December 2018 Dividend Income Update
Welcome to my latest dividend income update – my final one for 2018!
For those of you new to these posts on my site, every month I discuss our approach to investing focusing on Canadian dividend paying stocks. We believe buying and holding a number of Canadian dividend-paying stocks in our tax-free (thanks TFSA!) and non-registered accounts will, over time, provide some steady monthly income for future wants and needs in retirement.
Hard to believe 2019 is right in front of us but before we look ahead let’s look back to see how we did last month and over the last calendar year with our investing approach.
I’ll also take some time in this post to answer a few reader questions that I’ve received over the last few months.
Two big financial goals
I write about dividend investing often; as in every month, but I want to remind you this investing approach is part of a broader financial plan for us. If I were to distill our financial goals down, there are really two BIG ones we are chasing:
- Become debt-free. $0 debt. Ideally, never take on debt again once debt free.
- Own a $1 million investment portfolio (outside any existing workplace pension assets, excluding any of our home equity).
We believe, realizing goals #1 and #2 will allow us to work on our terms, essentially making us financially independent. We could largely live off dividends as part of semi-retirement; spend just the dividend income derived from our portfolio and not worry (too much) about market volatility or gyrations with any stock market price changes across our portfolio over time.
When do you expect to realize these goals?
A reader recently asked:
Mark, I’m a new follower. Congratulations on your progress to date. You write about your dividend income journey and killing your mortgage debt. Do you think you’ll realize both of these goals at the same time? At what age do you think you’ll realize these goals? Thanks for your answers as we make our own plans.
Thanks for your questions! Ah yes, if I could only predict the future!
If I had to guess, as long as we keep maxing out contributions to our TFSAs every year (I’ll maximize my TFSA first thanks) and strive to maximize contributions to both RRSP accounts every year, I figure with any stock market cooperation (i.e., rising prices over time) we’ll realize our investment portfolio goal in about five years – before I’m 50.
Killing the mortgage might occur around the same time although we’re likely to make some lump sum payments in 2019 and thereafter, so maybe we can kill this beast off sooner.
About the $30,000 income goal
Another reader recently asked:
Mark, your $30,000 per year dividend income goal from your dividends page highlights this is planned income from your non-registered account and TFSAs with your wife? Have you considered including your RRSP dividend income for us readers so we could see the grand total?
Thanks for your question. I get this one a lot and I answered it back in July this year as well.
To clarify for all, our passive income goal of earning $30,000 per year is linked to our TFSAs and non-registered accounts. It does not include income that could be, rather, will be generated by our RRSP assets.
Well, the biggest reason is I’ve always reported it this way so I guess I’m too lazy to change it now!
The other reason I report it this way is because I know we’re definitely going to draw down our RRSP assets in semi-retirement. We believe we’ll keep our capital intact for our non-registered account and TFSAs for some time to come.
The order of drawing down one’s assets in retirement is not an easy equation. There are many retirement income considerations to think about here.
With some RRSP withdrawals in our 50s and 60s, killing those accounts before age 70, plus earning $30,000 per year from the rest of our portfolio that I write about every month, we believe that’s enough assets to cover our basic living expenses – we can stop full-time work by our early 50s. We will however work part-time to keep our minds and bodies active once we hit our financial goals. That’s the game plan…
In my last update, I reported some great progress towards our ultimate dividend income goal.
In fact, when I compare our income update to December 2017 we made HUGE strides – largely from sticking to our investment plan that included contributions to our TFSAs at the start of year.
With all the recession chatter and market instability, one could argue it might be best to sit on cash into 2019. Not us, we will invest. That’s been our plan every year and this year should be no exception. Besides, I cannot predict what markets will or won’t do. Sure, we’ll keep some cash handy if prices decline further but getting invested and stay invested has gotten us this far.
