August 2014 Dividend Income Update

Welcome to my latest dividend income update for 2014.  For those of you new to these posts on my site, every month I discuss my approach to investing using dividend paying stocks and how reinvesting the dividends paid from the Canadian companies I own are helping me reach financial freedom.   You can check out my previous dividend income update here.

My plan is rather simple, almost downright boring, executed this way over the last 6+ years:  I invest in many established Canadian companies with no intention of selling them and I reinvest the dividends paid by these companies every month or quarter to buy more shares commission-free.

Over the last month I noticed a few stocks we own raised their dividends effectively providing us an income raise without doing anything.  This is always a nice bonus.  Regardless of what the market does I’m finding buying and holding established Canadian companies that pay dividends and increasing my position in a couple of indexed products using Exchange Traded Funds (ETFs) is paying off, literally.  At the end of last month, I’ve calculated we’re on pace to earn about $9,100 in dividend income this calendar year from the stocks and ETFs we own, as long as the companies we own continue to pay dividends at the same rate.  This is our long-term passive income goal for retirement, about 14 years away.  We don’t dare touch this income – almost everything is reinvested each month for the next month.

My investing strategy for the rest of the year is to continue to save money where we can and likely invest these savings into more indexed products.  I’m not as diversified outside Canada as I should be so I’m considering increasing my U.S. and international exposure later this year and throughout 2015.  The main problem I see with this plan:  U.S. equity markets in particular seem rather pricy now so maybe just saving some money where possible and waiting for a market correction is a better approach.  The challenge with this is, I have no idea when that correction is coming.  Do you?  Besides, we have these financial goals to complete as well.  Hopefully a stock market correction will occur sometime over the next few months to cooperate with my plan.

I’ll have another dividend income update next month.  Thanks for reading and sharing.

28 Responses to "August 2014 Dividend Income Update"

  1. Hi Mark;
    My goal for my combined RRSP / TFSA / Non-Registered accounts is to grow the dividends by 10% per year. Sounds like a lot but that comes from several contributions every year.
    I am 64 presently and planning on retireing very soon so this will all change.
    It has been interesting to see the bell curve of increasing dividends year to year.
    1) MAX the TFSA every year. This is also the first year that I am holding the dividends within the TFSA so that I can re-invest them every three months. Prevously I was withdrawing them to pay down my HELOC. At least it “paid” me 3% to lower the HELOC principal every month.. The withdrawn dividends were re-committed every January with the TFSA contribution. Obviously dividends will increase faster in the TFSA as they are now being re-invested four times a year instead of one.

    2) MAX the RRSP. Obviously this also increases the dividends as I hold more stocks paying me divs. ALL dividends within the RRSP are re-nvested.

    3) Run a HELOC for investment purposes so ALL interest paid, 3%, is tax deductible. As long as the dividends pay the HELOC interest charges I am quite happy. I do buy and sell within this account but main strategy is to hold. I sold off some this year to buy a vehicle in preparation for retirement. With capital gains, buying and selling this account has built up to pay several thousand more than the HELOC interest. So this lowers the HELOC principal and it the occasion arises I purchase more stock and therefore more dividends. Wonder how long they will keep interest rates low. Run approx $100K on the helow so approx $3K per year in interest charges to the HELOC – all tax deductible.

    For this year I am well on track to exceed the 10% dividend gain. The accounts should easily reach a 20% gain and a 30% gain is quite possible. I will have exceeded the 10% gain objective by the end of next month with another two months of dividends to come in to end the year.

    So, MAX out your TFSA and RRSP if you can. Re-invest all dividends and along with, hopefully, dividend increases you should be able to attain the 10% per year. And the bell curve accelerates year to year as more and more dividends come in.

    Take care. Happy and hopefully profitable investing.

    1. Killer comment…!

      I hope to post an article about my income and retirement goals soon – so stay tuned for that!

      In short, we hope to:

      1) Use RRSP, TFSA and non-Registered accounts to hold ETFs and dividend paying stocks.
      2) Hope to see our pensions used at age 55.
      3) Hope to have a $1 M portfolio by age 50.

      To get there, we need to:

      1) Max out TFSA every year.
      2) Max out our RRSP contribution room before age 50.
      3) Pay off our house.
      4) Build our non-registered portfolio.
      5) Reinvest all dividends paid as much as possible


      1. You’re welcome.
        Investing goes good since that I already reached my 2014 goal for the revenues that is currently set at about 1/4 of yours. I always trying to find value, which is of course not the most easy way but I like it because it’s more for the intellectual fun than for the money, even if honestly this last part is important too since we do it with our middle class har earned cash.

        Keep it up! Financial freedom is on your way.


        1. Thanks for the encouragement and keep-on-moving forward yourself. Thanks for reading and I look forward to your comments on my future articles – including a dividend income update next month!

  2. Always interesting to read you.

    My dividend income is very similar to your with a forecast of 9865$ for 2014, unfortunately most of it is RRSP, but my financial objective has been based on RRSP. However, my selling/purchasing of stock is higher than your (58 transactions in the last 12 months), mainly selling stock that are not meeting my criteria to purchase better quality stock.

