August 2023 Dividend Income Update

August 2023 Dividend Income Update

Boom! Summer is done, just like that!

Yes, hopefully a few more nice, warm summer-like days to come but I can already see the leaves turning a bit here in Ottawa…

While the leaves and seasons change, my/our overall investing approach does not.

We still invest in a number of Canadian dividend paying stocks for income and growth, and we also invest in a few low-cost ETFs for extra diversification. Very simple for the most part. 

You can read more on pages that I keep updated below:

My Dividends

My ETFs

By investing the way we do, we try to shut out most short-term investing noise / price fluctuation noise including those against my investing approach. That’s OK. I personally feel there are many ways to invest. 

Besides, beyond becoming mortgage free we are slowly meeting one of our major financial goals: building and maintaining a portfolio that delivers growing income. 

Your mileage may vary!

August 2023 Dividend Income Update

Since it’s been a few months, and because I enjoy answering reader questions and emails, I thought I would post a couple interesting questions for this month’s update. Let’s get into it! 🙂

Mark, I enjoy your updates. Are you focused on total return or just stocks?

Total return matters. I’ve mentioned on this site for years, when in doubt, consider low-cost ETFs for your investment approach.

I feel with my/our investment approach however we’re getting the best of both worlds: sustainable and growing income for future retirement expenses via dividend payments and dividend increases – returns that trend very close to any Canadian broad market equity ETF returns – while we take advantage of the benefits of indexing beyond Canadian borders. 

Sure, to be honest, like I posted in previous updates including some Weekend Reading editions, I would have loved to have a higher personal portfolio value now – I would have obtained that if I went all-in on one of my favourite ETFs (QQQ) a decade or more ago.

I didn’t. 

Look at this chart. Hard to ignore the historical results. Any investor that just owns QQQ or just VTI for that matter would have done very well indeed. 

The best investing decisions are always in hindsight.

Instead, I invested in what I thought was correct then for our investment plan and what I still believe in now:

A blend of Canadian stocks and some U.S. stocks can deliver meaningful growing income.  

Here are some of my U.S holdings as an example:

You might say I have a bias to owning some moaty stocks.

I probably always will.

Weekend Reading – Building a moaty stock portfolio

Mark, I read on your site that you’re owning more indexed ETFs yet I recall you’ve invested in some oil and gas stocks recently too. Which is it?

Both!

I bought more low-cost XAW inside our TFSAs in January 2023. I bought this ETF in previous investing years as well.

Sensing an opportunity to get into more oil and gas stocks, before they moved higher during the pandemic/after the pandemic, I also bought some stocks in that sector in 2022.

Energy stocks (including pipeline stocks) tend to fluctuate between 10-15% of our overall portfolio value. 

On my Dividends page, I highlight some other stocks I own. I’ve held many of these companies for over 10 years.

All readers should also know that I try to keep any one stock to ~ 5% of my overall portfolio value. I call that my “5% investing rule”. That said, I’m more than fine if just a few stocks exceed that value (say 6% or 7%) from time-to-time since I tend to let winners run… I would be concerned if a few stocks dominated my portfolio over 10% though. (You can more personal investing rules and FAQs on this page here.)

I’m hardly like Warren Buffett who focuses on stock concentration for his returns.

Again, had I just invested in Apple like he did a decade or so ago, I would have had more wealth.

Weekend Reading – Does diversification really matter?

August 2023 Dividend Income Update 

Back to the update, we received income from the following key companies recently:

• Bank of Montreal (BMO)
• Emera (EMA)
• National Bank (NA)
• Procter & Gamble (PG)
• Royal Bank (RY)
• Waste Connections (WCN).

Here is our projected annual dividend income, at least for now:

And…where we might end up later this year in 2023 or in 2024?

Some notes:

• That’s averaging $3,533 per month.
• This is from taxable accounts (x2) and RRSPs (x2) – income we should earn this year assuming no dividends get cut and/or no additional dividend increases occur and/or I don’t buy anything else for the rest of the year. I don’t include any TFSAs (x2) in this report since we won’t be touching those assets for potentially another 20-25 years. 

Established readers will remember we do a few things to support this income inching higher each month:

1. We remain invested, for more dividend increases if and when they occur. 
2. We invest new cash when we have it, including saving for January 1, 2024 TFSA contribution room.
3. We avoid selling stocks where possible to avoid tinkering with the portfolio. 

August 2023 portfolio changes

As I wrap this post, there are no major changes to announce with our portfolio although I did get one small dividend increase in August and I also noticed that TC Energy is going to split into two separate companies over time:

• TC Energy post-Transaction: A natural gas / energy solutions conglomerate.
• Liquids Pipelines Company: A new company.

Under the proposed transaction, TC Energy shareholders will retain their current ownership in TC Energy’s common shares and receive a pro-rata allocation of common shares in the new liquids pipelines company. The number of common shares in the new company to be distributed to TC Energy shareholders will be determined prior to the closing of the split.

The transaction is expected to be tax-free for TC Energy’s Canadian and U.S. shareholders. Because that will require favourable rulings from U.S. and Canadian tax authorities, which will take some time to achieve, Poirier said, a shareholder vote on the transaction won’t be held until mid-2024.

Shareholders should expect most things to be resolved by the end of 2024.

Finally, just today, Fortis (FTS) announced a 4.4% dividend raise. I’ll tally that next month. 🙂

With a few months to go in 2023, it is my hope that we should earn a few more annual dividend increases from companies like TD and Emera to close out the year. I also anticipate a special dividend annoucement from Canadian Natural Resources (CNQ) before the end of the year as well. That, assuming no dividend cuts in the portfolio occur, should push our projected annual dividend income higher still.

Thanks very much for reading and I welcome any new comments or questions you might have!