August 2020 Dividend Income Update
Welcome to my latest dividend income update for 2020.
You can find my previous update here.
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.
Semi-retirement has always been the plan, the next phase if you will, and we’re slowly getting there...
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.
DRIPs help and matter big time Make sure you understand the power of reinvested dividends too.
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.
Here is my approach for rebalancing my portfolio.
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.
Well done, Mark. I remember you hold quite a lot of EMA. It just raised dividends for 4%. Fortis most likely will raise dividends too next week which you hold a nice position too. I am seeing next month you will have a big jump on your expected dividend income.
I just found out somehow I have added a few hundreds of FTS since last September. I am looking forward to seeing what the raise will be. Hopefully more than 4%.
I do! I think EMA is approaching 5% of my overall portfolio and I own it for income and growth. Nice raise.
I should also get a raise from FTS as well.
The challenge with my dividend income reports is I only report taxable and TFSAs. I own other stocks in my RRSP but don’t report that.
I suspect the FTS raise will be about 5% or so to $0.50 per share. Just a guess!
Consider within a TFSA HXS or HXQ for the equivalent to the other two with the NDX..
Yes, TFSA is a great home for growth ETFs. Thanks for the update.
Great update Mark. Always interesting. I held VYM more than several years ago. I switched to VIG Dividend Achievers, it is so superior. Greater dividend growth streak requirement and it applies financial screens. I much further ahead due to that change. I then switched to skimming that index in early 2015. That delivered an additional beat to total VIG.
For your addition of US holdings to TFSA you might consider the Horizons corporate class products. You won’t lose out on any US withholding taxes. Completely tax efficient.
I recently did a review on my site of their one ticket portfolios – the best performing in Canada. And tax efficient (a contributor to that outperformance).
But you don’t have to go one ticket – you can buy that NAS 100 or US core ETF.
Yes, VIG has outperformed over the last 10 years. By a bit I recall, maybe 1%. Both have returned 10-years over 12% and that’s still very good.
I hold VYM since I intend to use some of that distribution income within the next 5 years for semi-retirement. I will keep the capital intact.
As for my U.S. holdings I don’t keep any there inside the TFSA but I will consider the Horizon’s products. I could also consider a NAS 100 on the Canadian-side. Isn’t there ZQQ or XQQ? Thoughts?
Hi Mark, from inception VIG has outperformed by over 2% annual. It’s more exaggerated (beat) over the last couple of years.
And yes the Horizons corporate class offerings are wonderful for the TFSA. They see no taxes.
Interesting…might consider that (Horizons) for TFSA. So far, I have my eyes on just $6,000 each of XUU. Thoughts on that or would you go with Horizons personally and which one?
Great job! As for if 30K is enough, I’d hope so too! It certainly must take the pressure off you guys each year it grows…I’d say you’ll be alright!
Looking forward to see what changes, if any, you make due to the pandemic. Who knows, maybe we’ll get lucky and the vaccine will arrive sooner than expected?
I think the only changes I’ll make, via purchases, is to own more low-cost ETFs. I figure more diversification during these times is better and that was always my plan as I get older to help protect the portfolio I’ve worked so hard to create.
Thoughts? Thinking XUU for U.S. exposure and/or more ITOT as well. For any “growth kicker” I will add more QQQ.
XUU and ITOT have too much Tech and Consumer Discretionary exposure right now for my liking. Not to say they’re bad investments long term (quite the opposite), but I’d just be weary of going in deeper. Too much uncertainty but I’m more risk averse than others!
I actually just submitted a post to Seeking Alpha on VTV and why it’s my preference for at least the near term. Hopefully it gets approved!
Yes, I do see those as long term investments, not just a few years. We’ve owned a small portion of XUU for some time and likely always will.
Do you see/have a bias towards healthcare or other sectors long-term?
Part of the reason why I own VYM is you have JNJ, PFE, MRK and a few others in the top-10 or 20 stocks.
Long term, no. But short term it is more of a bias against Tech and Consumer Discretionary. Evem with something like VOOV you’ll get a fraction of the Tech exposure and about double exposure to Financials.
No idea if valuations across sectors are fair these days, but I’m of the opinion there will be some rebalancing going on en masse soon. That won’t be good news for an ETF like VOO or ITOT.
It is absolutely so hard to figure out what is or isn’t good value these days. That said, I think most investors (myself included) would be happy to ride the returns of XUU, ITOT, VOO, etc. for the next 10-20 years. Likely in the range of 7-8% or more potentially. No?
I think so, assuming you have the time and you’ve been executing your plan well! As much as I like the whole buy-and-hold strategy, as a DIY investor I think you always have to be thinking about how to best manage risk. As you said, it’s not only hard to figure out what good value is these days but also how to even estimate risk. With all that’s going on in the world, I think it’s higher than normal so I’m naturally going to look toward lower risk securities. Win by not losing.
But I think if you can take your current portfolio and project it out with a 7% return until retirement and you’re happy with that figure, that’s what matters the most! Guys like you likely don’t have to do much different 🙂
Ya. I figure if I can get/we can get ~7% return consistently (before inflation) in the coming decades we will be happy and certainly meet our retirement income needs with existing pension values + future CPP, OAS, etc.
Then again, time will tell!
Yah more green arrows! Hope to hit $8500 in dividends this year.
Nicely done Mark! We are hoping to end this year around $26,000 in dividends. 🙂
That would be impressive. I’m not investing as much as you. I recall you are investing over $70,000 in 6 months!