April 2021 Dividend Income Update

April 2021 Dividend Income Update

Hey Everyone!

Welcome to my latest dividend income update for 2021.

You can find my previous dividend income update right here.

Why dividends?

I get this question all the time but I don’t mind answering it this month too!

Dividends are payments from a corporation to shareholders – you are an owner/shareholder in that corporation. When stocks you own, pay out dividends, you are essentially receiving some of its retained earnings that a company has already created through its cash flow and profit-making activities.

It’s important to note when dividends are paid, the effect on the balance sheet is a decrease in the company’s retained earnings and its cash balance. In other words, retained earnings and cash are reduced by the total value of the dividend. That may or may not appeal to all investors. Shareholder value is created in many ways!

Dividends are not the only way corporations may reward shareholders but they can be a valid way to increase shareholder value for a few reasons:

  • Reason #1 – dividends are core to company strategy. Potentially there are no current companies to acquire, maybe company debt is under control, and/or there is already a healthy stream of cash to fund new company products or services. Therefore, it’s part of the company’s strategy to pay out a dividend and reward shareholders. 
  • Reason #2 – the company demonstrates it is on sound financial ground. Most companies that pay a dividend, especially long-term (as in decades) have a stable business model. I believe you really can’t fake dividend payments for very long. As an investor, it’s to your advantage to own shares in a company that makes large profits, consistently, with time. A reliable dividend can be a good sign of business strength. This is because unstable companies cannot divert profits directly to shareholders for very long.
  • Reason #3 – a dividend paying company wants to attract investors. This is akin to company strategy. Some investors are more speculative and like risks for capital gains. Dividend-paying companies can attract a certain type of investor; one who prefers cash in hand versus the hope of capital gains. Such investors like the idea of earning income from their investments the same way people go to work to earn an income – it can be somewhat* of a dependable paycheck. *Of course, there are never any guarantees. Companies know there are investors out there who put a bias on dividends for investment selection purposes.
  • Reason #4 – companies know investors like optionality. You see, in a perfect world, all businesses would allocate capital in a way to perfectly maximize the return on that capital. This would be done so reinvested money would go back into the business in way that pays off immensely for the shareholder value all the time (by increasing returns over time AND by continually reducing the company’s tax burden). Forget dividends for a moment, but regardless of what the company did, the goal would be to generate the highest possible return to shareholders. Of course, we don’t live in a perfect world and so sometimes the combination of dividends, capital gains, share buybacks, acquisitions, holding cash, or paying down debt is in the best interests of the company. The only challenge is, we only know those results in hindsight! So, a good way to consider a dividend as part of an investment approach is one of “optionality”. Dividends, that is some of the company profits paid to you as a shareholder, give you the choice: to increase or decrease your exposure to the business. Reinvested dividends, taking full advantage of that optionality, will increase stock exposure which is essentially looking at things from a total return perspective. On the other hand taking just the dividends, as cash, without any reinvestment whatsoever is the optionality part. You can simply take the money and run and spend it as you please… It’s yours to keep once paid. 

I personally love dividends for this latter point and I’ve been a dividend investor for almost 15 years now since this approach helps me psychologically:

  1. I can reinvest the dividends and distributions paid as I wish, the “optionality” part, to buy more shares or ETF units on my schedule and what works for me. 
  2. My portfolio is always working for me, I get paid to be a shareholder.
  3. This approach helps me psychologically for a buy and hold approach largely regardless of what the stock market does with price appreciation or price declines, including 20% or 30% declines (like those that happened starting March 2020). 
  4. I save money on fund management fees. I own many of the same stocks the big funds own – and pay no management fee to do so! I can build my own ETF if you will. 
  5. I believe my goal to “live off dividends” to some degree will ultimately serve me well in semi-retirement. I hope it will reduce any worries about when to sell stock or an ETF, as I ride out market calamity. I can simply take the dividends and distributions as cash and live off that for a period of time.
  6. Earning dividends is a great complement to my buy and hold approach using ETFs for long-term growth. You can read about my favourite, best, low-cost ETFs to ride market returns here.

