December 2020 Dividend Income Update
Welcome to my final dividend income update for 2020.
Ugh, quite the year. But investing-wise, it was rather good surprisingly.
Before we look at the numbers, let’s revisit our general investing plan…
Approach #1 – we own a number of Canadian dividend paying stocks for income and growth in our taxable and tax free accounts
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 dividends (and therefore owning some Canadian dividend paying stocks) matter to me because this approach is helping me realize my investing dreams one year at a time.
Since my bias is to own some Canadian blue-chip stocks in a taxable account and inside our Tax Free Savings Accounts (TFSAs), I use low-cost Canadian ETF XIU as my benchmark.
I decided to compare my returns recently now that a decade has passed since I formalized this investing approach.
|ETF Ticker/Account||10-years||MOA Comments|
|XIU||6.29%||XIU provides holdings to largest, top-60 stocks in Canada, arguably a blue-chip ETF.|
|MOA Non-Reg.||7.6%||Mix of Canadian banks, pipelines and utilities and telcos. I now own a 100% gain in AQN!|
|MOA TFSA 1||7.2%||As above but with some beaten-up REITs! Sigh.|
|MOA TFSA 2||7.3%|
Data extracted from iShares on January 2, 2020, up to November 30, 2020 – over a few cups of morning coffee before watching World Junior Hockey. Used same time periods for comparison purposes. Given our December/Santa Claus rally, I wouldn’t be surprised if my returns are over 8% now at the time of this post.
Over the last 5-years I’ve averaged 9% in my taxable account alone.
My secret to these returns for the last 10 years???
Own some of the same top stocks the big funds own and reinvest all dividends paid.
Oh, and try not to trade stocks.
That’s my strategy.
My monthly updates are focused on this approach #1.
There is however another way we invest…
Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time.
In our Canadian market (that continues to operate as an oligopoly), I think you can cherry-pick (a bit) the best stocks to own from XIU or other major Canadian funds. Again, see approach #1 above.
That said, I know I need to diversify away from Canadian borders so I’ve been working on that over time.
In recent years I’ve sold a few Canadian and U.S. stocks and moved that money into low-cost U.S. ETFs.
I wrote again about that update and approach here.
Lessons learned in diversification – reducing my Canadian home bias
I believe owning more low-cost U.S. ETF units (over time) for growth inside our RRSP accounts is a great complement to our growing passive dividend income machine above.
These are some great ETFs to own inside your RRSP here.
With our RRSP assets increasing with more U.S. content over time (I will make use of new RRSP contribution room later this spring and summer 2021…) it is my goal to have an equal 50/50 equity split between Canadian and U.S. content across our portfolio to enter semi-retirement with (in another 4 years or so).
December 2020 Dividend Income Update
These updates focus on just approach #1 (since that’s the way I started to report this income stream 10+ years ago), so I will continue to do that in 2021.
The big reveal!
You can see I’ve targeted a new goal for the end of 2021. We’ll see if we get there!
Even after some dividend cuts in 2020 (including selling off pipeline stock IPL completely) our income increased thanks to reinvested dividends (inside our TFSAs only) and thanks to multiple dividend increases during the year.
I recall last year, between our taxable account and TFSAs, we received sustained dividend increases from 15 stocks. Only a few didn’t raise their dividend (such as BMO, BNS).
We ended 2020 by earning $20,892 in dividend income in some key investing accounts.
(We don’t dare touch this income stream. We need it for our semi-retirement plans in the coming years.)
As done for previous months in 2020, putting this income into perspective, this means:
- If we weren’t reinvesting many dividends paid (but of course we are today…) that income would cover our property taxes, condo fees and utility bills as key household expenses – including likely all inflationary costs for those things in the range of 2-3% per year, for life.
- $20,892 per year in dividends earned translates to earning roughly $2.38 per hour of every hour of every day ($20,892/8,760 hours (24 hours x ~365 days)) even in my sleep.
It has been said some of the most successful approaches to investing are essentially boring.
With this being my 11th year of blogging and being a full-on DIY investor as My Own Advisor I couldn’t agree more.
Whether you choose to cherry-pick a bit from our Canadian economy, or just buy and hold a handful of low-cost ETFs from Canada or around the world, or you’re a hybrid investor like I am – the results should be clear:
The more time you remain in the market, the less money management fees you pay, the less you tinker with your portfolio, the more money you will undoubtedly have.
