Income Growth Investing and Cashflow for Life
Cash for life?
Sounds like a dream I know but when you talk to Henry Mah, 80-something, passionate DIY Canadian stock investor it’s not a dream – cashflow for life is his reality.
Over the years of running this blog, I’ve been fortunate to have this site as a vehicle to engage with others, meet other (successful) DIY investors and learn their story.
Henry Mah is one of them.
I’ve had Henry on this site several times and I’ll link to his previous interviews at the end of this post.
Today, I wanted to bring Henry back for an interview to talk investing once again and why his latest book Income Growth Investing and Beyond was so important to him.
Income Growth Investing and Cashflow for Life
Henry, welcome back to the site. Nice to chat again.
Hi Mark: Thanks for inviting me to another Q&A. It’s been a while and I’m grateful to have the opportunity to talk again about Income Growth Investing.
I know you are!
First, how are things with you and family? I believe you’re in your 84th year now?
I’ll be 84 in January, and thankfully our family is very close, and all are doing well. With the support of my daughter, she and I are able to provide the full-time care that my wife needs (she just turned 82).
Continued health and wellness to you and your wife, Henry. Health is wealth and I know that from my own family circumstances too…
Henry, since you know me a bit – I’m also a big fan of dividends and therefore dividend-paying stocks that help deliver an income stream for my wife and I as well. I’ve been a fan of designing a portfolio of ever-growing income (with some growth too) for almost two decades now, and in doing so, we have reached financial independence.
For those that might not know about your investing story, your journey and advocacy of rising dividends including how you got passionate about your own ever-growing income, can you share your investing journey once again?
Investing, in fact even savings were never big on our agenda. We worked hard, enjoyed life, and raising a family were the top priorities on our list. The one thing we always tried to do was keep our debt under control, and we got out of debt as soon as possible. About thirty some years back, we began to talk about what we might do if we ever wanted to retire. Since we had no company pensions or inheritance to look forward to, we realized that with only government pensions, and just some modest savings, we were not sure how we’d be able to replace our working income.
It was about that time when a friend talked about investing, specifically investing in stocks. Of course, we knew nothing about it and he was not interested in managing our money, and only provided some general advice. So, like many others we did some basic research, read, and followed what others recommended, and began trying to buy stocks which might grow in value, and sell when they reached a certain price level. We were modestly successful, but it was more like spinning our wheels. Eventually we turned our finances over to an advisor who converted most of our holdings and savings into Mutual funds, and GICs.
After a few years, we felt that this strategy was not doing much better than we had done on our own, and it was costly. Undecided how to proceed, or what to do, I happened to read an article by Tom Connolly (http://www.dividendgrowth.ca/) which changed my thinking about how to make money from investing in stocks. He suggested:
“If a company doesn’t pay a dividend, don’t buy it. If it doesn’t grow the dividend, don’t buy it either”.
Without dragging this out, over the next few years we took control of our investments, converted them to dividend paying stocks, and eventually developed an investment strategy which allowed us to retire financially secure.
Amazing.
I recall in your early books, you listed four rules that DIY stock investors might consider following to build their own ever-growing income portfolio, then you added a fifth I believe in your third book:
- Don’t consider any stock which has cut their dividend in the past 10 years.
- A company must have paid a dividend for at least 10 years.
- A company should have raised their dividend for the past 10 years.
- The dividend paid should have increased by at least 75% over the past 10 years.
- Avoid stocks which have not raised their dividend by at least 3% over the past three years.
Do all these rules remain relevant to you? Why or why not?
Once we got hooked on dividend growth investing, we read a lot and tried to follow what others were recommending. Most suggested finding and investing in quality companies, and using a number of tools, like monitoring company earnings, P/E ratio, Payout ratio, dividend history, finding companies with moats (items which made them successful, and protected them, that others might not have). It all made sense, but it really didn’t answer the question of how to narrow down one’s selection easily and get away from constantly being on the lookout for other good dividend growth stocks. A more pressing question, which no one seemed to have a definitive answer to was which stocks to buy, and when.
