasn’t until I read The Lazy Investor by Peter by Derek Foster that opened my eyes to the field of dividend growth investing. The idea of receiving money for owning a piece of the company sounds great to me. Also that dividend income will increasing ever year due to organic dividend growth is simply awesome because that means the income will keep up with the inflation. After reading more and more books on dividend growth investing, I was hooked.
Why do you Think Dividend Growth Investing is Better Than Other Ways to Invest Your Money?
Unlike many DGI investors, I don’t think dividend growth investing is better than other ways to invest our money per say. It’s simply our preferred method of generating passive income so we can eventually cover our expenses and become financially independent. I like that dividend growth investing is very simple – you hold stocks of solid companies that pay dividends. Companies produce products that you use in your everyday life, like Johnson & Johnson, Proctor & Gamble, and Chevron, just to name a few.
Having said all that, although our dividend portfolio is significant of our investment portfolio, we do hold other stocks that pay no dividends. We are also investing in index ETF’s to diversify our investment. I see our investment strategy as a hybrid. The income from dividend paying stocks will be our prime source of income when we reach financial independence but we will have other sources as well.
The Usual Argument Against Dividend Growth Investing is that you are at the Mercy of the Stock Market. Compared to Real Estate Investing for Example (Where you Have Control Over Your Assets), you Indeed have no Control over the Companies in which you are Investing in. What do you Answer to That?
When you invest in real estate, do you really have full control over your asset? Do you have full control the pricing of the asset in the open market? Do you control how much the property tax will be? Do you have full control of maintenance cost of the property? I’d say you don’t have full control on real estate investing, you’re also at the mercy of the real estate market and many external uncontrollable factors.
While you do not have control over the companies in which you’re investing in, you do have control in buying their products and evaluating the growth potentials. Go to an Apple Store and check out their products. Is there a huge crowd in the store ready to buy Apple products? Do you see a lot of people using iPhone or Mac computers? What do users think about Apple products? I believe there is no one investment in this world that would allow you to have control over your assets.
How do you Choose your Dividend Growth Stocks that you are Investing in?
We go through the US and Canadian dividend all-star spreadsheet which can be found on www.dripinvesting.org and pick out stocks that meet our criteria. Lately I’ve been focusing on high dividend growth stocks rather than high yield stocks. I also pay close attention to ROI, payout ratio, and PEG ratio. We also like to take a look at names that we use in everyday life, products that people use on a day to day basis that will not get affected whether the economy is good or not. I typically have 10 or 15 stocks on my watch list.
When I Browse Dividend Growth Investing Blogs, I see that Most of Investors are Solely Investing in US Stocks. What do you Think can be the Cause of this Behavior?
Many blogs are US based, so there’s already a build-in bias to start with. I think it is also because there are so many major international companies that are based in the US. So US dividend growth investors simply just invest these companies instead of branching out and invest outside of US. I also think there’s a natural bias to invest within your country.
For us Canadians, we tend to hold majority of our portfolios in Canadian stocks. Looking at our portfolio, we’re investing in a lot of Canadian stocks. We only invest in US and international stocks in our RRSP (401(k)) equivalent) to avoid the 15% withholding tax. Because there’s an annual limit to these tax deferred accounts, it makes more challenging to invest outside of your country, unless you’re willing to take a hit on the taxes.
Let’s Say I am Brand New to Dividend growth investing. What Would be the First step to Take?
Read my blog of course! I have written a few guides on how to get started with dividend growth investing. There are also a lot of great online resources that you can check out. Also, a great book to get started is The Lazy Investor that I mentioned, another book I quite like is The Single Best Investment: Creating Wealth with Dividend Growth by Lowel Miller.
What are the Best Ways to Get in Touch With You?
Best way is to visit me on my blog and either drop off a comment or send me an email. Again you can find me on Tawcan.com.