Thanks for reading and a Happy New Year of investing to you!
I’ll be back on the site with more content in the coming days.
Further reading – how we got here:
My dedicated Dividends page.
My ETFs page about top funds to own, why and where to own them.
Why reinvested dividends and distributions works wonders over time!
Here’s some various comments based on previous posts.
For tracking actual dividends paid, RBC DI has a really cool feature. You can do an activity search on individual or groups of accounts based upon dates and activity type (ie: dividends). You can then export the result to excel and work with it. I just did one on all my wife & my accounts for our 2020 dividend income and it was $135,970.50 (so we’re smiling big time 🙂
For portfolio info, we have a main spreadsheet that tracks book price & value, current price & value, YTD, life-to-date as well as forward dividends, date of dividend increase/cut, etc. I save a copy of this at the end of each month so I can easily look back to check/analyze things..
On index ETFs (and ETFs in general) vs individual stocks, like Cannew, we’re firmly in the individual stocks. I find I have way more control as it seems almost all ETFs have something in them that I don’t like. Also, the individual stocks tend to have more dividend increases. (they do also have divy cuts but I find these to be really rare especially compared to increases). Lastly, a company take-over results on a bigger return (and there’s been quite a number for us over the last few years).
WRT market corrections, I always just ignore the thought of them. The media has become so doom & gloom that it makes many investors more panicky and they miss out on some good returns. I once read that almost all market correction predictions have been wrong. We always have invested whenever we had the cash and have always remained fully invested and thus always collected the divys. Basically the same as what Mark and Divinvestor are saying.
As an aside, we are in the identical boat to divinvestor with 100% equities and more divys than we need (but have been retired for 7.5 years so just a little longer)
Lastly, I totally agree with all comments on what a great job Mark does. It is pretty much the only blog that I comment on.
GREAT work Mark and all the best in 2021..
We’ve been very fortunate with our plan. Now 7-figures thanks to a disciplined path of CDN and US payers and some indexed ETFs. Our hybrid approach is working although I can appreciate the lure of individuals stocks only 🙂
Yes, we try and ignore the market noise. Invest when we have money. Go to bed and the sun shall rise again!
I will also remain in 100% equities for the foreseeable future.
“…more divys than we need (but have been retired for 7.5 years so just a little longer)…”
That’s amazing Don and keep up the great work yourself.
What did you buy for your TFSA in 2021?
Thanks on the reply.
For 2021 TFSA, we added a bit to existing holdings – BMO, BNS, TD, and ENB.
I currently think the midstreamers/pipelines are a great medium term buy and think the banks are a solid long term buy.
Take her easy
You’re probably right 🙂
If you are, I will be very happy, DRIPping a bunch of those every quarter!
Hi Mark, are you comfortable sharing your REIT holdings in the TFSA accounts ?
Any that you don’t like anymore?
Well, I don’t disclose my entire portfolio for privacy reasons but I can say I’m a fan of many of the top-10 holdings in ETF XRE and I can confirm that I no longer own any HR.UN.
Do you have specific questions about REITs?
Nicely done Mark! Very impressive stuff. Love your dividend growth and return. Congrats on a solid year yet again.
We ended the year a bit shy of $27k. Didn’t hit our $30k goal but that was a given, given what happened in 2020. I’ll have to write a post later.
$27k is still incredible Bob – very well done!
I think you’ll find as you get more income, you’ll need to be very strategic with taxable dividends 🙂 You can only shelter so much dividend income inside TFSA and RRSP – which of course is a great problem to have.
Appreciate the work you’ve put in to your site. I see where you are coming from re dividends but I’m concerned that the current US and CAD market valuations are grossly inflated, that price discovery has been thrown out with the bath water, that Zero interest rates have fuelled asset appreciation.
Does the fact that the markets are overextended and due for a correction to the mean not concern you? I know the dividends may still hopefully continue, although could be cut or eliminated if conditions get bad enough when stock markets catch up with the poor economy.
Are you a buyer of assets at current prices full steam ahead and the devil take the hindmost, and cross your fingers that the dividends don’t get cut…ever?
A correction does concern me for sure Don – the challenge is – I have no idea when that may or may not occur. I doubt anyone saw double-digit returns from the S&P 500 for example when things tanked in March 2020. Alas, it happened!