What is dividend growth investing?

Taking dividends one step further, dividend growth investing is an investing strategy which involves investing in companies that pay dividends and those companies that tend to increase those dividend payouts to shareholders at least annually.

Since dividends are a large source of total stock returns, this strategy can make sense for many investors – investors not only get to participate in the dividend growth of the company (earning more income with every dividend increase) they may also get some stock price appreciation as well – combining for juicy total return.

Recall total return:

  • Is the actual rate of return of an investment or a pool of investments over a period, 
  • It includes interest, capital gains, dividends, and realized distributions, and
  • At the end of the day, is a strong measure of an investment’s overall performance for any comparison purposes. 

I wouldn’t call me a devout dividend growth investor since I do have some stocks in my portfolio, due to COVID-19/pandemic mainly, that have not yet raised their dividends in over a year. Is that a singular reason to punt those companies from my portfolio? Absolutely not for me.

In fact, I’ve held stocks even after a dividend cut. Would you automatically sell a stock after a dividend cut?

Your mileage may vary.

April 2021 Dividend Income Update

Advisors, critics of this site over the years, and others have told me that dividends do not matter unto themselves. True to a point. But they are an important component of total equity returns as I have outlined above.

More so still, they really matter to me and my investing journey to date. I wouldn’t be where I am today without a plan I could stick to: the psychological support this dividend investing approach has provided me, has been essential to my success. Again, your mileage may vary.

This time last year, after suffering some admittedly unfortunate dividend cuts in my portfolio, we were on track to earn $20,250 that calendar year.

You might recall we ended 2020 a bit higher, earning $20,892

MOA - December 31, 2020 Final Dividend Income

I included our 10-year performance at that time in a year-end update you can read about here.

With stocks and ETF units DRIPping along nicely this month, our money invested continues to grow without any new purchases. I have a bias to reinvesting our dividends paid as much as possible.

This month, we remain on pace to earn close to $22,500 by the end of December 2021 assuming some dividend raises occur, some more compounding occurs this year and we avoid some dividend cuts like 2020 brought upon us. We shall see!

Even if no dividend cuts or no dividend raises occur, I’ve calculated we should earn at least $21,649 this calendar year from our taxable account and TFSAs.

Using a metric I started here on this site, that continues to gain more traction with other bloggers around the blogosphere:

  • $21,649 per year in dividends and distributions translates to earning roughly $2.47 per hour of every hour of every day even in my sleep (income/8,760 hours).
  • That income could be considered earning the equivalent of earning $10.41 per hour assuming I work a 40-hour work week (income/2,080 hours) but that’s not quite true since some of that income is tax-free (thanks TFSA).

If our goal is to earn $30,000 per year, that will equate to earning $14.42 per hour.

Essentially, it would be nice see our taxable and TFSA accounts work for me 🙂

I look forward to sharing the next monthly dividend income update with you.

Thanks for reading and sharing. Bring your comments and questions below!

Mark

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and I'm now investing beyond the 7-figure portfolio to start semi-retirement with. Find out how, what I did, and what you can learn to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

44 Responses to "April 2021 Dividend Income Update"

  1. Hi Mark,

    I had a question: with your TFSA’s , do you hold the same dividend generating stocks in both or some in both or have you constructed both of these (yours and spouse) to hold the top dividend paying stocks you want to see in this account but divide them between both and not have any duplicates?
    Sue

    Reply
  2. Lloyd (60, retired) · Edit

    I know a lot of folks here have AQN…

    “Algonquin Power & Utilities Corp. (“AQN”) (TSX: AQN) (TSX: AQN.PR.A) (TSX: AQN.PR.D) (NYSE: AQN) announced today that the Board of Directors has approved an annual dividend increase of U.S.$0.0620 per common share to a total annual dividend of U.S.$0.6824 per common share, paid quarterly at a rate of U.S.$0.1706 per common share.”

