December 2021 Dividend Income Update
Wow, what a year.
Welcome to my December 2021 dividend income update.
What an investing year.
Amazing, really, since I didn’t see my portfolio gaining about 30% overall in 2021. But it happened.
Our taxable account was up just over 32% thanks to some of these returns below. Thanks to Nelson @uproarcapital for doing some recent math:
Our TFSAs were up about 30% in 2021 thanks to holding a mix of bank stocks and telecommunications stocks.
Our RRSP holdings actually dragged us down in 2021, given the U.S. total stock market (as measured by VTI ETF that I own) only gained 26% this year. Only.
Just wow.
And I did essentially nothing this year beyond sitting on my hands.
I avoided trading. I didn’t own (nor do I own) any pot stocks. I don’t own gold. I don’t own any crypto. I don’t own any disruptive ARK funds managed by famous money manager Cathie Wood. Heck, I don’t even own any bonds.
Further Reading: Why would anyone own bonds right now??
December 2021 Dividend Income Update
Last month, thanks to some reader questions, I highlighted why dividends matter to me in addition to holding some low-cost ETFs for growth in my portfolio:
- Income is good! That means, while I strive to achieve strong total returns, as an investor I can’t help but feel and invest in a way that gives me comfort: dividend investing delivers tangible, usable, real income from my portfolio. I will be using the income generated from my portfolio to help fund semi-retirement expenses (ideally in a few years).
- I like the optionality that dividends provide. You see, in a perfect world, all businesses would allocate capital in a way to perfectly maximize the return on that capital. This would be done so reinvested money would go back into the business in way that pays off immensely for the shareholder (by increasing returns over time AND by continually reducing the company’s tax burden). But you should know by now we don’t live in a perfect world. This means shareholders have over time demanded a dividend – for the purposes of “optionality”. Shareholders like optionality – and dividends provide that optionality – to give investors the choice to increase or decrease their exposure to the business. Reinvested dividends therefore, take advantage of that optionality, to increase exposure. Dividends taken as cash, do not.
At the end of the day…I enjoy seeing dividends “flow” into my accounts without buying or selling shares. That tangible money income machine helps me stick to a plan I believe in.
With a number of dividend increases at the end of 2021 now fully accounted for in my forward dividend income projections, I am happy to report we earned $24,997 in 2021 in dividend income, from the capital invested inside our TFSAs and a non-registered accounts.
(RRSP assets are always ignored in these monthly dividend income updates, for privacy and other reasons. You can find more answers from readers on my FAQs page here.)
To put that juicy dividend income stream into perspective:
- We earn $2.85 per hour of every hour of every day (income/8,760 hours (24 hours x ~365 days)) even in our sleep.
- Part of our portfolio is essentially a job – earning almost minimum wage.
- Almost 50% of this income is tax-free. Meaning, we earn about $1,000 per month in tax-free income from our portfolio.
For well over a decade now, dividend investing remains at the core of my investment plan. I must say, I enjoy getting paid to be an investor. 2022 will be no different.
New Year – New Targets!
With a new year upon us, and with a 2021 target now surpassed and in the books, it’s time to update this outdated chart I showcased in 2021:
Here is the new chart and target for the end of 2022 and beyond!
December 2021 Dividend Income Update summary
For new investors out there, a reminder this income stream has taken years to build. It has been a slow yet steady path.
For all investors out there, a reminder building this income stream should offer a comfortable retirement years down the road. On that note, I look forward to seeing what new highs the portfolio can hopefully deliver in 2022 as financial independence and work on own terms #FIWOOT draws very near.
Further Reading:
I’ve always preferred FIWOOT to FIRE.
You should consider ignorning the 4% rule for any early retirement planning.
A Cash Wedge is great to maintain to navigate any market conditions.
Happy 2022 to you and your family.
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
kudos on the consistency not only on investing but also posting it on a regular basis. FIRE is definitely one step closer
Congrats. You are ahead of your goals. Great work.
Coming along May – thanks very much and nice to hear from you.
Best wishes for 2022 to you and family.
Mark
Congrats on your 2021 success Mark and hopefully 2022 will bring much of the same or like you said even 10% is nothing to complain about , I believe the market have spoiled us to much and I wonder when it’s going to turn its bear face towards us but who knows when 🙂
Thanks again for all your hard work on this site.
Congratulation, Mark. Your return really proves that patience wins, not always busy for trading makes sense.
