April 2020 Dividend Income Update
Welcome to my latest dividend income update for 2020.
You can find my previous update below:
Regular readers of this site will know we continue to take a two-pronged (hybrid) approach to investing:
Approach #1 – we own a number of Canadian dividend paying stocks for income and growth.
Advisors and other investors will continue to tell me that dividends do not matter unto themselves – although they are an important component of total equity returns. But the reality is dividends will likely always matter to me.
Because while some dividends may get cut from time to time (yes, looking at you Inter Pipeline (IPL) and Suncor (SU)), some stocks do continue to increase their dividends even in times of crisis.
Thanks very much Algonquin Power (AQN) for the recent 10% raise!
Dividends continue to matter to me since I hope to “live off dividends” of sorts within five years.
Our plan is to use this dividend income from our Canadian stocks to pay for a number of fixed expenses in semi-retirement. It is my hope dividends will cover:
- Our condo property taxes (~$500 per month or $6,000 per year) in *Ottawa.
- Our monthly condo fees (about the same as above).
- Our utility bills and personal insurance (a few hundred bucks per month).
*Living in Ottawa is not cheap.
If our dividend income can cover those expenses, I suspect my wife and I can definitely consider some part-time work as soon as the mortgage debt is gone. We figure that’s also about five years away…
At last count, we own 24 different stocks inside my non-registered account and within our Tax Free Savings Accounts (TFSAs). We own dividend payers because we believe buying and holding such companies will deliver some steady monthly income for future wants and needs in retirement.
Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time, to go along with our existing holdings of U.S. dividend paying stocks.
We believe investing in companies beyond Canada’s borders will provide us with some much needed U.S. and multinational diversification.
We own U.S. stocks like AT&T, Verizon, Procter & Gamble, and Johnson & Johnson inside my RRSP – I DRIP at least one share of these stocks every single quarter.
While I love my U.S. stocks I will however be buying more U.S. ETFs like VYM and ITOT over time.
April 2020 Update
Thanks (sarcastic tone) to another recent dividend cut (Suncor), I lost another $150+ in annual forward dividend income.
Like my previous dividend cut, IPL, I’m thankful SU stock also only represents <1% of my overall portfolio.
After factoring in two recent dividend cuts from our Canadian energy sector, my spreadsheet tells me we are trending to earn $20,250 this calendar year.
While that’s down from my February 2020 update, it’s still comforting to know that money equates to the following:
- That’s like earning $2.31 per hour of every hour of every day ($20,250/8,760 hours (24 hours x ~365 days)) even in my sleep.
- In terms of an hourly wage:
- It’s the equivalent of earning $9.74 per hour assuming I work a 40-hour work week ($20,250/2,080 hours (40 hours x 52 weeks)). Then again, some of that income is 100% tax-free (thanks TFSA).
Will more top TSX stocks cut their dividends?
But that’s also probably a good thing for the viability of the company. No point in owning a dividend paying stock if it goes under!
So, I’m banking on a few more dividend cuts in my portfolio this year.
That doom and gloom aside, times are tough. I firmly believe in the companies I invest in, so it won’t stop me from making more investments in such companies every few months let alone stopping me from running dozens of my dividend reinvestment plans that earn more stock shares, commission-free, every month and quarter.
(For the record, I will continue to own both IPL and SU in my portfolio. I’m also DRIPping at least one share of each every quarter.)
Without any further dividend cuts and with my 10% raise from Algonquin Power coming to an account near me very soon, I should be inching towards some new all-time income highs later this year.
Stay tuned to my blog to find out the results after May dividends are paid. I will tell you of course!
Read on about what I own where and why asset location is important to me.
What stocks might cut dividends in the coming weeks or months as more companies strive to weather the COVID-19 market storm? Thoughts? Any concerns about what you own?