2018 dividend increases
In terms of dividend increases, 2018 has very kind to us even when markets overall were not for price appreciation. We got raises from the following companies in 2018, among others:
- AT&T (T:US)
- Bank of Montreal (BMO)
- Bank of Nova Scotia (BNS)
- Bell Canada (BCE)
- Brookfield Infrastructure Partners (BIP)
- Canadian National Railway (CNR)
- Canadian Utilities (CU)
- CIBC (CM)
- Emera (EMA)
- Enbridge (ENB)
- Fortis (FTS)
- Great-West Life (GWO)
- Johnson & Johnson (JNJ)
- Manulife (MFC)
- Procter & Gamble (PG)
- Riocan (REI.UN)
- Royal Bank (RY)
- Suncor (SU)
- Sunlife (SLF)
- TD Bank
- Telus (T)
- TransCanada Corp (TRP)
- Verizon (VZ)
(You’ll notice I listed some of our Canadian and U.S. holdings above even though our RRSP assets are not part of these monthly dividend income updates. I simply wanted to show you some of what we own.)
Mark, have you changed your mind about buying more ETFs as you get older – to diversify risk away from Canada?
No, no big changes because I’ve already started to do that. Great question.
While I believe our current basket of 32 Canadian stocks is fine to cover the Canadian market, largely the same stocks the big funds in Canada own anyhow (see examples here) I know Canada only represents somewhere in the range of 3-4% of the global market. Therefore, if you only focus on Canada you might be missing out on healthy returns from around the world.
So, to avoid our fear of missing out, we own some stable blue-chip U.S. dividend paying stocks (see the ones above) and some U.S. listed-ETFs like VTI. We put those assets in our RRSPs for many reasons listed here.
Over time I know I will own more U.S. ETF units or some Canadian-listed funds like VXC or XAW in our RRSP – so we can own thousands of stocks from around the world for long-term growth, making the portfolio almost bulletproof through equity diversification.
Owning either VXC or XAW I will avoid currency conversions.
Back to the December 2018 dividend income update – where did we end up?
Buy and holding Canadian dividend paying stocks for the long-run has been part of our game plan for almost a decade now – I have no intention of changing that approach, other than to own more units of U.S. ETFs going forward.
With dividend reinvestment plans for most of the stocks we own on autopilot, shares DRIPping commission-free every month and quarter, we managed to end the 2018 calendar year with about $17,221 earned in dividend income from our non-registered and TFSA accounts. I’m very optimistic that if we keep doing what we’re doing, we have a chance of surpassing $19,000 or more by the end of 2019.
You can read more about how I built our dividend income portfolio here.
A great year of progress overall. We’re proud of what we have accomplished while killing some debt and taking some trips as well. I look forward to sharing updates on this income journey and much more in 2019.
Best wishes to you for your financial year ahead. Happy New Year! See you on the site!
What do you make of my game plan to own dividend paying stocks and ETFs for the long-run? Too risky? Not bold enough? Got questions about my income journey? Ask away. Thanks for being a fan – Mark
Fantastic, keep up the excellent work. That growth is something to be admired!
I will do what I can! Thanks!
Mark you said at some point in the past that dividends received by some ETF are at time not transfered totaly or in parts to these ETF owners. As a conséquence, Those ETF yields suffer. That is one reason you prefer owning individual stocks
My question is : where those “retained dividends” go ?
ETF distributions can vary widely over time or in some cases, barely grow at all.
Here are two Canadian examples, great funds as well.
Check out the distribution history.
2018 = TBC but close to 0.6880.
2017 CAD 0.62406
2016 CAD 0.60015
2015 CAD 0.85573
2014 CAD 0.56857
2018 = 0.82
2017 = 0.756
2016 = 0.71
2015 = 0.72
2014 = 0.75
“Retained dividends” – I assume you mean why there is a discrepancy between the sum of all stocks in a fund or ETF vs. what the fund pays out in actual distributions?
I believe in theory – all dividends would be reinvested in the stocks of the index or what the fund holds but….some money must be retained because funds are redeemed by investors from time to time. This is my understanding but I would need to confirm with each fund company and the particular funds themselves.
Maybe more importantly, ETF distributions change because fund inflows (and outflows) change over time.
When a fund has major cash inflows, or outflows, it can result in a lower (or higher) distribution per unit. The fund company has no control over how investors pour money into funds or out – although they try to influence money going in 🙂 More money in, more inflows, less distributions paid out.
The inverse is generally true for outflows.