In the end I took some of Tom Connolly’s approach, and came up with my four rules, which are intended to be used as the initial screening of any dividend paying stock. If a stock passed the four rules, then one could apply others tests or criteria to try and identify the current best dividend growth stocks, in each sector.
I added the fifth rule later, because I felt that one needed an indicator which might show that the dividend growth rate was slowing, and possibly show a weakening of company earnings.
I believe that the five rules are still doing what I intended them to do, which is to provide a simple and easy way to screen out weaker dividend stocks, and help one to develop a list of stocks to consider investing in.
I also came up with a simple approach to deciding which stocks to buy and when.
You and I had some fun a few months ago during a TD Direct Investing webinar – bantering about an income-focused portfolio or one that delivers more total return. As you know too, I own a blend of Canadian stocks and low-cost ETFs in my portfolio – I call it hybrid investing.
You’re very focused on income and yield and you only own individual dividend-paying stocks. Can you explain why your investing approach in general terms?
From the very beginning, I found that investing to earn an income from your investments was easy, and that the long-term results could indeed provide one more income than they needed to meet their retirement needs. I also found that one did better when they ignored the stock market (except when they had money to invest), stock prices, one’s net worth, and especially the value of their investments. In addition, I discovered that I didn’t need to worry about capital losses, provided the particular stock remained what I considered a quality dividend growth stocks.
I’m not saying that I didn’t make some mistakes, but most were because I didn’t follow my own advice, and chased yield, or I strayed from my basic criteria of what to expect from income growth investing.
Have a plan, stick to it – I get that too!
Hey, we all make financial mistakes and we’re human.
While money might not grow on trees, you firmly believe that with ongoing investments, given the right elements, the right amount of time and investing fortitude, your portfolio can grow big and strong AND like a tree, dividends like fruit from the tree can be plucked – dividends can be harvested year after year for generations.
In one of your books, you wrote:
“We learned that you can’t assume the stock market will go up every year. In fact, I learned quickly that that’s the problem; you can’t predict how the market will react at all, or which stocks will do well, which will go down, or when to get rid of stocks before they go down, and neither can those so-called experts.”
Given you’ve been in retirement for some time now, congratulations on that (!), what are the reasons that income investing has been so successful for you and can work for others?
It’s a cliché, but it’s really due to compounding. One uses the money they have, or receive, whether it’s from savings, part of one’s wages, borrowed money, or dividends, and they use that money to make more money. But in our case, it’s not the how much money, but how much income.
Some suggest that it takes much more savings to generate enough income to be able to live off the income from their investments. Well, that’s just not the case. In fact, I found that it takes less investment than it does for one to live off their capital.
How much capital might one need to retire comfortably? $1.5Mil to $2Mil, or more? Sure, some will get by with less, but can they live the lifestyle they wish, and will their money last their lifetime?
We’ve managed to retire with more income than we need, having less capital, and our retirement income continues to grow. And as mentioned earlier we’ve sold over $1 million dollars of our stocks, gifting most of net proceeds to our kids, and grandkids.
We’ve achieved this status by ignoring the market, and without wondering if we should have paid more attention to standard investing conventions, such as diversification, asset allocation, investing in, and adding fixed assets as we aged (which we don’t own).
I know you’re a passionate stock investor, very much so, but I recall your portfolio is quite concentrated. Last time we talked I think you had only 11 Canadian stocks in your entire portfolio: a few banks, some telcos, some pipeline stocks and some utilities. No ETFs, no REITs, no U.S. stocks, no bonds.
Why do you stick to just a relatively small, select set of Canadian stocks?
The longer we invested following the Income Growth strategy, the more we began to realize that only a handful of stocks we owned provided us with the most reliable income. These were ones where we didn’t need to worry about buying and selling, or panic if their growth was not as much as others. They were the steady eddies. Some were faster growth, but most were the bread-and-butter dividend payers.