    Reply
    1. Good news. I have lots of AQN. Also added a bit yesterday on dip. Boost my expected dividends quite a bit.

      Change my name as we have another reader named May. LOL.

      Reply
  3. Mark, as always a great job with your investing march forward, your progress on creating more income and with the explanation of why you do what you do. A fantastic consistent plan with action, and endless good site content. Many very good comments and astute readers too, that I enjoy following.

    Best wishes to all.

    Reply
          1. Thanks again.
            After injury and 13 years of hardly being able to run at all I finally found therapy that is really helping. That was about 21 months ago, so I could up my training and ran 2 events before season end where I did well. I really ratcheted up the running and strength training since. Then Covid came and I have stayed in top shape with no where to go, and feeling like there aren’t many more years I can keep pushing like this. Gotta keep at it!!

            Am thinking of a few other goals like handstand pushups.

            Reply
            1. Handstand pushups? Geez. I try and do a few reps of regular pushups each day, sets of 10 or 15 to get me away from my desk!!

              There is no way I could go that!

              Reply
              1. Ha, you probably could if you want. The human body is a crazy machine if you have the desire and will to train maximally. My priority is running so don’t want to bulk at all, so limits how far I want to go with strength stuff. Want to stay leaner & smaller-but still strong!

                I can do a few against a wall but free standing ones are a different level of difficulty.

                Apologies to others for my diversion. I see a raise for both AQN & Telus. Nice.

                Reply
                1. Yes, a slight bump for Telus… Maybe back to x2 raises per year soon?
                  https://www.globenewswire.com/news-release/2021/05/07/2225343/0/en/TELUS-reports-operational-and-financial-results-for-first-quarter-2021.html

                  Wait until they spin off Telus Health in a few years!!

                  I put in 15 km on bike last night. Will put in another 20+ km this weekend and getting about 7,500 – 10,000 steps per day now. Just need to work on strength a bit more with core, free weights in condo, but that will come…

                  Reply
    1. Really admire your fitness. I hate exercise and I have always failed my PE course when I was a student. But of course I know I have to do some especially now I am getting older. Spring is here and my beautiful neighborhood is quite isolated without very little traffic, I do enjoy doing some biking from time to time. Should try to do more.

      Mark is fast approaching the financial goal, amazing. I have lost a few thousands $ dividends recently due to selling of my BPY holdings and also switched some dividends stocks in my TFSA to growth stocks. OK with that as we don’t need to dividends yet. Also I plan to use all my group rrsp to purchase DGI stocks once I retire. While I want to have enough dividends to cover my basic expenses, I think it’s better to have my portfolio more diversified. I have DGI stocks in my TFSAs for historical reasons and now I decided I won’t touch TFSA for maybe 20 years, I think it’s better to get more growth there.

      Lots of portfolio fine-tuning for me recently and also planned for near future. Hopefully once I get it done soon then everything will be on auto-pilot.

      Reply
      1. Interesting call since part of the reason why I put XAW into my TFSA is to get some longer-term growth. Will I get it? No idea but hoping so!

        The more I run my numbers, it makes sense to:
        1. Spend and withdraw from taxable first,
        2. Spend and withdraw strategically, slowly, from RRSP(s)/RRIF(s) next, then
        3. Save TFSAs x2 “until the end” as we defer CPP x2 and OAS x2 until at least age 65.

        This is what our math is telling us anyhow to smooth out taxes and deliver a max income spend to age 100.

        Time will tell in another 3-5 years where we are and if we are ready for part-time work in our early 50s by then.

        Reply
        1. I guess we keep adjusting our plans while our situations change and also while we learn more everyday. Being agile financially is very important for a comfortable retirement I assume.