I noticed that your dividend income for 2021 actually way exceeds your expectation, have you calculated your portfolio dividend growth rate? Your might be able to reach your semi-retirement goal early than you anticipated.
Looking forward to reading/learning from your blogs in the new year!
Thanks Angela, very nice to hear from you.
Yes, it was definitely exceeded thanks to a number of large raises I finally got around to calculating in December.
I haven’t calculated my dividend growth rate in some time, and it would be tricky since I have ~ 30 stocks in total but these updates only focus on about 20 or so holdings – all in Canada. I know my average yield which is about 4% but I haven’t calculated my DGR in some time. I guess I don’t really worry about it. Good or bad?!
I think our plan regardless is to keep going, maxing out TFSAs and RRSPs for the next 2-3 years, and see where we end up. Markets will be what markets will be.
https://www.myownadvisor.ca/financial-independence-update/
Our three keys in that plan:
“To realize FI in the coming years we’ll do the following until the end of 2024:
Max out TFSAs every year.
Max out RRSPs every year.
Build our cash wedge/emergency fund to cover 1-years’ worth of expenses.”
We are getting close though which is exciting.
Best wishes to you in 2022!!
Mark
Hi, Mark,
My portfolio yield is less than 2%, but the dividend growth rate is at 11.16%, knowing the dividend growth rate, I can calculate the amount I can spend at the time of need, in this case, the dividend income will double in less than 6 years assuming no more extra funds are invested from now on. Dividend growth rate gives one a relatively accurate picture how much dividends will be generated during certain period of time, so that one can forecast/budget/plan accordingly.
Certainly, your portfolio has performed very well simply because you stick to your plan, with patience and diligence, it rewards you now and in the future. So inspiring to see a well-balanced portfolio perform so well with a good investor mindset and behaviour.
Thanks Angela, very mindful of how I should calculate it but you know, to be honest, I gave up a bit in the recent years on keeping close tabs on my portfolio for the simple reason: the less I know, the better I do.
I know that sounds a bit counterproductive when it comes to investing and certainly as a personal finance blogger but the reality is there only so many hours in the day and I prefer to avoid (rather stopped) tinkering with spreadsheets and calculators for the most part.
If I did some math, I would anticipate my DGR is about 8-10% for the assets I own. So, to your point, my dividend income should double in about 7 years if I don’t access it at all and I let time and compounding (markets willing!) do their thing.
Ultimately, in the coming years, I intend to live off my dividends from my taxable and RRSPs, while working part-time so I figure if I can do that I’ve saved “enough” and it shouldn’t matter too much what the DGR is because the assets I hold for income then won’t really change nor can I predict the future of the growth rate. It’s just a bunch of assumptions.
Beyond my RRSPs, I will have a small workplace pension to rely on in my 60s and CPP x2 + OAS x2 eventually so that will be nice in my old age 🙂
What do you own that provides yield of 2% but DGR over 11%? What’s your secret? 🙂
Cheers,
Mark
Hi, Mark,
When I first started, I focused on the dividend income due to we are self-employed and need to create our own pension. Then after reading/studying/analyzing, considering our personal situation, I realized the dividend growth rate plays a key role in growing the income. If I want to double my dividend income in 5-6 years, then, I need to select stocks with 10-14% dividend growth rate though the starting yield could be very low. Since we don’t need the income at the beginning, it is ok with us. Also, our personal income is from Holding Co., either as dividends or salary, we don’t want to have lots of high yield dividends stocks under personal accounts due to its tax leakage. With strong dividend growth rate, the dividend income will exponentially grow way faster than those with lower dividend growth rate but higher starting yield.
My total portfolio yield is 1.87%, and the dividend growth rate is 11.16%, I own Canadian banks, Telus, CNR, CP, CNQ, TFI, ATD, APPL, MSFT, AVGO, BLK, V, UNH, ABT, HD, COST etc, and a few ETF (VOO, QQQ) and 6% non-dividend payers (Google and FB). I want to have a balanced portfolio with strong dividend growth, so that when I withdraw the funds from different accounts, I don’t have to force to deal with tax leakage problems.
Great stuff, you and I sound similar. When younger, I too focus on dividend income as a way to hedge a job loss.
Now, older, a bit wiser maybe, I focus on a mix of yield and growth – since I’ve always recognized a good retirement income plan needs both.
