August 2020 Dividend Income Update
Welcome to my latest dividend income update for 2020.
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.
We own Canadian banks, utility companies and pipelines in our taxable account, and beyond that, a few Canadian REITs with other assets inside our Tax Free Savings Accounts (TFSAs).
We have done this for many years now, 10 years in fact. My how time flies…
During a very trying investing year to date, with likely more investing surprises to come, some companies we own have actually increased their dividends this year:
- Algonquin Power (AQN) – 10% raise in May.
- CIBC (CM).
- Great-West Life (GWO).
- Manulife Financial (MFC).
- Royal Bank (RY).
- TC Energy (TRP).
- TD Bank (TD).
- Bell Canada (BCE).
- Capital Power (CPX) – most recently a 6% raise!
One company we own increased then decreased their dividend in 2020 (Suncor (SU)). Suncor stock now represents <0.3% of our portfolio.
Other companies significantly cut their dividends to survive – looking at you Inter Pipeline (IPL) and H&R REIT (HR.UN). We’ll see if I keep you!!
For the foreseeable future, I will continue to own many other Canadian-listed assets for income and growth inside our TFSAs. We’re now saving up for 2021 TFSA contribution room as part of these financial goals.
Approach #2 – Although these updates do not focus on these accounts, we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. We’re investing this way for a few reasons:
- We want to diversify beyond Canada’s borders for income and growth.
- We believe investments outside of Canada may deliver gains that outpace our domestic performance in the coming decades. Time will tell!
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.
Our dividend income goals
People asked me many years ago if I thought our goal (to $30,000 per year in dividends from our taxable account and from our TFSAs) was “enough”.
Geez I hope so!
It is my hope in the coming years this income 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).
Beyond that income, we hope to draw down our RRSPs while working part-time in semi-retirement for 5-10 years.
August 2020 Update
Although we’ve lost hundreds of dollars per year in forward dividend income (sarcastic tone) thanks to dividend cuts from Suncor, Inter Pipeline and H&R REIT, our portfolio has rebounded a bit in recent months.
Without any new money added since early 2020, we’re on pace to earn $20,575 this calendar year.
While that’s at least $500 lower than where I would thought we’d be at this point in the year, I’ll also go on record and say I never thought we’d be living through a pandemic. But here we are. Life happens.
On the positive, to put that calendar year dividend income in perspective:
- We’re 69% at our financial independence goal.
- That’s like earning $2.35 per hour of every hour of every day ($20,575/8,760 hours (24 hours x ~365 days)) even in my sleep.
- In terms of an hourly wage, that’s like earning almost 10 bucks per hour assuming I work a 40-hour work week. Then again, some of that income is 100% tax-free (thanks TFSA)!!
Will more dividends get cut?
Will I change my investing strategy inside our TFSAs as the pandemic prolongs?
Yes, only a bit.
I am leaning on rebalancing my portfolio in the coming months (a bit) by buying/owning some Canadian-listed ETFs that hold U.S. assets inside my TFSA for 2021 OR an all-in-one equity ETF. Then again, I might consider tech plays such as ZQQ or XQQ inside my TFSA.
There is also the option of going with growing renewable companies like AQN and Innergex Renewable (INE) – both of which I already own.
The 2021 TFSA contribution room will be a great time for that.
I’ll keep you posted on my thinking.
I look forward to sharing my next update with you, as hopefully dividend income climbs higher.
Learn why I like dividends, what I invest in, and where – here on my Dividends page.
Learn why I enjoy a lazy, passive approach to investing using low-cost ETFs on this page here.