Dividends are a great source of income and are a major component of my plan to grow my wealth and achieve financial freedom because:

1. They are “passive income” – I don’t have to work for it.

2. They increase over time as companies raise their dividend payout.

3. They serve as an inflation hedge because companies raise their dividends over time.

4. They are tax-efficient income.  In most provinces if dividends are your only source of income and you earn approximately $50k/year, then you would not pay any taxes on them.

5. Receiving regular dividend income increases your cash flow.  While, as a rule, I reinvest all of my investment income (see my post on DRIPs), if I ever needed the money I always have the option of taking the cash and using it for my living expenses.

6. Dividends are helping to diversify my income.  I want to diversify my income so that I’m not always 100% dependent on my job for money.  Dividend income is a great way to achieve this.

What I love most about the dividend growth investing strategy is how my monthly dividend income continues to grow no matter what the market does!  My focus will continue to be on buying high quality dividend-paying companies that not only pay a regular dividend but have a history of regularly increasing their payout.  That’s what making your money work for you is all about.

For more information about dividends and dividend reinvestment plans (DRIPs) see my articles below:

The Joy of Being A Dividend Investor

Why I Reinvest My Dividends

Ex-Dividend and Other Important Dividend Dates For Investors

Why Dripping is Like Planting Your Very Own Money Tree!

What Are Dividend Reinvestment Plans (DRIPs)?

How To Set Up a Dividend Reinvestment Plan (DRIP)

Dividend Reinvestment Plans (DRIPs): Their Advantages and Disadvantages

Dividend Reinvestment Plans: What Are The Best Companies to DRIP?

See also Lowell Miller’s classic on dividend growth investing: The Single Best Investment: Creating Wealth with Dividend Growth

Image credit: Photo by Stuart Miles / Freedigitalphotos.net