Posted by Tim Stobbs on December 7, 2007
On yesterday’s post I had a question on why do I use net worth to define my goals and that got me thinking about my passive income in general and the fact I have yet to do an update from my first post where I discussed my thoughts on it.
As you might have noticed from my first post I’m not a huge fan of planning a retirement only using passive income. At the same time I do feel most retirement plans can benefit from having part of their income from dividends and distributions from companies. So when I see a really good opportunity and I have the cash I do tend to pick specific companies up. Yet I’m very careful about which companies I buy because in my mind I’m looking for something I don’t ever intend to sell unless it’s radically changed from what I originally bought.
So far this very select list only has two companies: EIT.UN and BMO. I recently bought BMO because I thought the market was grossly over reacting to their write-downs. It pushed their dividend yield to 5%, which was just a bit too attractive for me to ignore, so I bought just a few shares.
EIT.UN is a bit of a different beast. We are basically using this company to ride out the income trust storm, which I predict will continue along until 2013 or so. Once the market settles into the new taxation of income trusts we might change to specific companies rather than pay the fees for someone else to manage a collection of income trusts. You might have noticed I used ‘we’, both my wife and I have some EIT.UN.
Overall these companies current give us just over $1400/year in distributions and dividend income (overall yield I haven’t calculated, but I would guess around 11%). So in total they provide an extra 2%/year to our household income. Hardly huge money, but that represents around 6% of my retirement income so never the less it is progress.