          Recently I crunched the number and realized that we have to focus on withdrawing our RRSPs before we claim CPP/OAS, and also better to clean it out in our 80s. This, together with investment income from taxable account, should be more than enough for our expenses. That makes me realize I don’t want to put low growth stocks in TFSAs, neither high growth stocks in RRSP and taxables. Better gradually switched my positions. The chance I will touch TFSAs before very late in age would be quite slim. Most likely there will be some leftover there for the next generation.

          Although dividend stocks are nice to have and will always be my core holdings, with the expected lower total return, TFSAs might not be the best place to hold them. I won’t need the dividends to spend, and I don’t want my estate to pay lots of tax when I die due to tons of unrealized capital gains. Capital gains will be better ends up in TFSAs.

          Still in the process for adjustment. Maybe five years later when I look back I will find some other problems with what I am doing today. It’s why life is charming. There is always chance to better your knowledge thus we become better self and having better life every day.

          Reply
          1. I think you’ve nailed it – financial flexibility is key.

            “It’s why life is charming. There is always chance to better your knowledge thus we become better self and having better life every day.”

            Well put!

            Reply
        2. Its a toss up here with your #1 and #2 first here on what’s best. I’m choosing #2 (RRSPs) as a lot more of our assets are there, although even with withdrawals the accounts have grown over 7 years. (Great markets)

          Mayflower, I expect our situation/ order of account utilization will continue pretty much the way you mention for yourself.

          Yep, staying involved, learning, adapting is a great way to be.

          Reply
      2. Thanks Mayflower. Find the active thing or things you like to do and give yourself true important reasons why you should do it. then make it a habit. Its the only way you’ll stay at it. Maybe join up with a partner or group to help with staying at it and for social enjoyment. Good luck.

        Yes, Mark is doing extremely well.

        Sounds like you’re planning well. I agree on diversified, having a good base of reliable income from dgi but focus on total return- for those of us ultimately planning to spend capital.

        I find there is always some fine tuning. Just need to limit that so there isn’t a lot of real tinkering that just isn’t beneficial.

        Reply
  4. Lloyd (60, retired) · Edit

    “Using a metric I started here on this site, that continues to gain more traction with other bloggers around the blogosphere:”

    Amazing what NeoCitran Nighttime can do! 🙂

    Reply
    1. LOL. I have appreciated your input and ideas all along Lloyd. Definitely some credit to you and others on lots of blog content 🙂

      Reply
  5. Hi Mark! Thanks so much for a great content!
    I’m starting to learn about investing in dividend-paying stocks (especially due to such low returns from bonds), and your website has been a big help.
    My apologies if I’m mistaken, but given that dividend from Canadian stocks has preferential tax treatment, what is the reason for using TFSA? Thank you again, take care!

    Reply
    1. Great question. I keep CDN stocks in my taxable account for the reasons you already know (Dividend Tax Credit) and because I had a decent taxable account, I have in the past been moving over taxable assets to the TFSA in some years – so the same dividend stocks that were in my taxable account are now in my TFSA.
      https://www.myownadvisor.ca/dividend-tax-credit-101/

      I am striving to own more international / ex-Canada assets in my TFSA over time!
      https://www.myownadvisor.ca/lessons-learned-in-diversification/

      Thanks for your readership!
      Mark

      Reply
      1. Hi Mark, Thank you so much for the detailed response & links. I read them all.
        From what I understand, one of the reasons why you moved some of your CDN dividend stocks from a taxable to your TFSA is so that you pay no tax (because although we receive DTC, it won’t completely cancel out, and we pay some tax).
        Sorry if these questions have been covered before, I’m a new reader so I’m trying to catch up with your past articles..
        Thank you again!

        Reply
        1. I like questions 🙂 Makes me think. Ha.

          The big reason was in some years, I was unable to save up the cash, for x2 TFSAs so I decided to transfer some of the stocks in taxable to TFSA. In other years, I was able to save up cash and invest inside TFSA, buy from within there.

