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 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 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 many of the companies I invest in. That also won’t stop me from running dozens of my dividend reinvestment plans that earn more stock shares, commission-free, every month and 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.
Read on about some low-cost ETFs to invest in to capture near market returns.
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?
Great post! Quite informative
As always a thoughtful and inspiring report, thank you.
Speaking of goals, TD has a neat feature on its Direct Investing platform, Projected Income. Touch the button and you get a 12-month forward-looking estimate of dividends of all the holdings in that account, and also for each holding month by month. Two lines appear across the main chart, one for the average expected income over the next twelve months, the other one you reset as a target. I reset mine at the end of each month, to the end-of month figure, which then gives me incentive to tweak things a bit to boost the income. It really works for me. Perhaps other brokerages have this feature.
The other suggestion I have for you is, do not forget your health and fitness. I am 80, retired 24 years, and having trouble with my knees to the point that I have had to give up hiking. Just days before Covid-19 broke, my wife suggested we look into pole-walking. We did a one-day introduction, liked it, and bought some special poles, paid for with dividends. The results have been incredible for us, and especially for me as poling takes pressure off my knees at a critical point in my gait. We are now prancing along local paths at a rock-steady 6 km/hr. Highly recommended for your older readers.
Just replied! 🙂
Mark, you’re still doing well. I’ve had about $1500 annually in cuts to date. (that I’m aware of)
Yes, we could see some more cuts but if it means ensuring the viability of the business then that’s probably a good thing.
We’re not travelling now and probably not for some time so our cost of living has gone down more than the cuts – fortunately.
I think so RBull but I just need to stick to my plan with DRIPs and staying the course in the stocks I own. I really have no other choice since selling low or at losses makes little sense right now in my asset accumulation years.
You doing OK through all this mess?
Yep. Good, relatively speaking. Fortunate.
I agree with you. It might be a tougher decision for those of us looking to protect capital with a questionable outlook for equities in the coming year. However, we do not know what will happen and from an income point of view FI doesn’t offer much, and all but govt stuff still carries risk. So I too plan to hang in, not sell equities and exploit a large market drop with FI selling, if that happens and my allocations get far out of whack. I am dripping my TFSA equities.
Good to hear. I too plan to hang on to my dividend cutters as well. No intentions of selling IPL and SU in particular. HR.UN recently cut but will hold on. I can also continue to DRIP that stock 1 share/month.
I don’t see a reason to stop DRIPping the equities in my TFSA. I recall I can DRIP 20 shares per quarter there alone.
Good stuff. I really like your comment that dividends matter to you. They also really matter to me & my wife as besides my CPP & OAS, they are our only source of income.
So far, our only cut is IPL but it did put a $6k/yr dent into our dividends. The only reason they actually had to cut was that they bit off more than they can chew with their $4B Heartland project. I didn’t like it when they announced it as I thought they should have found a partner. As an aside, PPL did find a 50% partner with their identical project and have now put it out hold. Much more prudent management.
AQN is our biggest holding but I actually didn’t like that big a divy increase in these uncertain times. I thoght 5% would have been a btter number.
One other point is that after 2015, I decided that my wife & I would never ever again invest in oil & gas producers for the long term. Their income is just too closely tied to a commodity price. We also decided no cyclicals, mining, gold, direct consumer, etc. That’s how we ended up with a 5 sector portfolio – banks, utilities, midstream, REITs, and telecom.
Keep up the good work
Very interesting Gruff.
I lost a few hundred per year in dividend income if I include my RRSP; lost about $200 per year with the IPL cut inside my TFSA specifically.
I now have 3 cuts that I will update readers on in my next dividend income update: IPL, SU and HR.UN. Sigh.
Overall, across the portfolio, I think I’m down about $500 per year in income to date vs. when offset for increases.
I’ve also had some dividend increases like AQN and JNJ and PG on the U.S. side.
Your 5-sector portfolio seems good for Canada = banks, utilities, midstream, REITs, and telecom. By midstream I assume you mean pipelines?
Do you think more dividend cuts will occur in REITs? I think REI.UN might occur which will be another hit for me!
Holding the line though…not selling any of these stocks above.
Comment is actually from me (Don), not gruff. The 5 sector portfolio is all we own (and yes midstream essentially equals pipelines but there is also some processing and other activities as well). We are 100% TSX dividend income/growth stocks with absolutely no fixed income or direct foreign holdings. We get our foreign exposure from TSX multi-nationals. We also keep a couple year cash wedge. (that I do some short term trading with as well – great time for it!!)
We also just got hit with the HR cut. I’m a little disappointed by how big it was. I was expecting more like a 30% cut.
I think the rest of the REITs we hold will be fine on the divy cut front – BPY.UN. DIR.UN, GRT.UN, MRG.UN, NWH.UN, and WIR.UN.
Interesting on REI. I have lost all faith in most CEOs and their comments so Sonshine guaranteeing no cut doesn’t mean a hill of beans to me. I don;t know how a pure retail REIT won’t have to cut.
As an aside, we used to own REI but sold all back in mid-2017 at $25.78 because of the Amazon effect threat.
I think with your a couple of years’ of cash wedge, you’ll be more than fine.
It is my hope we keep at least one years’ worth of cash on hand in about 5 years when we start working part-time… For us, that’s $50K.
Yes, my recent cuts are 1) IPL, 2) SU, 3) HR.UN. Lost close to $200 + $150 + $260 associated with each.
We had some raises though as well: 1) AQN, 2) JNJ, 3) PG. I hope there are few more coming this year but it’s a very tough year so we’ll see.