Your portfolio yield is 1.87% – wow, very low, which means you likely have a higher growth rate then which makes sense: U.S. payers like APPL, MSFT, BLK, V, UNH, etc. will do that.. Very smart own VOO and QQQ, I have essentialy the same with VTI and QQQ.
Thanks for sharing, you seem to be set-up very well for the financial future 🙂
Mark
Hey Mark, yes congrats. I just wondered if you’ve considered to not max out RSP’s over the next 3 years? My mom is 77 and had always tried her best re RSP contributions, but (as you have experienced re 30% growth) this means the RIF w/drawals get sizeable (yes this is a high quality problem). Have you considered partial rsp contributions, full TFSA and then non registered the rest….then if you have more than you need you can gift in kind to charity some non registered stock and buy back the stock donated (or buy a new stock) w excess dividends that grow from non registered a/c’s.? I’ve been doing this for a few years. I increase my acb, I don’t realize a tax’l cap gain, I give to favourite causes and govt doesn’t get tax money from me unnecessarily. What do you think?
This is a great question Jim.
I have, but as part of my financial independence plan, I know if I/we want to retire in our late-40s/early-50s, my best bet is to have as much invested and dividends flowing as possible. This means max out TFSAs for the next 2-3 years (done for 2022), RRSPs as well (not yet done for 2022), and then taxable investing.
As you well know, RRSP withdrawals are taxed but I intend to withdraw RRSP assets in my lowest taxable years and am likely to shift that money not spent from RRSPs to TFSAs or taxable throughout my 50s. By age 70, I probably won’t have any RRSP assets at all.
We absolutely donate to charities and I could see myself donating more over time for sure. I would rather my funds to go causes than to financial mis-management. 🙂
I could continue to work full-time throughout my 50s but it’s not my plan. I feel those are valuable years to work part-time ideally/FIWOOT = Financial Independence, Work On Own Terms.
Thoughts? Feel free to counter of course!
Best to you in 2022!
Mark
Great work Mark!
Thanks Brad!
HNY and best wishes for 2022!
Congratulations Mark for achieving another milestone in your successful investing journey. Your numbers are fantastic and I am sure you are going to do even better this year as you are so focussed and know what good stocks to pick. Great job.
I see the Canadian banks will do just as well this year given the rates are going up. VTI also should do well. Are you going to increase your stakes in Canadian banks or do you prefer to invest in U.S. banks?
Thanks again for sharing your wisdom and knowledge.
Thanks very much Ken. I say this a lot, but I’m really trying to stay out of my own way for the most part. With 2-3 years before some form of semi-retirement / part-time work kicks in, I hope (?), I’m really trying to do two key things with my portfolio:
1. Be “OK” with not trying to find nor hit a home run with any one stock or asset. Consistent singles and therefore a consistent income stream will do with my part-time work, AND
2. While staying with #1, try to ensure I also add more growth over time. An example is owning QQQ or maybe even it’s counterpart in Canada XQQ or ZQQ in my TFSA eventually. It’s not all income stocks or nothing and my TFSA will be the last account I tap in retirement. That’s the plan anyhow.
VTI continues to be a long-term hold for me and I’ve long since ditched VYM in favour of VTI for boring growth. My wife always had VTI, I had VYM, I have since owned more VTI since selling VYM in my account. I figure I own enough U.S. banks via VTI so I won’t be buying any directly. As well as JPM and other U.S. banks have done, they are still well behind the U.S. total stock market index in terms of 5-year returns at least so I made the right decision there to date.
Thanks again for your thoughtful questions!
My best to you in 2022!
Mark
Congrats Mark. Great progress.
Thanks very much Deane. I owe you an email to say hello!
Mark
You’re welcome.
It really was an extraordinary market result.
Although so many other things are extraordinary too like Covid, personal & govt debt, interest rates, housing etc.
Upside down world. What will 2022 bring?
That’s what scarces me a bit. This upside down world. Rates low, yes, but debt extremely high (and people don’t care), real estate up, gold up, crypto up, stocks up, oil up, everything up. It doesn’t make sense long-term. Waiting for something major to occur.
I just hope we keep our health and jobs in 2022. That will be a great year.
We’re on the same page. It really does not make sense.
Yes to health.
Nicely done Mark. Those are nice returns that many of us would happily take every year.
Thanks Bob. I anticipate, at best, 10% this year, but you never know! I certainly didn’t see 30% coming in 2021.
Best wishes to you and family in 2022.