So, for the past eighteen years we’ve held about a dozen stocks, and have only traded or sold two. More recently, because of zero commissions and fractional share purchasing we’ve added several, but they are not a large part of our holdings.
Are you holding at least a bit of cash for any emergencies?
The longer we are in retirement; the less cash we hold in savings. We keep about $35k in savings but rarely draw upon it. We have increased the dividends we draw upon, but the remainder gets reinvested to keep the income growing.
Seems wise, a cash position even with dividend income.
OK, let’s turn to maybe an obvious question – why the new book? What makes this book different than the others?
I didn’t really think that there was much more to say from what I had written in my other books. But once I started, I felt that some things should have been given greater importance and expanded upon. I also tried to talk more about the situation today, and provide further support for the Income Growth strategy, and to show that it continues to work.
What are some of your own, favourite chapters in the new book and why?
Besides the Testimonials (a special Thank You, to those who contributed), I think the section on taxes, and the final chapter might be most helpful to those getting close to, or those in retirement.
I continue to “get” the income desire, I really do, and maybe more so now since I’ve been in part-time work for many months and I’ve decided to give retirement a try in spring 2026. But the TSX (and one of your favourite ETFs that you screen with to select individual stocks (ETF XIU)) is up over 20% at the time of this post. Certainly not all your stocks are up that much, although I know some are!
ETFs can be great for DIY investors.
Are you still (a bit) against total return that ETFs like XIU and others can deliver to DIY investors?
I’m not against any strategy which helps one achieve their goal, as long as they are comfortable with it. I also know that one can achieve success by following any number of investment strategies. It’s just a question of what it takes, how much work, and the effort required. Each investor needs to find or invest in a manner which suits them, and they feel good about. I am not trying to convert anyone or suggest that my path is better than any other, but I do feel it offers an alternative and might be a simpler approach to achieving financial freedom.
But, when one suggests you shouldn’t rely just on investing for income, and that we are missing out on growth, are they saying that one can’t achieve financial success without including capital gains? Well, we’ve done just that. We managed to achieve an income level from our investments which exceed our needs, without worrying or even considering if we might have done better concentrating on capital growth. And it wasn’t that difficult.
As for ETFs, I’ve proven to myself that one can earn more income from owning individual stocks. Again, I’m not concerned with capital appreciation, diversification, or protecting my investment value.
Our stocks do, and are providing us with capital gains, but some are not. I don’t worry when they don’t, as long as my investment income continues to come in, continues to grow, and the income is more than we need. Even when I sell capital to gift the funds, my lost income recovers.
- We only sell shares when we wish to do so.
- We don’t have to worry about a withdrawal rate (ours is zero), or decumulation.
- We don’t worry about a market crash, or if our capital value drops, and
- I doubt we’ll ever never need to worry about; out living our savings, no matter how long we live.
What more could we ask for, or expect from our investments?
We often hear the risks of “chasing yield” with some stocks, maybe even dividend stocks. What is your advice or perspectives on that, for younger income-oriented investors who want to learn from you and your experiences?
When one lists the risk of any investment strategy, there will likely be many. Like market fluctuation, market crashes, inflation, interest rates, economic factors, world conflicts, and the unknown, such as Covid. But with Income Growth investing, it’s Dividend Cuts. Just that.
So, my advice is to minimize the risk of dividend cuts, by selecting and sticking with the best dividend growth stocks, avoid high yield, cyclical stocks, and monitor your holdings. As I mentioned earlier, try to identify those companies which have performed well over the long term, and those that continue to provide a reasonable income, and reasonable income growth.
I remember in at least one of your TD webinars, including the one with me I think Henry, that you mentioned you wish you didn’t invest in your RRSP as much as you did. Why or why not? Do you have any advice for retirees using their RRSP/RRIF for income?
