August 2021 Dividend Income Update
Wow, where does the time / summer go???
I hope you’ve been keeping well.
Over the summer, I received a few more reader questions about my dividend income journey. So, for this month’s update before the income progress number reveal, I thought I would answer those. Read on and I hope you enjoy this latest August 2021 dividend income update in this format.
Mark, do you have any stocks on your immediate radar? If so, which ones?
Not really. I honestly feel most of my portfolio is on autopilot. Sure, I would love to buy more of these companies during the remainder of the year but the reality is there is only so much money to go around. We’re in savings mode for 2022 TFSA contribution room right now. We’ll want to have $12,000 in cash ready to deploy / invest as of January 1, 2022 which is not trivial savings.
Mark, what are your thoughts on investing in “TULF” stocks only? Have you heard of that? If you do invest this way already, what do you own? Thanks!
I have heard of “TULF” stocks in fact! I remember the term TULF was popularized by DIY stock investor Tom Connolly many decades ago.
For any readers who aren’t familiar with Tom Connolly, Tom is a rather famous and revered man to the Canadian DIY stock investing community. He created The Connolly Report investment newsletter way back in 1981 as an investing resource for like-minded investors – fans of Canadian dividend paying stocks in particular. While Tom no longer publishes the original paper-based newsletter version of his report, it remains essentially a blog for subscribers. Tom shares a few pages per month with some investment ideas, links to dividend data, and other Canadian dividend paying stock musings.
Mr. Connolly leveraged the term TULF to highlight stock considerations to build your income portfolio around in Canada. TULF stocks represent market leaders, they are companies in sectors with established dividend histories, these companies have maintained a competitive advantage in Canada over new entrants (i.e., they could be considered “moaty” stocks), and most importantly to Tom (and myself) these companies tend to increase their dividends year after year.
- “T” for telecommunication companies (think Bell, Telus and Rogers)
- “U” for utilities (think Fortis, Emera, Algonquin Power, Brookfield Renewable Partners, and others)
- “L” for low-yielding dividend growth stocks with growth potential (think Canadian National Railway, Waste Connections, Nutrien, Metro, Alimentation Couche-Tard, Brookfield Asset Management, and others), and last but not least everyone’s sector favourite in Canada for dividends,
- “F” for financials (you know the names).
Now, Tom suggested you start with the S&P/TSX Dividend Aristocrats Index for any of your TULF or Canadian dividend stock research but you need to rule out higher yielding stocks at or over 6% or so – dividend cuts can occur at this level or above that range. Tom also suggests for your DIY stock portfolio you remove any cyclical stocks as well given there is little assurance such companies can continue to reward shareholders via dividend increases during bearish markets. (We saw that from Suncor actually last year, as just one example.) Essentially, after your screening, you’re left with about 20-30 reasonable stocks to choose from – which is not surprisingly – the stocks many DIY stock investors hold in Canada for growing income.
You can check out the great Connolly Report here.
So, yes, I have heard of TULF stocks and so have many other DIY stock investors.
Henry Mah in particular is a raving fan of Mr. Connolly and has written a few books about Ever Growing Income based on his investing adaptation of TULF stocks and Tom’s learnings as a DIY investor.
Any aspiring income investor would be wise to get a copy of Henry’s book(s).
To answer the latter part of your question, I certainly do invest in TULF stocks myself and have done so for years. I own a number of them and I highlight a few of my largest stock holdings on this dedicated Dividends page here.
Because Canada represents only 3-4% of the world equity markets however, I don’t just own TULF stocks. There are total returns to be had beyond Canada’s borders and that will likely always be the case. That said, it has been an outstanding year for TULF stocks and the Canadian stock market in general, up about 20% if you have been paying attention. 🙂
Mark, I read about your cash wedge concept in “How much cash should you keep” and I like it. I want to adapt it myself to reduce my risk of selling equities in a prolonged bear market. So, when are you going to start building your cash wedge for semi-retirement?
Great question. I think sometime in 2022 or as part of next year’s goals in fact. I’ll probably need about 2-3 years to build up our cash wedge before considering part-time work.
We’ll also want to continue maxing out our TFSAs and RRSPs as semi-retirement draws near – it’s part of our overall financial plan that I’ve provided a snippet to below:
More reading: What is a Financial Plan? What does a Financial Plan cover?
August 2021 Dividend Income Update
As I continue to mention on this site, as a long-time hybrid investor, we try and keep investing as straightforward as possible:
Approach #1 – we own a number of Canadian dividend paying stocks for income and growth.
We own these stocks inside our non-registered account and within our Tax Free Savings Accounts (TFSAs). Every monthly dividend income update (along with today’s post) focuses on that.
Approach #2 – we own a number of U.S. dividend paying stocks for income and growth AND we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time.
There are many reasons why I like income stocks, ever growing income stocks as Henry Mah puts it above:
- I enjoy seeing dividends “flow” into my accounts without buying or selling shares. Meaning, the companies I own, generally speaking reward me to own them. Many of those companies also increase their dividends over time including many TULF stocks this year with more dividend increases likely on the way (looking at you Fortis and others!)
- I like the “optionality” of dividends. I don’t have to sell shares nor time the market to generate my cashflow. I don’t incur any transaction costs to generate my own dividends by selling shares. I can (and do) reinvest all dividends as I please or I can save up my dividends for a new major stock purchase. Dividends provide optionality to investors beyond capital gains.