          Correct, no DTC in TFSA or RRSP. Dividend tax credit applies to taxable investing.

          Reply
          1. This makes sense, thank you so much for sharing!
            I will keep learning from your articles. Thank you again. I will talk to you soon Mark!

            Reply
  6. Hey Mark,

    Nice job! Our 2021 dividend income will come in at ~$19,700 (2x RRSP +2x TFSA) looks like I’m not going to catch up with you:)

    Re. US holdings I consolidated all of my US dividend holdings into SCHD which offered good value vs other ETF’s. It outperformed VIG and offers 2x the yield at the same MER with double digit div growth YoY but it tracks the DOW so a different product. In general US stocks are better for growth not that great for divs especially the popular ones (JnJ, PG etc). Besides SCHD I hold OHI/QYLD for income and HASI/BYD for growth.

    Dividend growth is all over the place but after last year I’m happy with the route we’re taking. At the worst our portfolio was down >25% but our dividends only dropped by a couple hundred dollars. Yoy dividends increased regardless so that helps stay the course. That said I’m looking forward to our financials restarting their dividend increases.

    Ben

    Reply
    1. Happy to have an income race Ben!

      It seems super smart to me to consolidate U.S. holdings – I need to consider that at some point into a mix of VTI, QQQ, etc. but I have a hard time (biased) letting go of my dividend payers now up over 100% like JNJ and PG – I’ve owned them for 10-11+ years now.

      SCHD is an outstanding fund. Long been in my list!
      https://www.myownadvisor.ca/top-dividend-etfs/

      “Dividend growth is all over the place but after last year I’m happy with the route we’re taking.”

      Indeed. Look at CDN banks. Tanked and now all-time highs. I suspect the special dividends or re-established dividends from the big-6 banks in Canada could be outstanding in another 6 months or so….just a hunch 🙂

      Reply
  7. Hi, Mark,

    Thanks for another report. Good plans work, right?

    I have a question regarding the asset allocation in different market. Since you have both US and Canadian holdings, how do you allocate the cash amount to each market? Any specific percentage allocated in your strategy? Such as 50-50 in Canada and US market? Since currency fluctuates a lot, how often do you rebalance?

    Angela

    Reply
    1. More great questions.

      I really don’t rebalance per se but that is a challenge for DIY investors. Check out this post.
      https://www.myownadvisor.ca/reader-questions-how-do-you-rebalance-your-portfolio/

      When I do rebalance, I try and buy more of lagging stocks or sectors. REITs would have been a good example last year, I dumped some HR.UN and bought more of REI.UN.
      https://www.myownadvisor.ca/march-2021-dividend-income-update/

      Given I only hold a handful of USD stocks now, I just add to my RRSP with US-listed ETFs over time. So, I don’t rebalance per se in that account, I just buy and buy more – like more VTI. I have no bonds to rebalance. This may or may not be wise for others….

      Ideally, I would like to have in the coming few years 50% USD (with international) and 50% CDN assets + cash wedge for semi-retirement.
      https://www.myownadvisor.ca/cash-wedge-opening-investment-taps/

      Hope that helps a bit 🙂

      Mark

      Reply
      1. Thanks, Mark.

        Portfolio management becomes increasingly important after passing the initial accumulation period.

        “Cash Wedge” concept makes sense, I have one year cash account, plus HELOC with good size of credit room, which can be accessed as cash, the rest of the money can go to work. Even market goes down for a couple of years, will not be forced to sell. This type of self insurance is critical to provide peace of mind.

        Reply
        1. Having ~1-years’ worth in cash seems outstanding to me and I hope to have the same to start semi-retirement with.
          We will also keep our HELOC as well, just in case.

          Having our cash wedge will absolutely give us piece of mind in semi-retirement or full-on retirement and given bonds earn next to nothing now, it will allow us to ride out bad markets a bit while riding the gains back up. That’s the plan anyhow Angela!

