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December 2013 Dividend Income Update

Welcome to my final dividend income update for 2013.  For those of you new to these posts on my site, every month I discuss my approach to investing using dividend paying stocks and how reinvesting the dividends paid from the Canadian companies I own are helping me reach financial freedom.   You can check out my previous dividend income update here.

For investors who don’t tinker with their portfolios very much, and thus follow a passive investing strategy, 2013 should have been a great year.  The S&P/TSX composite index closed the year around 13,600 even with the battered gold sector dragging it down.  The S&P/TSX gained close to 10% for 2013.  State-side the market did much better.  The Dow closed the year shy of 16,600 realizing a gain of about 26% for 2013.  The S&P index had almost a 30% gain in 2013, its best year in over 15 years.  Using low-cost products that follow the market, index investors would have had a fine 2013 campaign.  This doesn’t mean people like me using a hybrid approach, indexing and dividend investing, didn’t have a good year as well.

As you might know from reading other dividend income updates on my site, I hold many Canadian companies that were part of that 10% S&P/TSX market gain and a few large U.S. stocks that fueled the >25% gains south of the border.  Some Canadian stocks that did rather well in 2013 in my portfolio include TD Bank, National Bank and Sun Life which all had gains close to 20%.  Using this free calculator (thanks to the team at PWL Capital) I calculated my return for holding a bunch of boring Canadian bank, energy and telco stocks was about 13% in 2013. 

I haven’t calculated my returns in my RRSP (considering I don’t include this account in these income updates) but I suspect it’s somewhere between 10% and what VTI did for investors in 2013, since a good portion of my RRSP account holds VTI.  This is something I want to improve upon in 2014, track my returns against a relative benchmark index.  Michael James recently wrote about this and so did Robb Engen.  This broad market Exchange Traded Fund (ETF) invests in over 3,600 U.S. stocks and costs next to nothing to do so.  VTI returns in 2013 associated with net asset values rocked to about 33%.

What does this all mean for dividend income earned in 2013?  Thanks to Canadian companies that pay regular dividends and tend to increase them every year we earned $7,645 this calendar year from our investments in tax-efficient and tax-free accounts.  Compare that to where we started 2013 it was a significant step forward for us and pretty much bang on with my prediction.

If we max out our TFSAs in 2014 like I think we can and reinvest most dividends paid throughout 2014, I could foresee us earning close to $9,000 in dividend income 12 months from now.  That would put us to closer to this retirement goal, retirement that is hopefully no more than 15 years away.

Are you tracking your progress to financial independence?  If so, how is your progress coming along?  Got any comments or questions for my plan?

Filed in: Monthly Dividend Income Update

22 Responses to "December 2013 Dividend Income Update"

  1. Mark,

    $7,645 is some serious dividend income, my friend! Very nice work. :)

    I’m sure you’re going to have another stellar year. I’ll be rooting for you!

    Best wishes.

    • Mark says:

      Thanks Jason. It’s going to take 10-15 more years of diligent saving (at least $10,000 per year, every year) but the finish line is established at least.

      • Since I like playing with numbers, it seems to me that if you achieve 15% growth in annual dividend income, you will be able to hit your target annual dividend income in a decade.

        However, if you only achieve 10% growth in annual dividend income, you will be able to hit your target annual dividend income in 15 years.

        Given that fact that dividends grow by 6%/year, and yields are 3 – 4%, and you are planning to add at least $10K/year in dividend stocks, I would expect you to hit your income goal by 2026 ( halfway between 10 and 15 years).

        Of course, do not discount the fact that you will be earning more money to save and invest going forward..

        • Mark says:

          My math tells me, if things can continue to go well, age 55 I’m fully retired. That’s another 15 years. Hopefully after the mortgage is retired, all/most money going to mortgage can ramp up investments. Then again, if things go well financially over next 10 years, then I might choose to work part-time ages 50-55.

          The key is our savings rate. The higher that becomes over next 10 years, the closer we’ll be to our goal.

  2. If that 13% return is just for your Canadian individual stocks, then you did well this year. However, if it includes U.S. stocks as well, then 13% doesn’t look very good compared to an appropriately blended benchmark.

    Your rising dividend income must be satisfying. I don’t tend to focus on dividends much, but I do add them up each year. My wife seems to like hearing the total.

    Robb’s record over the last 4.5 years looks good, although it’s hard to know how much RioCan juiced his returns without knowing how much of it he owned. It can be work to calculate an appropriate benchmark.

