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