          Reply
  8. Hey Mark, love the blog and have followed it closely for several years. One question I have on your monthly dividend updates is around why you only report on your TFSA and non-registered dividends and not your RRSP dividends. I too track my monthly dividends in a master spreadsheet with graphs but don’t separate out the different accounts, but rather just lump them all together….

    All the best and keep up the great work.

    Rod

    Reply
    1. Fair question. I get that A LOT Rod and I will post this answer in my FAQs.
      https://www.myownadvisor.ca/faqs/

      Essentially, I’ve always done it this way, I have no USD <> CDN currency conversions to deal with when reporting, I keep some level of privacy, and I will draw down my RRSP assets over time. I know I will likely “live off dividends” for the early/semi-retirement years and based on our calculations, I know if we earn $30K in our taxable + xTFSAs, then that income steam along with RRSP withdrawals + part-time work (maybe the blog??) will cover the rest.

      I can appreciate great readers like you want to know the entire financial picture, including the dividend income part, but for many reasons I’m just not quite ready to disclose it all – largely because of cybersecurity issues.

      We’ve been good savers (and spenders!) over the years and I too, track my monthly dividends in a master spreadsheet with graphs. I have a total number from taxable + x2 TFSA + x2 RRSPs but don’t always share the latter.

      That said, we are just over 60% towards our desired, overall semi-retirement goals. If you assume our $30k per year goal (from taxable + x2 TFSAs) is a big part of that semi-retirement dream then you can estimate our RRSP assets but I will leave the math to you!

      I appreciate the kind words, always great to hear from readers! 🙂
      Mark

      Reply
  9. “Recall total return:
    Is the actual rate of return of an investment or a pool of investments over a period,
    It includes interest, capital gains, dividends, and realized distributions, and
    At the end of the day, is a strong measure of an investment’s overall performance for any comparison purposes”.
    That’s the description almost every uses and feel it’s the only explanation of total return. But if you invest for a different reason, then one does not have to use measurements, others use. I suggest one use the measresment of success that suits them, not others. Check my opinion on my blog.

    Reply
    1. Well, it is true 🙂 Total returns are the combination of dividends or none, interest paid or none, capital gains only, etc.

      With many dividend paying stocks as you know, you can get both income (part of the company profits via dividend paid to you) AND often price appreciation = the stock price goes up. But to be very fair to all readers, dividend investing is not the only way to build wealth although it’s one way I personally like!

      At the end of the day, for most investing or entrepreneurial success or other, you need to be very comfortable and confident in your own skin. To your point, if a few stocks and sticking to those brings you that conviction my friend – great and more success to you of course.

      I will check out your blog of course!
      Mark

      Reply
  10. Hello Mark,
    Love your content. So real and relevant for the everyday individual. No hype. No get rich quick buzz. Just the goods.
    Do you have a list of the ETFs you have chosen for your various accounts? You mention some here and there but wondering if you have a consolidated place where you outline your various choices for your accounts – and why? Ie: US based in your RSSP vs TFSA. Etc

    Reply
  11. Great stuff Mark. Readers might explore building their own U.S. stock portfolio as well. The benefits are there just as much or more compared to building the Canadian stock portfolio.

    It often comes back to that sector weightings.

    Keep on keepin’ on …

    Dale @ Cut The Crap Investing.

    Reply
    1. Very true right? – skim the U.S. VIG, etc. It can be a good method but potentially more challenging. That said, I happy to own a few U.S. Dividend Aristocrats in my portfolio for dividend income and growth, along with some juggernaut BlackRock (BLK). Then I use indexed ETFs in the RRSP and LIRA with U.S. ETFs. Seems to be working for me and will own more VTI, QQQ, etc. over time.

      Thanks for the social media shout outs – very much appreciated.
      Mark

      Reply

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