Mark
At the start of 2021, could you have answered two questions with any certainty:
1. Will my capital grow and by how much?
2. Will my investment income grow and by how much?
If you could answer yes, to either question, then you should invest to achieve that goal, because you’ll have the best chance of success.
Repeat for 2022.
Thanks Henry. Yes, it will be interesting to see if markets can even somewhat repeat in 2022. I doubt it but you never know. Predicting something more like 10% total returns – which I would gladly take of course.
Buying anything inside your TFSA this year? Still own the same 12 stocks or so?
Happy New Year to you and I’ll have my interview questions ready by the end of this month for you 🙂
Mark
As mentioned on my blog, I’m hoping for a market correction to close out our RRIFs. Still hold the same 12 stocks and just transferring shares to TFSA from RRIFs.
Best to you for 2022.
Ya, I can appreciate you don’t want to pay more tax. I did read that 🙂
Best back for 2022.
Mark
Why would anyone own bonds? You answered this in your own post when you said “as an investor I can’t help but feel and invest in a way that gives me comfort:”. As someone who has already won the game I like the fact that bonds offer some downside protection from a stock market crash. I don’t need high returns now, I just need to avoid losing everything. During my working years I was nearly 100% in stocks but now I feel much better with only 55% in stocks and the rest in cash and bonds. I know the math still favors equities over bonds but its just too bumpy a ride for me in my senior years. Great post!
That’s the thing and good reflections. If you’ve “won the game” there is little merit in taking on more risk.
It will be interesting to see how I change my approach Steve. I mean, I plan to enter semi-retirement with 100% equities and some cash re: cash wedge in a few years. My cash wedge is likely going to be ~ 1-years’ worth of expenses. And, I will be working still part-time. Too risky? Thoughts? Seems you’ve “been there and done that” and curious about that. 🙂
Mark
I think it’s a good plan, yours. A lot of smart people are not using bonds anymore. I’m just a little happier this way. It does sting a little in big years like last year. Being only 55% in stocks “cost” me a lot of missed portfolio growth. Like a lot of things in life, there are trade offs. I was all stock for a lot of years, but I had time to recover back then. I’ve got less time now.
Always tradeoffs is right Steve and that’s the thing I try and keep in mind as well. You can add more risk for more potential reward but that may or may not happen.
I’ll keep you posted of course via the blog if my plans with bonds change, they might!!
Mark
That sounds like a plan – thanks, Mark 🙂
Yes, quite a year!
“I avoided trading. I didn’t own (nor do I own) any pot stocks. I don’t own gold. I don’t own any crypto. I don’t own any disruptive ARK funds managed by famous money manager Cathie Wood. Heck, I don’t even own any bonds. ” Love this. Success is more about what we don’t do than what we do.
All the best for 2022. If dividend stocks do half as well as they did in 2021, we’ll all still be smiling.
Yes, quite a year. No doubt you had similar returns Matt given your focus on CDN dividend payers and BTSX.
I enjoyed your last post. Dividends are juicy and fun at times but certainly never guaranteed. I’ve written about that extensively and I still own a few stocks (e.g., SU) even after their dividend cut since it can be very responsible for management to cut a dividend – for overall financial health. Folks need to remember that dividends and growing dividends are great for total returns but total returns do matter very much at the end of the day…
Yes, I try and avoid getting in my own way most days Matt – seems to work well when it comes to investing 🙂
Happy 2022 to you and family and stay in touch often.
Mark
Great numbers Mark, congratulations!! As you know, our plan is somewhat similar to yours, with a mix of dividend-paying stocks and ETFs. Thanks for sharing the dividends, and I am looking forward to reading your posts, and witnessing your success.
Cheers!
Hey Gean!
Great to hear from you and I see you and Kristine have been busy on YouTube! Nice stuff. Yes, I’ve long since been a fan of owning CDN stocks directly (the dividend payers mostly) and some U.S. stocks, but just a few, and as I get closer to semi-retirement to be more lazy and also get some growth, I do own ETFs like VTI, QQQ for the U.S. market and then some XAW for some “everything else”.
Returns were bonkers in 2021:
VTI was up just shy of 26% in 2021. I recall you own ITOT and that was almost right on 26% too (25.99%).
QQQ up closer to 28%.
XAW up about 20% but lower since emerging markets and other markets didn’t fare well. Ha, can’t complain about 20%!!
Thanks for following along of course and I’m sure we’ll be in touch in 2022 🙂
Best wishes to you as your FIRE journey goals draw near.
Mark