April 2019 Dividend Income Update

April 2019 Dividend Income Update

Welcome to my latest dividend income update – where I share our monthly passive income progress report from investing inside our non-registered account and Tax Free Savings Accounts (TFSAs).

This month, I’ll answer a few more reader questions before I share our income update for April.

First up though, a reminder about why I invest in Canadian dividend paying stocks:

  • The income received from our Canadian companies we own is real; I do not have to hope for just stock price gains to fund our retirement – I can spend dividends instead.  This is tangible income I can spend without selling stock shares to do so.
  • I can count on many of these Canadian companies to increase their dividends over time, helping to protect us from inflation. In fact, from this month alone, I expect to receive a dividend increase from Telus (T) and Algonquin Power (AQN).  A raise by both companies should increase our dividend income by at least $50 per month.
  • The dividend income earned inside our non-registered account and TFSAs, helps me stick an investing plan I believe in. This behavioural benefit is huge. Sticking to any plan, especially one you believe in, will save you in transaction costs and help you avoid poorly timed investment decisions.  Win-win.
  • I can control the portfolio turnover.  I don’t rely on a fund manager I have to pay. In fact, I’ve essentially created my own DIY Canadian dividend ETF. This is a big reason I don’t own any Canadian dividend ETFs.
  • With my buy and hold and reinvest the dividends approach, I don’t have to pay a money management fee.

Those are just some of the reasons I/we own dividend paying stocks inside our non-registered account and TFSAs – and we’ll continue to do so.

Now, some answers to some reader questions…

Hi Mark,

I enjoy reading about your journey.  I’m a new reader, so, do you own any U.S. stocks or ETFs?  If so, which ones and where?

I do own some U.S. stocks and ETFs actually, inside my RRSP.  You can find some of those stocks on this page here.  I own U.S. ETFs like VYM and HDV at this time.  I’ll be buying more of these low-cost ETFs more in the coming years.  I own HDV in my LIRA.

I want to own more U.S. assets over time to diversify away from owning just Canadian dividend stocks only, held early-on in my DIY investing career.

Mark,

How do you rebalance your Canadian stock portfolio?  Are you worried about over-concentration?

Great questions.

I wrote about rebalancing my Canadian stock portfolio here and my approach remains the same years later.  In a nutshell, I try and buy stocks lagging in price or I buy stocks in certain sectors to get back to the TSX index allocation.

Recall the TSX index has the following breakdown:  30-40% financials; 20% energy; industrials and materials make up another 20%.  The rest of the TSX is weighted in smaller denominations of consumer stocks, telecommunications, utilities and a bit of information technology.

Given I’m DRIPping a number of Canadian bank stocks in recent years; I’ve been buying stocks in other sectors – including the industrial, material and utility sectors.  In particular, I’ve been buying some Canadian National Railway (CNR) and some utility stocks in recent years.   Here are some examples of the utility stocks I buy and hold and reinvest dividends with.

Am I worried about over-concentration?  No, not really.  I simply need to keep an eye on my sector allocation over time.

Mark,

When do you think you might reach your desired $30,000 goal?  Are you going to draw down your TFSAs or RRSPs first?

I wish I knew those answers!

Really though, I think based on where we were in December 2018, and where we are now (see later on below), I think we have a shot of realizing our goal in the coming 5-8 years.

Dividend Income December 2018

To help us “get there” – we hope to max out all contributions to our TFSAs going-forward.

To your other question, I think we’ll draw down our RRSP accounts before touching our TFSAs.  This way, I can reduce the tax liability that is our RRSP assets, before taking any workplace pension in my 50s and 60s, AND allow tax-free assets (TFSA) to continue to grow in the coming decades.

Here is an overview of our updated, desired retirement income “bucket approach” in the coming 5-10 years:

My Own Advisor Bucket Approach May 2019
I figure “living off dividends” derived predominantly from our dividend paying stocks
(bucket 2) will be the key to realizing any semi-retirement dreams.

Where are we at – end of April 2019?

Based on our simple, buy and hold, and reinvest all dividends-paid-approach for many Canadian dividend paying stocks, we’re on pace now to earn almost $18,600 this calendar year from investments inside our non-registered account and TFSAs.  This is >60% towards our part-time work goal.  Something we are very proud of.

Stay boring.  Stay invested.  Stay patient everyone.

I’ll keep you posted on our journey when those dividend increases come through in May!

Thanks for your questions and reading.

Mark

Mark Seed is the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $600,000 now - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

11 Responses to "April 2019 Dividend Income Update"

  1. I love the details in this post. Despite not being a dividend investor myself (we’re indexers) I think your approach is sound.