    I start to invest much more in US market during the last two years: Apple, Intel, Proctor and Gamble, Lilly Eli, Johnson and Johnson, Coca-Cola and Verizon. A lot was invest when the Canadian dollar was trading at par with the US. Still looking to had more US stock: Deere, UTX, United Health, just hoping a quick 3-4% market correction.

    1. That’s a number of transactions Hemgi…I don’t buy as often and I very rarely sell, but you raise a good point about diversification which is key if you’re going to be a stock owner and not an indexer. Your dividend income sounds great but you’ll eventually need to turn that tax-deferred income into taxable income. Have you thought of any strategies for that?

      I too, hope for a correction I just don’t know when it will happen unfortunately.

      1. My first option was to move to Alberta as soon as I retired and cash everything (Alberta tax rate is much lower than Quebec’s one) but for several reasons, I will not proceed like that.

        First step is to transfer my wife RRSP to a RIF very soon and start to withdraw money in a way that she is still in the same tax bracket. Money will be move to TFSA as much as possible. We also bought a land for our future house and some of the RRSP will go on paying this debt (6.8% RRSP equivalent). My RRSP is still an interesting investment place, giving me 52% taxes “saving”‘ knowing that I will withdraw it at 42%.

        I know we will have to pay taxes on RRSP withdrawal but I want to maintain that as low as possible (39-42%) seems to be the optimum rate right now.

        Maybe I’m wrong but I prefer to cash them sooner than later because I don’t believe that the medium bracket around 42% will stay at this level forever. I will not be surprised to see Government starting to reduce taxes for very low income and increase the percentage for medium income (42K$ to 80K$).

        1. I like your call about RRSP > RRIF and then anything not spent funds the TFSA. I think winding down the RRSP sooner than when it must be converted to a RRIF is a good plan now the TFSA is around, but that’s just my bias. Anything can happen with tax laws so best to keep all income tax-free and then tax-efficient as possible.

    2. @Hengi
      Sounds like you are trying to build you capital base. A good objective if you do not have to sell low on stocks because they have not worked out for you.
      I try to look at “hold em” stocks, such as JNJ which I sold recently, that hopefully will appreciate in capital value as well as increase dividends. My strategy is to build up good dividend paying stocks that I can hold even in a downturn because I will be “sure” that they will come back. Dividends ,in my opinion, are what will pay your retirement both through re-investment and withdrawals when you reach that phase.

  3. @ Dan
    Hi Dan. In my opinion. if you are young enough ( I don’t know how to calculate that), you should concentrate on the TFSA before your RRSP. At the end of the line when you have to start pulling money out of the RRSP’s (converted to RIF) you will have to meet the minimum withdrawal percentages established by the CRA. With the TFSA you can pull whatever you want from it without any tax whenever you want. So if you end up with a million dollar RRSP you may end up paying a significant amount in income tax and maybe even clawbacks.

    @ Mark
    Great to see the increases in dividends every year though both company dividend increases, re-investment of the dividends and I presume some contributions to your RRSP’s.
    My goal is to have 10% dividend increase year to year through those three increases mentioned above to the principal invested. RIght now Iam on track to achieve a 20% increase over last year and I may even hit 30% increase over last year.
    I do sell stocks every now and then such as just having sold out of JNJ just below their high. I re-invested in KMI and caught the rise from them when they announced the consolidation of their various companies. Plus a doubling in the dividends paid to me. More money to re-invest.
    It is interesting and gratifying to see the increasing bell curve of dividends paid out over the years though their re-investment.

    1. Thanks for the comment, it’s great to see the strategy in action, largely because of reinvesting dividends paid every month and quarter. Sometimes no new investments are made, and regardless of the stock market performance, the income goes up.

      I’m surprised you sold out of JNJ? KMI I think is going to go through the roof in the coming decade.

      1. Hi Mark;

        That is partially why I sold out of JNJ.
        I felt that JNJ had had a good run up ( I had bought in at $67.75) and that they just might stagnate in the $100- $105 price range. As to KMI, I just happened to like them at that moment (price level) and bought in with the JNJ proceeds. Just after that they announced the consolidation of their diviisions in to KMI. So I was lucky on that call. The bonus is a doubling of the dividend payout to me from KMI versus JNJ. More money to re-invest! I agree with you that “Oil” (KMI) will outperform the market in the coming years. In a slump right now but that just might be a good time to load up on “good” oil related stocks.

        1. They might Ricardo, but who really knows. Stocks like those, that have paid dividends for decades and going on a few generations, I’ll continue to hold until they (the company) shows me the dividends have stagnated or the business changes.

          That said, I think oil stocks will eventually go through the roof, there is only so much of it in the ground.

  4. Wow, congrats Mark – $9100 in div income is impressive! Im still adding to my portfolio and I have a ways to go. I’m currently working on adding to the RRSP to max out my contributions (and my wife’s as well) and then I’ll start chipping away at the TFSA


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