I received my income tax return and with some other savings I bought 63 more shares of the Bank of Nova Scotia (BNS) through our online discount broker. Scotiabank pays an annual dividend of $2.72/share so that purchase will increase our annual dividend income by an additional $171.36.
Scotiabank is Canada’s most international bank and has a particularly strong focus in Latin America. BNS shares have underperformed other Canadian banks because that international exposure is hurting them right now. In the long run the bank will be just fine. It’s paid its shareholders a dividend every year since 1832! I also believe that Latin America will benefit from increased manufacturing activity (Mexico seems to be getting all the new Auto plants) and by virtue of having a young workforce.
I’ve held BNS ever since I first got into buying dividend stocks and I will continue to hold it for the long term, notwithstanding near term risks like Canada’s frothy housing market and a slowdown in global economic growth.
I also buy BNS every month in a Dividend Reinvestment and Share Purchase Plan (DRiP / SPP) that is offered through Computershare. I recently sent in an optional cash purchase (OCP) for another $100 and, thanks to my recent pay raise, I’ve increased my monthly regular contribution to $175 from $100.
I try very hard not to fall into the trap of lifestyle inflation. So as a matter of habit, whenever I get a raise at work, I will either increase my automatic saving and investment plans or increase our weekly mortgage payment. This year my primary focus is on increasing our passive investment income so I put the extra money into purchasing more BNS shares.
I love using automatic saving and investment plans to increase my wealth over time because I can increase them by small, incremental amounts. I use my online discount broker for big investment purchases when I get lump sums. But for smaller amounts I find it easier to “set and forget” through automatic saving and investment plans. Increasing my monthly savings by $75 is hardly worth doing if I were to put the money in my online discount broker, but with Drip/SPP plans I can immediately invest the money and earn more passive income.
I’ve also been busy trying to maximize our tax efficiency by moving some investments into my wife’s TFSA. One of my 2015 goals is to max out our TFSA’s. I’ve already maxed out mine for the year in January when I moved some cash and my Toronto-Dominion Bank (TD) shares from my non-registered account into my TFSA. Since then, I’ve been focusing on filling up my wife’s TFSA. So far, I’ve moved 287 BNS shares into her TFSA. That means that we’ll be able to shelter $780.64 in annual dividend income. By the end of the year, hopefully, I’ll be able to have that account full.
As I’ve said before, TFSAs are great investment accounts because you can grow your money completely tax-free. If you invest your TFSA money in dividend paying stocks and ETFs you can grow that money exponentially. Sadly, many Canadians continue to use their TFSAs as a glorified savings account. Wake up people and invest that money! No one ever grew wealthy by “investing” in a savings account. Buy great companies or index funds in your TFSA and you’ll grow wealthier every year.
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