I hope you are right on the rest of the REITs, own BPY.UN from that bunch.
Was considering owning DIR.UN actually. I own a small portion of NWH.UN and could buy more. Thoughts??
Between REI.UN and CAR.UN I own some considerable units. A bit worried about REI.UN dividend. Likely going to be cut.
Five years out is great! Congratulations! Another benefit of diversifying with US ETFs is the currency diversification. In times of crisis, the US dollar usually goes up. My portfolio would look a lot worse without the benefit of the exchange rate.
Thanks Laura. Well, that’s the plan to work part-time in five years. Who knows what the future holds!? 🙂
Yes, I enjoy owning U.S. stocks and ETFs. Helps the portfolio for sure.
I never wound up picking up SU just due to the up-and-down nature of the oil industry, but I’ve had it close on my radar on several occasions (reading “The Investment Zoo” by Jarislowski turned me off of cyclicals). I agree we’re unlikely to move away from a dependency to oil in Canada in the foreseeable future. It’s just hard to know what to expect when an ego contest between Russia and Saudi Arabia can literally upend the entire industry. Either way, cutting the dividend was the prudent move, as you mentioned. The health of the company has to be the most important thing (otherwise there will be no dividends at all, ever), and the oil industry has been hit with the double whammy of lower prices and the pandemic.
All that aside, as you mention, there are still bright spots in the dividend growth investing space. Amid the cuts we’ve all felt, there will be plenty of raises to bolster our portfolios. Seeing you’re on track for +20k for the year is inspiration for everyone. I’m at just over a quarter of that, myself, and have been loving the growth over the past few years. Just takes time and consistency to make it work.
Thanks Ryan. Well put on the time and consistency. This is not a get-rich-quick scheme. It’s a get-wealthy-eventually path.
All the best and stay well!
Solid stuff Mark. Yea the SU dividend cut sucked but I kind of expected that. As you know, we received over $2,500 in dividend income, an all time high. But we may not break this all time high due to all the dividend cuts/suspensions we have encountered. 🙁
Thanks. But you and I both know dividend cuts happen in these times, and there are more to come. Inevitable. It will be a good pre-semi retirement test for me to see what stocks hold up vs. not and making any adjustments!
I still don’t include any RRSP assets in these calculations since my goal is for $30K tax-free and tax-efficient income to semi-retire. RRSPs will be used to draw down in 50s and 60s. Time will tell if I can realize my goal!
Hope you continue to stay well Bob!
Times like this are a good test run for your retirement planning scenarios, especially when you are still working. You can make any adjustments and move forward (Tawcans comment on reducing O&G exposure). Dividend cuts, freezes, even eliminations are never fun but par for the course with dividends. Also a great time to add some quality companies to your portfolio. Good planning, like you have done Mark, will help you weather this practice storm and you’ll be better able to handle it when you are actually using dividends to live and the market dives. IPL cut hurt and I believe T announced no dividend raise as planned.
I think so Gruff.
I do figure as bad as this oil crisis is, Suncor will continue to operate as will IPL so dividends will come back, again, and I’ll have more shares by them to churn out more dividends. I will continue to keep my exposure to SU and IPL very low, just in case I get burned!
Time will tell 🙂
How are you holding up? Buying anything or just holding the same stocks?
All good. No purchases as we are fully invested. Holding fast. Gave blood today. Stay safe.
Excellent to hear on the gave blood. All Canadians are thankful for people like you!!
A shame about IPL and SU. I have only lost DIS to a suspension so far. Will continue to hold it!
Ya. That will teach me to invest in many cyclical stocks! Onwards and upwards.
Mark, it’s good to see you are still posting all these great blogs. I was so busy with work for the past couple of months, absolutely no life for me. Might have missed the market bottom already, sigh. Still quite some cash at hand. On the other hand, very grateful that I still have a decent job during this difficult time and can work from home.
I have a worse dividend hit than you as I have a few restaurant stocks, along with IPL and SU. I will see how I survive this storm and adjust my investment strategy. So far I am even more leaning to dividend growth investment strategy. But I will invest in safer ones. Instead of IPL, maybe ENB, TRP and PPL. While dividend cuts hit, there will always be here and there one can reduce the expense. I have planned two travels every year, it looks like this year it will be zero. I also stop to go to restaurants. So far the dividend cuts are still far less than my save on travel and restaurant expenses. LOL.
Be very grateful May for your job. I am…
I own those pipelines as well and they are not immune to cuts. We’ll see!
I love going to restaurants! I miss that.
We really should look into owning Algonquin eh? The Suncor dividend cut sucked but it was expected. I think we are going to slowly get out of the oil sector.
It’s a renewable play for me as is the Brookfield company like BEP and Quebec company INE. I figure we have to go more “green” as a world economy for sure (a given) and those companies should benefit from more wind, solar and hydroelectric power we all need to use. Including in Canada.
I will continue to hold SU since I don’t see our Canadian need for oil fully going away in my lifetime (i.e., another 50 years).
Thoughts my friend?
Love that Algonquin Raise. It’s my largest TFSA holding.
Looks like you have a fairly low exposure to Oil/Gas – probably a good thing. Aside from my funds, I don’t own a single share of any oil companies anymore. Though im sure my Canadian Equity fund holds more than enough/more than I want..haha
I own LOTS of ENB so if they cut their dividend it will be nasty for me…
I continue to own <1% of my portfolio in SU. A small portion of IPL as well. I figure oil is here for another 50 years until I’m gone at least.