So…I continue to invest when I have the money to do so. I’ve used this approach for the last 10+ years and it has gotten me this far – maybe lucky, I dunno!
How are you investing right nor or are you sitting on the sidelines?
I believe when you have a portfolio of good companies that have a great track record of paying dividends, it is best to stay invested and keep investing. We have done this for 20 years now and stayed fully invested even through 2008/09. Over those 20 years we have average annual dividend growth of 4.75%. And now after being retired for almost 3 years we have dividends that exceed our expenses and are still 100% equities. Maybe not diversified enough for most investors, but is working for us. Those that try to time the markets often miss the opportunities.
Hi Mark, great update. Curious to understand how you track your performance and how you calcluate 1- year annualized performance for a basket of equities? I’m tracking the IRR of each equity but haven’t found a simple way to calculate portfolio return.
I use various tools including my brokerage but you can find some good ones below:
This site is also outstanding on my Helpful Sites page for any comparison work!
Hope you have a great 2021 Joe!
Absolutely amazing results Mark, 9% annualized return over the 5 years – Bravo!
I finished the year just shy of my goal of 6k dividend income, let’s see what 2021 has in store 🙂
Great work! I think we have a shot at $22,500 inside our TFSAs and taxable in another 12-months assuming no more dividend cuts occur. We shall see though!!
Happy New Year,
Great achievement, Mark. I am happy for you and wish more success and dividends in 2021 🙂
Thanks very much Gean. Just did my TFSA contribution for the year so we’re done for another 12-months. All the best and stay in touch.
Would you say that you are eventually going to become fully indexed rather than owning individual stocks like you currently have?
Logically and mathematically speaking, owning it seems that a broadly diversified index “globally” and across all currencies is the way to go.
Yeah, no idea 🙂 I will say I am gravitating to more ETFs as I get older since I better appreciate the diversification they provide vs. individual stock risk and some dividend cuts incurred this year.
Will I sell all individual stocks eventually? I doubt it but I can see myself reducing my holdings over the coming decades.
I still intend to “live off dividends and distributions” in semi-retirement in a few years. I will only spending those dividends and distributions in the first 5-10 years of semi-retirement while working. That’s the plan…
Thanks for the luck and hope you follow along…Happy 2021,
I’ve probably asked this before (CRS disease)…..is the income going forward 12 months or actual? For example, when I get a change in a dividend payout, and I enter it into the spreadsheet, it gets calculated looking forward 12 months. I know this isn’t necessarily all that accurate (especially with GICs renewing in the ladder), but it’s the way I started doing it and I’m too lazy to change.
All good! That December 2020 figure is actual. Starting in January, it will be expected forward income assuming no dividend cuts or changes occur.
I hope that helps will continue to clarify for readers 🙂
Happy New Year Lloyd!
I’ll probably forget for next year too. 😉
So investing income went from $19558 in 2019 to $20892 for 2020. If my calculator works that’s a ~6.8% increase which is a *lot* more than most wage increases. That would of course include the effects of any new money shoveled in during the year but given the freeze imposed on bank dividends, and the overall economy, it’s a decent step in the right direction.
And in my delusional mind I like to think that the banks et al that have been hoarding those withheld dividend increases will reward us at some point. Hope springs eternal.
After January 2020 contribution room, it was all reinvested dividends. Nothing more. I hope to do the same for 2021 (this year). Just made my purchases for 2021 TFSA and will write about that soon enough.
Hope springs internal on the bank dividends as well….we shall see Lloyd!
Long time lurker here.
Been following Mark and Div earner, using both strategies.
Divs and a DB enabled us to retire last summer.
I have been playing ZQQ and cant see any downside for my ETF portion.
Also Lately VFV.
Would love any feedback from anybody.
Great to hear from long time lurkers 🙂
I own QQQ (essentially same as ZQQ or XQQ) for a tech growth kicker. This way, I don’t have to choose between MSFT or Apple or Tesla or other who will win.
I suspect QQQ returns will be similar or better in the next decade.
VFV is a great fund to own the U.S. S&P 500 in CDN $$.
What do you own for CDN? Just dividend payers? See my page here since that’s how I’m trying to invest more, a dozen of CDN stocks and everything else indexed 🙂