Does that help?
Again my understanding of course and I would need to do more research to confirm 🙂
Keep up the great work Mark, $17,000 is amazing for just your TFSA and non-registered! happy New Year and you know what that means… another $6000 to put into the TFSA! 🙂 I’m going to be doing that now.
Just put my $12K into the TFSAs (for my wife too) today! :):)
Thanks for the support of the blog and journey GenY. I will continue to see you and support you as well in 2019.
All the best to you and family,
Happy New Year to you and family, Mark! Always learn something new and noteworthy in your and your readers’ posts. Look forward to further reading in the new year.
Peace and Prosperity to All in 2019.
Thanks for the kind words Karen. Always great to hear that!
All the best to you as well!
Congrats Mark! As my six year old grandson would say “that’s SIC”!! LOL. Good luck and best wishes for 2019.
Ha. Happy New Year Gary!! All the best,
Congratulations on your dividend update! I’m a new reader to your blog. Thank you for the great content and all the time you’ve spent on this site. I’m looking forward to following along in 2019. Happy New Year to you and your readers!
Great to hear from you Anusha and happy to have you as a fan!
Best wishes to you and family in 2019.
Congrats Mark. Another great year for you. I am sure you will achieve your goal and even more.
I got a little bit over $3000 organic forwarding income growth for 2018. I consider that as the equivalent of $75K investment. Not bad I guess.
For 2019, hopefully I will get enough courage to continue to buy more dividends growth stocks. Looks like lots of stocks are quite cheap right now.
Congrats May! Very good.
You’ll do well in 2019 and for your retirement. Keep working your plan.
Thanks May. I really hope so!
Lots of stocks are cheap now for sure. Looking at BNS myself for the TFSA, as one stock in particular, in the coming days. I hope we get our wish!
Happy New Year and thanks for being a loyal fan.
Very good progress Mark.
Keep up the great work on this and on your debt in 2019!
That’s the plan. Priority #1 = TFSA. Priority #2 = RRSP. Priority #3 = lump sum debt payments. Boring! 🙂
Happy New Year and thanks for all the support and interactions in 2018!
Very nice Mark! Will have to tally our yearly total later but pretty sure we’ll break our goal of $18,000 for 2018. 🙂
I really like that linear line you got there. 🙂
Over $18,000 in a year, and more going forward, is outstanding for a 30-something. Keep up the great work.
just awesome Mark
congrats on a great yr with huge growth and a healthy amount of dividend raises. Your portfolio seems nice and diversifed as well.
Cheers to a great 2018 and a even better 2019!
Thanks Rob. It’s a journey for sure, the chart shows some meager beginnings but the plan is coming together.
Thanks for the support and best wishes for 2019.
2010 $4,272.00 26.17%
2011 $5,231.00 22.45%
2012 $6,403.00 22.40%
2013 $7,645.00 19.40%
2014 $9,550.00 24.92%
2015 $11,750.00 23.04%
2016 $13,475.00 14.68%
2017 $15,150.00 12.43%
2018 $17,221.00 13.67%
% Inc 10 yrs 408.59%
Does this look like the Income growth chart of my grandson? Only difference is you are adding funds and growing your income much faster. Good work Mark and as I’ve said before you’ll achieve your goal sooner than you projected.
Thanks cannew. Again, as you know, it’s a very slow but steady climb over time to invest this way. But I do see how it’s coming together. Hopefully my chart can show we surpass $19K in 2019.
Appreciate all your support and comments on the site in 2018.
Happy New Year and best wishes for 2019.
Wow over $17k is awesome Mark congratulations. I have enjoyed following your blog ever since I discovered it, and I look forward to reading more great posts in 2019. I feel pretty confident that you will reach at least $19k next year. By my calculations I won’t reach my dividend goal that I set for 2018 if you can believe it I will be short $10.75 lol.
Happy New Year
Thanks Matthew. The key is, I think, to have a plan and stick to it. It takes many, many years of discipline to build up a portfolio. It can however occur. There are certainly far better savers and investors out there than me but our plan, for us, is coming together.
Good luck with your financial goals in 2019 and stay in touch on Twitter!