A Conservative Investor's Approach to Building Wealth

Strategic Insights -

Bob Gibb, a semi-retired investor, has managed to amass a significant income from his dividend-focused portfolio, achieving a substantial increase in his dividend income over the past two decades. His approach to investing, which has been refined since the mid-1990s, is centered around building a stream of dividend income through the use of dividend reinvestment plans (DRIPs), share purchase plans (SPPs), and selective investments in undervalued companies.

Key Takeaways:

  • Mr. Gibb allocates 20% of his income to accumulating quality dividend stocks, which has resulted in a dividend income "well into five figures" by 2009, and at least 50% higher now.
  • He utilizes company DRIPs and SPPs to minimize costs and maximize returns, allowing him to reinvest dividends and purchase stocks at discounts of up to 5% off the stock exchange price.
  • By pooling dividends to buy shares in undervalued companies through their SPPs, Mr. Gibb has achieved exceptional long-term returns, with Enbridge averaging 18.9% per year and Telus averaging 14.5% per year since 1998.
  • As he approaches 65, Mr. Gibb plans to discontinue using DRIPs and opt for cash dividends, maximizing his Tax-Free Savings Account (TFSA).
  • He recommends that small investors with time can create their own "mutual fund" using DRIPs and SPPs, avoiding management fees and building their own diversified portfolio.

Statistics:

  • Enbridge has averaged 18.9% annual returns since 1998.
  • Telus has averaged 14.5% annual returns since 1998.
  • Mr. Gibb's dividend income has increased by at least 50% since 2009.
  • The use of SPPs discounts has resulted in up to 5% savings per stock purchase.

Sources:

  • Me and My Money column, March 2009.