Welcome to my latest dividend income update.
For those of you new to these posts on my site, every month I discuss our approach to investing focusing on Canadian dividend paying stocks. We believe buying and holding a number of Canadian dividend-paying stocks in our tax-free (thanks TFSA) and non-registered accounts will, over time, provide some steady monthly income for future wants and needs in retirement.
A new year and more dividend increases…the plan continues to work…
Although Enbridge was a bit late with their dividend increase from 2016, early last month they did not disappoint – with a 10% increase. Algonquin Power also increased their dividend by 10% last month. Raises like these without doing anything except sticking with the plan continues to be a positive reinforcing factor with my Canadian buy, hold and collect dividends approach.
Maybe so much so, I always get reader questions about my investing approach – which I’m happy to answer as part of these updates.
Question #1 – I’m curious about your $30k dividend income target. What is your annual contribution?
We strive to max out contributions to our Tax Free Savings Accounts (TFSAs) every year. This means, if we are successful this year, that’s another $11k invested. Give or take about $11k invested churns out about $440 or so in dividends per year – moving us closer towards our goal here.
We also invest in our non-registered account but that’s only if there is any money left over after investing in our TFSAs, then Registered Retirement Savings Plans (RRSPs).
Question #2 – Why don’t you include your U.S. assets in this update?
I suppose I could, but then, that complicates things with a fluctuating U.S. and Canadian dollar exchange rate. In addition to that, these updates have historically focused on tax-free (TFSA) and tax-efficient (non-registered) dividends from Canadian stocks only. Third, while I could easily include projected RRSP-withdrawals as income for these updates I have no idea how I’m going to manage that yet. Will I withdraw just the income generated from the capital? Will I withdraw more? Probably the latter but I have no idea at this time. In any event, rightly or wrongly, I’ve decided to report just Canadian dividend income from certain accounts.
Question #3 – Aren’t you concerned about diversification in your portfolio with only Canadian dividend paying stocks?
Not at all but these updates may be misleading you.
We hold a number of blue-chip Canadian stocks inside our TFSAs and non-registered account. Those are the biggest companies in Canada. If they all go under, we’re all doomed in this country. In addition to Canadian stocks we hold a modest amount of U.S. dividend paying stocks and U.S.-listed ETFs for U.S. and international diversification. In addition to that, we are on our way to owning our home – another asset. Finally, we invest heavily in dividend paying stocks and a few low-cost industry leading ETFs because we are fortunate to have workplace pensions. We consider these pensions a big bond and for that reason we hold no bonds whatsoever in our personal portfolios. So, all this to say, we’re have assets beyond just Canadian dividend paying stocks.
Thanks for your questions. And thanks to Canadian companies that reward shareholders like me, whereby I can reinvest all dividends paid to move future income higher, we hit a new income milestone in January 2017. We’re now on pace to earn over $14,000 this calendar year in dividend income from Canadian stocks, in other words, about $1,200 per month cash for life.
We look forward to reaching a bigger milestone later this year, hopefully halfway to our long-term goal.
Got questions? About our journey? About investing in general? Send them my way and I’ll do what I can to answer them.
Note: I had some site issues on the weekend and I needed to restore the site from the previous day so some comments were deleted due to the recovery process. I apologize for that – so if you left a comment and now don’t see it – that is why. Thanks for understanding.