    • Mark says:

      Yes, that 13% is just from the CDN side. I need to work on the RRSP returns, which has a blend of U.S. stocks, VTI and XIU. XIU dragged down my RRSP this year :(

      I have another post coming up that highlights some of the individual stock returns I had with U.S. stocks; KO, JNJ and WFC are examples. A few were up about 30% but that’s not surprising since the S&P500 climbed that much. The article, when you read it, will go on to state an U.S. ETF would have been an easy way to get the 30%….I had to work a bit harder.

      Your comment about your wife hearing the dividends made me laugh.

      Your post was excellent about your returns Michael.

      • I just found out from Robb that his allocation to RioCan was small, so his 4.5 years of returns have beaten an appropriate benchmark by nearly 3%/year.

        • Mark says:

          That’s pretty darn good. I’m in the process of unbundling my REITs from any ETFs. I hold RioCan, HR.UN and a few others directly, a few hundred shares each. They have brought down my TFSA returns unfortunately.

  3. Well done Mark and I expected no less from you with all the effort you put into your portfolio. I’m sure you will reach that $9000 goal this year and be well on your way to that retirement down the road. I look forward to what tips you have to share on the blog in 2014.

    • Mark says:

      Thanks Mr. CBB. I’m passionate about investing since I want to work on my own terms someday. Hopefully, part-time work is another 10 years away and full “retirement” or working as I choose is 15 years away. Hopefully my plan will get us there…

      I appreciate you following along and sharing the journey on social media.
      Mark

  4. Peter says:

    Hi Mark – enjoy hearing about the rising dividend income as I track that as well and have grown it in my non-registered account(s) for the last 12 years. As for your goal of retiring in 15 years with $30k of divvy income (saw that # elsewhere on your site), can I be so bold as to ask how old you are now? :)

    Full disclosure: I am 53 and have $26k in non-reg divvy income. Alas, I have no DB plan (or any pension plan for that matter), so need to save it all myself. Regardless, my wife & I are doing OK, so figure 4-6 more years. That’s the plan anyway!!

    • Mark says:

      Thanks Peter, I appreciate the support and following my journey.

      Yes, the $30k figure is hopefully from CDN stocks largely held in our TFSAs and non-registered account. I don’t include RRSP in this calculation, rightly or wrongly because I need to draw-down that account at some point. I have no intentions of doing that for where the CDN stocks and ETFs are held.

      I just turned 40 but I feel like 30, but that changes back to 40 the day after too many beers. It sounds like you’re doing just fine.

      I have fortunate to have a DB plan, how long, who knows, which is part of the reason why I have a bias to maximizing my TFSA first every year. That reminds me, I need to write about our 2014 financial goals soon.

      Keep up the good work and I look forward to more comments from you!

      Mark

      • Peter says:

        Hi again Mark, just curious as to your rational for not drawing down the principal of the non-reg and TFSAs…Is this in order to leave a legacy for your children/family?

        As as avid saver, I know it will take a huge shift in my mindset at some point in the next 5 to 7 years to make the switch from accumulating non-reg capital to drawing it down. I plan to use dividends first and then draw down the capital over a course of 10-20 years. At that point, the RRSPs that will (hopefully) have grown substantially will take over for the bulk of our revenue stream.

        • Mark says:

          Hey Peter,

          No legacy for children, my wife and I are not planning on any but we have a number of nieces and nephews we are close to, so yes, potentially some gifts in their future…

          We’re still at least 10 years away from any retirement plans, which could include part-time work actually, we’ll see. It really depends on our savings rate. I would love to be in a position to leave the workforce and not work in 15 years. Regarding that plan, I suspect I’ll keep my RRSP intact until then and then likely drawn down the RRSP first. I plan on keeping the TFSA intact for many years to come and same with non-registered investments, although depending on our age and health, I will draw down the non-registered account before the TFSA. That might be the last man standing since tax-free withdrawals are tax-free withdrawals :)

          I have a post coming up that discusses my parents situation. I think they are wise to start drawing down their RRSPs in a few years, before age 71. I hope you find that post interesting and I would be curious what you and other readers have to say.

          Cheers,
          Mark

  5. That is some pretty impressive income! You are well on your way to being able to retire nice and early. You’ll hit that $9,000 no problem at all. Good luck!

  6. Dante says:

    I am new to this exciting world of stocks and trading. I am looking for some solid dividend paying stocks that can be put into an RRSP and let it ride. Any thoughts or pointers would be greatly appreciated. I am turning 24 this year and have had my poor choices in buying “crappy” stocks.

  1. […] Own Advisor, an avid dividend investor, is up to $7,600 per year in dividend […]

  2. […] Welcome to my first dividend income update for 2014.  For those of you new to these posts on my site, every month I discuss my approach to investing using dividend paying stocks and how reinvesting the dividends paid from the Canadian companies I own are helping me reach financial freedom.   You can check out my previous dividend income update here. […]

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