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 your Inter Pipeline (IPL) and H&R REIT (HR.UN).
For the foreseeable future, I will continue to own 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 AT&T, Verizon, Procter & Gamble, and Johnson & Johnson inside my RRSP – I DRIP at least one share of these stocks every single quarter.
We also own U.S. ETFs like VYM and ITOT.
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 in 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.
While I’m certainly not selling anything right now 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 buying more Canadian energy 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.