- This is plan I’ve been able to stick to. As such, I’m exceeding the Canadian equity index returns over the last decade while growing a juicy income stream to fund some semi-retirement fun. Win-win.
With stocks and ETF units DRIPping along nicely, our income stream grows with time. I simply need to let time and compounding do it’s thing.
Assuming no dividend cuts occur, and dividends continue to compound as they might, we have a great shot at earning over $22,500 at the end of this calendar year in dividend income, from the capital invested inside our TFSAs and a non-registered account alone.
As of this month, our forward dividend income is at $22,387.
To put this income stream into perspective:
- We earn $2.56 per hour of every hour of every day (income/8,760 hours (24 hours x ~365 days)) even in our sleep. Our hourly rate is growing at about $0.02 per month based on compounding alone.
- Part of the portfolio is essentially a job: earning $10.76 per hour assuming I work 40 hours per week. Then again, some of that income will be 100% tax-free (thanks TFSA).
With markets continuing to hover near all-time highs resulting in growing portfolios for many investors, investors might question whether now is a good time to invest, should you remain in cash, or simply wait things out.
Personally, I try and invest when I have the money to do so. I like dividend income investing for another reason regardless of what the stock market is doing – I can put my money to work and move on with my life. For well over a decade now, my dividends, for the most part albeit with a few cuts to endure over that period, continue to flow my way regardless of market conditions. I get paid to remain an investor.
If you are interested in how I built my portfolio, learning my lessons learned, don’t forget to check out this post with the intuitive title:
How I build my dividend portfolio.
I hope this update gives you some inspiration for your financial journey and you share it with others.
A reminder – watch me at the 2021 Canadian Financial Summit!
I’m honoured to be back at the 2021 Canadian Financial Summit to share what I know for a 5th year!
If you haven’t attended the summit in the past, well, this is your chance to do so – FREE.
The Canadian Financial Summit is a virtual summit that features over 35 Canadian personal finance experts discussing a wide range of topics geared towards helping you become the best investor you can be! For the 5th year, once again, you can watch and listen to Rob Carrick, Andrew Hallam, Ellen Roseman, and many more at the summit.
The summit is virtual, free, and it kicks off on September 22nd.
Just head on over to the Canadian Financial Summit and sign up for free with my link here.
This way, you’ll be automatically entered to win one of the free Premium All Access Passes they will giving away when the event goes LIVE.
My link gives you access to all the talks – you won’t miss a thing – and you can watch and listen from your couch or patio!
I look forward to hearing about your feedback on the entire summit and my contribution to it!
Dividend Growth Stocks will always be my core holdings for sure, but I will not limit myself to DGS only. I think everybody has a comfortable zone regarding to investment and it’s different for each person. I feel I am extending my comfortable zone gradually. Originally it’s only dividend growth stocks, then including some growth stocks, now including some options trades.
Because we want dividends to cover our basic expense in retirement, although our withdrawal order has to be RNT, but the withdrawal mostly likely will be dividends plus transfer in kind. So it’s actually will be R+N, finally T. There are quite some dividends income even right now from our non registered account, and we are paying tax on it. But I want to be in the status that I could quit my job tomorrow and don’t need to worry too much about finances, so I will just leave it as is.
Great stuff May.
You and me both: “But I want to be in the status that I could quit my job tomorrow and don’t need to worry too much about finances, so I will just leave it as is.”
I’m pretty happy with my order, largely NRT, but that doesn’t mean it won’t change based on assets (i.e., could easily become RNT) if assets grow in some accounts / RRSP accounts.
Keep me posted!
Earning $10 per hour for a 40 hour work week is good! I wish I had an employee who pays me $10 per hour for 40 weeks a week every year. Sounds like your employee is working hard to make you rich!
They are working very hard for me David. They are a good employee 🙂
Similar thoughts. I recall posting the portfolio visualizer some time ago on your blog comparing S&P500, VYM, VTI.
I picked up CNQ, XEG, PPL a while back, and am building more TRP, ENB on ~50% drips + small purchase. BIP is on full drip.
Haven’t decided on TFSA purchases. More CDN or XGRO or QQQ or other? Need to unload a fair bit of something from RRSP in 2021 & 2022.
Ya, I think for TFSA 2022 it will be XAW again for extra diversification just in case.
For RRSP, likely to own more VTI and QQQ with 2022 room (out of it now) although I love BLK 🙂
As for taxable, I could see more BIPC, TRP, ENB but there is also AQN, WCN, CNR on my list.
Good sounding choices/options.
I’ll let you know what I come up with in another 4 mths or so.
Ha, tulf. I remember it well as I subscribed for a few years to Tom’s report. I prefer more diversification.
Nice on the hourly wage Mark. I sometimes think of this for myself too and thank my lucky stars, as I sit and drink beer with friends who are still working, and I know haven’t yet done as much to create that for their future.
Yes, I can’t just own TULF stocks (too risky for all-in-Canada approach) but I can own a bit of the world via VTI, QQQ and some XAW as my personal favourites. Owned VTI in my wife’s RRSP for the better part of 12 years now. I’ve gone back and forth as you know with VYM and VTI – finally landing on the latter (VTI) which is better for growth vs. VYM.
I hope to buy some more BIPC and TRP in the coming months, if any $$ will allow given I am in savings mode for 2022 TFSAs. I hope I get my chance. Those stocks, and ENB, will be a smart move now if oil really starts booming again. 🙂