December 2019 Dividend Income Update

December 2019 Dividend Income Update

Welcome to my final dividend income update from the decade that was – this is our December 2019 dividend income update.

To put a bow on our decade of dividend income from key accounts, let’s recap our investing journey, since we take a hybrid-approach to investing.

Approach #1 – we own a number of Canadian dividend paying stocks for income and growth.

Advisors and other investors will continue to tell me that dividends do not matter unto themselves – although they are an important component of total equity returns. Very true. But the reality is dividends will likely always matter to me.

Why?

I hope to “live off dividends” in about 5 years. So, until my cash flow from Canadian companies that pay healthy dividends stops growing month after month, I’m probably going to tune any negativity out.

You see, primarily because I’ve stuck to a gameplan I believe in, for a solid decade now, our passive dividend income derived from many Canadian dividend paying stocks is rocketing higher each month, year after year. These updates focus on that progress.

In fact, ignoring month by month let alone year by year updates, when I look back on my decade of DIY investing, I’m rather impressed. My basket of buying and holding boring Canadian dividend paying stocks has provided some beautiful returns even when compared to the S&P/TSX Composite Index, and many top-Canadian ETFs.

ETF Ticker/Account	5-years	10-years	Comments
VCE	6.39%	n/a	This fund doesn’t have a 10-year return history yet.
XIC	6.27%	6.77%	XIC owns the entire CDN stock market, largest 230+ stocks.
ZCN	6.25%	6.32%	Similar composition as XIC, owns the CDN stock market for MER 0.06%.
XIU	6.54%	6.82%	XIU provides holdings to largest, top-60 stocks in Canada, arguably a blue-chip ETF.
MOA Non-Reg.	7%	8.2%	Mix of Canadian banks, pipelines and utilities and telcos.
MOA TFSA 1	7.1%	7.8%	As above with REITs.
MOA TFSA 2	6.7%	7.3%

Data extracted from Vanguard, iShares, BMO sites on January 4, 2020 over a few cups of morning coffee and watching World Junior Hockey.

The best benchmark for my portfolio is against XIU. I’ve always been a fan of this ETF for its long-term performance: solid 3% yield and growth. I use XIU as my Canadian benchmark because I tend to own the almost the same top-25 held by this fund, with a few exceptions, in different quantities however.

XIU from summer 2019.

My secret to these Canadian portfolio returns?

Own the same top stocks the big funds own and reinvest all dividends paid.

That’s my strategy, for a decade, in one sentence.

Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. 

In our Canadian economy (that continues to be dominated by a handful of companies in a handful of sectors), I think you can cherry-pick the best stocks to own for income and ignore the rest. See above.

The U.S. market is a totally different beast. So, I believe owning more low-cost U.S. ETF units (over time) inside our RRSP accounts is a great complement to our Canadian dividend income machine. 

There are great, low-cost ETFs for your RRSPs outlined in this post here.

With our RRSP assets increasing with U.S. content more and more every year, it is my ultimate goal to have an equal 50/50 equity split between Canadian and U.S. content across our portfolio to enter semi-retirement with (in about 5 years). I’m striving to keep most of our Canadian content inside my non-registered account and our TFSAs. Most if not all of our U.S. content will be inside our RRSPs.

You can read about why I feel that way in this post about tax efficiency here.

A decade to remember

At the start of the 2010s, we were barely on our income investing path. At the end of December 2019 we ended up at this income milestone in three investing accounts:

Incredible.

Putting this income into new perspective, thanks to a reader suggestion on this site, he equates this dividend income level to earning $2.23 per hour of every single day.

In hindsight, we accomplished this goal by doing a few things really well that anyone else can likely replicate with time on their side:

1. We owned the same top-stocks the big funds owned in Canada.
2. We reinvested the dividends paid by the companies we owned, to buy more shares commission-free over time.
3. We rarely sold anything. In fact, when the Canadian stock market did not cooperate with price returns, we actually bought MORE stocks.
4. We maxed out contributions to our TFSAs every single year.
5. We kept doing 1-2-3-4 for a decade.

The future and my lessons learned to you

It has been said some of the most successful approaches to investing are essentially boring. For the last decade of my investing career, I couldn’t agree more.

Whether you choose to cherry-pick a bit from our Canadian economy, or buy and hold low-cost ETFs like these that own assets around the world, or a bit of both – the results are becoming very clear to me:

The more time in the market you maintain, the less money you pay in money management fees, the less you tinker with your portfolio, the more money you will undoubtedly have.

I look forward to what the next decade may bring in terms of growing dividend income, including sharing that progress with you.  

Got questions about my investing approach? Want to learn how to invest in low-cost ETFs or dividend paying stocks? Ask away.

Mark