Posted by Tim Stobbs on March 12, 2015
As I previously noted in my last net worth update we already finished maxing out our TFSA accounts for the year. So with that in mind my wife and I went shopping for some additional stocks.
Our strategy for our TFSA accounts is fairly straight forward. We buy individual stocks that pay a dividend and mirror our existing bills. So that means we tend to look at banks, power companies, telecommunications, real estate trusts….you get the idea.
We also have a few other ‘rules’ that we try to follow. These include we also try to buy stocks with a fairly good yield, so while this doesn’t result in any firm minimum number or maximum we do try to aim for the accounts combined having about a 5% yield based on current value. The other ‘rule’ we try to meet is to have about two companies per sector and try to not have too much dividend income from any one company. We don’t keep a firm cap or anything, but we try not to have more than $500/year in dividends for a starting position in a given stock. If the dividend growth of the stock pushing it higher than that I tend to ignore that.
Our current holdings are (by stock ticker symbol):
We recently increased our shares in RY and started a position in RCI.B. That consumed the majority of our available cash so I doubt we will be buying much more for a while until our cash position builds up again. We don’t bother with any DRIPs for these accounts.
Overall we are hitting the majority of our objectives with these accounts. Our current combined yield is $4973/year on $100,270 in account value, which puts us just under our 5% target (yes I’m acutely aware our actual yield on contributions to these accounts is much higher). The longer term plan is to get the yield up to $6000/year by the time I retire from my day job, which should be doable in three more years. That way we can only draw out the dividends from these accounts and never touch the principle.
Well at least that is the plan…long term I suppose when we adjust positions over the years we might end with a small amount of principle getting paid out. I intend to just take the cash out periodically rather than a complicated tracking spreadsheet. The other longer term adjustment would be in our retirement years strip out our RRSP and taxable accounts and move the money to the TFSA over the years to reduce our tax owing in the long run.
Of course these are only ideas for the long term. I still need to sit down and plan out in more detail how I will switch from the contribution phase to the withdrawal phase. After all getting the money invested is one thing, living off the investments gains is entirely another beast.
Any questions or ideas of companies for me to consider?