I used to think this way, however I don’t think it’s realistic to live off dividends and never touch your capital in retirement. First of all, any RRSP savings will eventually be converted into an RRIF and face stiff withdrawal rates. Second, what if you want (or need) excess capital in one year to pay for a car, new roof, large vacation, etc.? You’d probably look to sell off some stock to access the capital. Finally, there’s the potential to work longer than needed in order to reach a target dividend income stream. It’d take a million dollars in capital to spin off $35,000 to $40,000 in dividends. Why wouldn’t you want to tap into that million dollars?
Those of you who read this blog regularly will know that I’ve been less than diligent with my posts recently. Baring your soul on the Internet to people you’ve never actually met seems to be the “done” thing these days, so I’ve decided to pull back the curtain and share where I am these days, in terms of my financial worries. Being able to be open about these things (and a possible upcoming career change) is one of the benefits of blogging anonymously, so here we go:
When dividend investors look to buy stock, it’s (almost) all about the yield. By determining the dividend yield of a stock, you can see what that stock is going to pay you if you buy it. The dividend yield alone is not enough information to decide whether or not you should buy a stock, but it is one of the major factors, and should be one of the first ways you use to screen potential stock investments. Unlike the dividend amount (or dividend payment, or just “dividend”) the dividend yield is stated on a annualized basis, which permits apples-to-apples comparisons, regardless of whether dividends are paid monthly, quarterly, or even annually. Here is how to calculate a stock’s yield.