Welcome to my final dividend income update for 2014. For those of you new to these posts on my site, every month I discuss my approach to investing using Canadian dividend paying stocks and Exchange Traded Funds (ETFs), and how reinvesting the dividends and distributions paid from these holdings are helping me reach financial freedom. You can check out my previous dividend income update here.
For the year that was:
- The S&P/TSX Composite Index ended the year at 14,632.44, up about 7.5%. Not bad considering the selloff in oil and gas stocks before Christmas.
- South of the Border, the Dow Jones Industrial Average and the S&P 500 set new records although they ended the year down from their all-time highs. The Dow ended the year at 17,823.07, up 7.5%. The S&P 500 ended 2014 at 2,058.90, up 11.4%.
How does this relate to our portfolio?
- We index a portion of our portfolio, so whatever the returns the Canadian equity market provided in 2014, we got those returns less minuscule money management fees.
- We also own a number of blue-chip Canadian stocks, even some of those oil and gas stocks that dove in share price and remain at depressed prices. When prices dropped, it was an opportunity to buy more shares of some companies AND get companies at cheaper prices thanks to our Dividend Reinvestment Plans (DRIPs) running with those companies.
- We own a few U.S. stocks and U.S.-listed ETFs although we don’t include them as part of these reports since this report focuses on passive income from Canadian holdings.
What does this all mean for dividend income earned in calendar year 2014? Thanks to Canadian companies that pay regular dividends, and Canadian-listed ETFs that pay distributions, we earned $9,550 from our investments in tax-efficient and tax-free accounts. Compare that to my December 2013 report ($7,645) and it was a significant jump forward for us.
With 2015 TFSA contribution room now available our hope is to maximize contributions to those accounts this year. That should increase our passive income (some of it tax-free income) as we work towards this retirement financial goal.
Our financial plan is to diversify more in 2015, adding more cash to indexed ETFs throughout the year to offset the risks we’ve been taking owning individual stocks. My hope is that in the years to come, our passive income can be derived from a more balanced (say 50/50) blend of stocks and equity ETFs.
Next month I’ll try and answer some reader questions I’ve been getting about this approach. Until then, I will stay the course: continue to hold the companies and ETFs we currently have and reinvest all dividends and distributions paid. Thanks for reading.
Are you tracking your progress to financial independence? If so, how is your progress coming along? Got any comments or questions for my plan for my article next month?
Not sure how I missed this update. Good job Mark! That’s a nice jump. Keep up the good work. 🙂
I’m not sure either 🙂 Thanks for the support!
Great jump indeed, keep up the good work 🙂
Thanks! Always good to see your comments.
Stay the course: Don’t underestimate how low oil stocks can come back from. I remember when PCan hit $7 the last time oil tanked. If you think a company is financially sound, just close your eyes and ignore the daily fluff. (Although diversifying is a key too.)
Overall, it’s looking very good. That $9k+ should be able to pay (in the future) many of your core expenses!
I hope they come back Bet! I’m sure the rest of the economy and the federal government feels the same. I will do my best to follow what you said, tune out market noise (and financial experts on their predictions in the process 🙂
Congrats on that increase. Each deposit, dividend or distrubition gets you closer to your goals. Keep at it and before you know it, you will be financially free.
I hope so IP! Thanks for the encouragement.
Well done Mark! Wasn’t your goal to hit $10,000/yearly? I’m pretty sure you will have an even better 2015!
My (end) goal is to hit $30k per year. That coupled with other savings and assets should allow us to leave the workforce. That is the plan, we shall see!
great stuff mark … congratulations! looks like it could be a choppy year ahead but you are getting paid to watch.
Yes, I am 🙂 It should be an interesting ride with O&G stocks for sure.
Great job Mark! We finished 2014 with almost $27K in dividends vs. the $19K we made in 2013 (thanks IPL!!!). With the price of oil tanking however, it should be interesting to see what 2015 brings in terms of dividends (hopefully no dividend cuts!!!).
WOW, that’s a bundle, you’re WAY ahead of me on the passive income scale. IPL has been flying. Hopefully no dividend cuts is right…but you never know, so as you know, always risks with individual stock selections.
Thanks for the comment and support. Continued financial success to you.
Hey Mark, congrats. I think almost 10k$ either way you slice it is awesome work. The snowball continues to build.
cheers
T
Thanks Tales…we’re trying to save, simple as that whether the income is from dividends (stocks) or distributions (from ETFs). I appreciate the support.
A hybrid ETF and Stock methodology could be viewed as “neither fish nor fowl” in terms of a plan.
Are you more specific stock heavy in your Taxed or Tax-free accounts, and what are the reasons why?
Ha.
I’m more heavy in CDN stocks non-registered. I still have CDN stocks and some ETFs in TFSA. I’m more heavy in RRSPs, indexed via ETFs.
The TFSAs should be maxed out in 2015. The RRSP, almost, likely later this year.
Dividend income value doesn’t seem to be a good metric for an outside observer without knowing the value of the portfolio. Whether this income was received on a million dollar portfolio or 100K portfolio is significant.
True, but whether my goal is to live off 1% dividend income or distribution income, or 4%, it’s still a goal in mind to avoid touching the capital until I have to in retirement and saving as much as I can in the process. Thanks for the comment, interesting insight.
I wonder if you also calculate time-weighted return of your portfolio? That figure could be compared to the return of a Canadian dividend ETF showing how you’re doing compared to the benchmark. It could also be compared to the return of portfolios following other strategies.
My returns for the Canadian stocks were around 15% last year igra. The years before that it was on par with the returns of ETF XIU.
http://www.blackrock.com/ca/individual/en/products/239832/ishares-sptsx-60-index-etf
Thanks again for the comment.
Thank you for sharing, Mark. 15% is excellent, especially considering that XIU returned 12% in 2014 and returns of dividend ETFs were significantly lower (except CDZ that returned about 13%).