    Clearly, you’re the right sort of person for dividend investing—you know what you’re doing and you have a clear plan.

    While I have a clear plan, I’m not nearly as knowledgeable as you on dividend-paying companies!

    Life’s a little too busy for me to get on board the dividend investing train, so passive index investing just works better for us.

    Still, I always enjoy learning more from my fellow Canadian bloggers—even if their investing approach is different from mine!

    Reply
    1. Indexing is great and certainly an outstanding choice for long-term investing. As I approach semi-retirement in 5-10 years, I’m focusing on income from my portfolio.

      We figure if we can earn $30K from non-reg. + TFSAs; then add in some RRSP withdrawals + part-time work in 5 years = we should be “good” to live off that before any small workplace pensions kick in, in the years ahead.

      Actually Chrissy, now that the ETFs like XIU/XDV are largely debundled in my accounts, I don’t really watch stocks at all. Only when things tank to buy more 🙂

      All the best and will check out your site this week. Your emergency fund post was a bit controversial 🙂

      Reply
      1. Our investment approaches might differ, but there’s one thing we completely agree on: “I don’t really watch stocks at all. Only when things tank to buy more.”

        You’ve got that right! Buy when stocks are on sale! 👍

        Re: my emergency fund approach… it’s definitely different and isn’t for everyone! 😉

        Reply
  2. Needless to say, loving this post as we have a similar approach. We are aiming to get $23k in dividend income this year. Unlike you, that amount is from RRSP, TFSA, and taxable accounts.

    Reply
    1. Yes, we do have similar approaches! $23k per year would be incredible – you guys are younger and have kids! Very well done Bob.

      My RRSP is pretty much maxed out but we’ll be working on my wife’s account in the coming year or so – hope to have it maxed out by June 2020 if not sooner.

      Mark

      Reply
  3. “Life’s a little too busy for me to get on board the dividend investing train, so passive index investing just works better for us”.
    I am not criticizing ones investment strategy, but would like to provide a comparison if one invested in an ETF as apposed to individual DG stocks (I’m using my 4 Step criteria to select them). I’ll select the period Dec 31, 2017 to Mar 2019, to allow for the market drop of 2018 and recovery.
    Lets invest $100,000 in XIU and $25,000 in BNS, BCE, ENB & EMA (selected to cover 4 sectors)
    Over the 15 months (5 distribution/dividend periods reinvested)
    XIU ends up worth $103,698.55 with distributions received of $3,698.56
    4 Stocks end up worth $104,958.81 and dividends of $6,314.88
    XIU price difference down $1,260.26 or 1.22%, distribution difference down $2,616.33 or 70.74%
    Not much price difference, but look at the income difference.

    Reply
    1. I must apologize, I did not calculate the Mar 2019 ending values correctly.
      XIU ended up worth $104,348 while the 4 stocks only $101,233 so XIU had a price gain by $3,115
      So XIU had a price gain over the period but not an Income gain.

      Reply
    2. XIU is a stellar fund. I would anticipate on a total return basis, by owning Canadian stocks, while the current yield might be higher for some investors by owning stocks outright over 20+ years or more of investing – XIU might give many DIY investors a good run for their money even with accounting for MER = ~ 0.18% on a total return basis.

      I could be wrong of course but I think that’s what some of your data is showing!

      Cheers,
      Mark

      Reply
  4. I am surprised that only 20% of overall TSX are telecommunication, utilities, consumer staple etc. I don’t follow the TSX breakdown. I have 20% utilities (Fortis, CU, emera), 15% telcos (bce, telus), another 8% in both consumer staple, (e.g. metro) and CN (not sure what is this under.)

    Reply
    1. I feel the same Rn.

      So, for the top utilities in Canada:
      https://www.blackrock.com/ca/individual/en/products/239844/ishares-sptsx-capped-utilities-index-etf

      FTS FORTIS INC Utilities 23% of ETF
      BIP.UN BROOKFIELD INFRASTRUCTURE PARTNERS 16%
      EMA EMERA INC Utilities 12.25%
      AQN ALGONQUIN POWER UTILITIES CORP 7.77%
      H HYDRO ONE LTD Utilities 6.91%
      BEP.UN BROOKFIELD RENEWABLE PARTNERS NON 5.42%
      ALA ALTAGAS LTD Utilities 5.41%
      CU CANADIAN UTILITIES LTD CLASS A 4.61%

      Basically, own most of these and you have utilities in Canada covered and you’ll get 4% yield for life let alone some growth.

      To have these steady payers only make up 4% of the index – for life long dividends makes no sense to me. Cash for life.

      CNR and CP are under industrials. I hope to buy more CNR in the coming months actually.

      Reply

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