RRSPs were great when they were first introduced in 1957 and remained one of the best retirement savings options. But I found that they misled investors in that they kept delaying the inevitable; The taxes which would eventually need to be paid.
Yes, they encouraged one to save, and those saving could grow tax free. One was also able to claim the RRSP contributions as a tax deduction which also seemed great. But really, even the tax rebate was nothing more than a loan, which would result in greater taxes down the road, especially as most people spent the tax refund.
I think for low to medium income earners, they would be better off investing their savings in a non-registered account (and now especially in a TFSA), ignoring the enticing RRSP tax rebate, and over the long-term will likely find that their capital gains, and income from dividends will result in much less tax being paid.
For those, like me, who ended up with about 70% of our investments in an RRSP, I suggest that they consider withdrawing higher amounts from their RRSP\RRIFs sooner, consider delaying CPP\OAS, and investing the funds in their TFSAs, non-registered accounts, gifting the money to their dependents, or donating some of it.
Is your RRIF balance coming down quickly and any concerns with that in your 80s?
We’ll be making the final withdrawal in early 2026. Then both of our RRIF accounts will be closed out. I mentioned earlier that even after selling capital, we recovered the lost income. In other words, even with less capital, because we’ve sold over $1 million of our RRIF holdings as mentioned above, our income grew to a higher level than before.
2026 is around the corner for all of us. Are you investing inside the TFSA again this year and if so, how?
We have contributed the maximum allowed to our TFSA accounts since they began in 2009, usually in January. And of course, we invested the funds to earn a growing income. I’m pleased to say that all our family members have also made their TFSA a priority.
Excellent.
Finally, it’s the holiday season, time for the good company of family and friends. Any holiday wishes you have or for 2026?
Life has its ups and downs, but I’m grateful for the time spent, and support we receive from family. Not just during the holidays, but year-round.
I’m also extremely humbled by those who have found my investment strategy helpful and have expressed as much.
So, I want to wish everyone the best of the holiday season, and hope that they have more ups today and in the coming years.
Thanks for having me Mark, and I congratulate you on reaching your semi-retirement objective. We wish you continued success, happiness, and good health to you and your wife.
Super kind, Henry. Thanks for this interview…
Income Growth Investing and Cashflow for Life
Even we invest differently, I’m more of a total return guy even with my 25+ Canadian stocks, I congratulate Henry on his investing success. There are words of wisdom here for everyone even if you invest a bit differently.
To wrap, one of the best financial books I’ve read, The Investor’s Manifesto by William Bernstein, talked about the attributes of a successful investor:
- They must possess an interest in the process,
- They need more than a bit of math horsepower, far beyond simple arithmetic,
- They need a firm grasp of financial history, and
- They need “the emotional discipline to execute their planned strategy faithfully, come hell, high water, or the apparent end of capitalism as we know it.”
This last point, one that Bernstein stresses is all for naught if investors don’t posses this fourth attribute, is likely the single biggest benefit provided to investors who follow an income focused investment strategy.
The benefit of getting paid (which I also enjoy and desire in part) instead of waiting for my capital gains to be had, helps myself and other dividend investors from making too many behavioural mistakes.
To wrap this Q&A with Henry Mah – I want to giveaway one (1) copy of Henry’s latest book Income Growth Investing and Beyond.
Simply tell me why you want this book from Henry – Henry will draw one (1) lucky reader comment and related name at random. Leave your why in a comment to enter.
This giveaway is open to only Canadian residents, age 21+. No purchase is necessary.
Additional Reading Links with Henry Mah:
https://www.myownadvisor.ca/your-ever-growing-income-review-and-giveaway/
https://www.myownadvisor.ca/your-tfsa-compounder-work-your-tfsa-harder-so-you-can-retire-sooner/
https://www.myownadvisor.ca/how-to-earn-a-salary-for-life/
Mark
Mark
My name is Mark Seed – the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I’ve reached financial independence. Now, I share my lessons learned for free on this site. Join the newsletter read by thousands every week.
