December 2022 Dividend Income Update
Quite the investing year that was…
Welcome to my December 2022 dividend income update.
This time last year, our portfolio was up about 30% overall. I have the post to prove it.
2022 was different.
This year was not lots of investing fun but we saw it coming (I think?) and I tried to prepare along the way accordingly…
- In January 2022, with higher inflation coming (at least I thought it was headed much higher in 2022….which happened for the rest of the year), I was already positioning my portfolio for higher inflation.
- In October 2022, with chatter of a pending recession coming in 2023, I was also revisiting how I might navigate any recession in 2023 including owning more recession-proof companies.
Fear and market doom-and-gloom triggered many investors to sell in 2022.
With a good financial plan you don’t need to react that way.
2022 will go down as a year many investors may want to forget, or at least put behind them – unless you were buying cheap assets of course.
The S&P 500 ended the year down about 20%, while the Canadian TSX index was (only) down about 9% in 2022. The tech-friendly Nasdaq offered up a lump of coal to investors, down 33%.
In a year where there were few places to hide, the energy sector rebounded and long-term buy and hold investors in Canadian energy assets were rewarded. Myself included. The S&P energy sector shot up over 55% and our Canadian TSX energy sector was up over 45% in 2022 – calendar-year returns we probably won’t see again for some time although if I was a betting man, I suspect most energy stocks might continue to buoy investors in 2023….just not as much as 2022.
Strong energy prices heading into 2023 are likely to favour a home-country-bias given our resource-rich Canadian market, where energy stocks represent close to 20% of our index vs. energy stocks that make up only a small portion ~5% of the U.S. S&P 500.
That said, I personally won’t be buying any bonds myself and instead I’ll load-up on more of my favourite stocks or ETFs for higher dividend income and distributions to compound away.
What does this mean for my December 2022 Dividend Income Update?
2022 was another teachable moment for me as a DIY investor since it reinforced staying invested is essential for wealth-building, regardless how far down or how high certain stock prices might go.
I’ve learned that sticking to an investing approach I believe in, that I can maintain, is essential for goal achievement.
I’ve also learned that owning a little bit of everything (energy stocks, financial stocks, healthcare stocks and other companies from other sectors) will provide some necessary diversification when any one sector shines or performs poorly over time. Market returns from 2021 and 2022 tell us market history rhymes although there are stocks that tend to Beat the TSX over time and it’s worth owning those.
December 2022 Dividend Income Update
This time last year, we reported a final 2021 dividend income tally of $24,997. That was income delivered from the capital invested inside our TFSAs (x2) and one, then non-registered account.
By staying invested, reinvesting dividends, maxing out our TFSAs in early 2022 and with some additional investing in our taxable accounts where possible/where we had any money to do so, we blew past our 2022 dividend income target as we consider stepping into semi-retirement in another year or so.
In 2022, we earned a total of $29,316 from a few key accounts. It was a great year of higher income.
(A reminder our RRSP assets are always excluded 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 2022 dividend income stream into perspective:
- Even with some low-cost ETFs inside both TFSAs, we averaged over $1,000 per month in tax-free income for the year.
- We earned $3.35 per hour of every hour of every day (income/8,760 hours (24 hours x ~365 days)) even in our sleep.
- This income translates to an average monthly income stream of $2,443 (which is bound to be higher in a few short months as I fund our TFSAs again for 2023.)
Here is my updated chart for 2023 including a new year projected annual dividend income (PADI) target we hope to achieve by the end of December 2023:
For almost 15 years now, dividend investing remains at the core of my investment plan.
Here are just some of the *companies we own inside these accounts (non-regs. and TFSAs) that we hope to get some dividend increases from again in 2023:
- AQN* Likely a cut coming in 2023? I’m planning for this.
- T (Telus)
We also own low-cost ETF XAW inside our TFSAs for growth.
Of course, they are many ways shareholder value is created.
Dividends are just one important part of total return.
Shareholder value can be gained from many sources: dividends as part of total return, price appreciation, increasing free cash flow, share buybacks, company acquisitions and paying down debt. Shareholder value is the value delivered to owners – based on management’s ability to increase sales, earnings, and free cash flow – which leads to an increase in dividends and capital gains for the shareholders.
I must say, I do enjoy getting paid to be an investor.
December 2022 Dividend Income Update summary
For new investors out there, new readers to this site, a reminder this income stream has taken years to build.
This investing approach is not without some *risks. Meaning, dividends from *individual companies can and do get cut from time to time. (Looking at you *Algonquin Power (AQN) in 2023…).
For all investors out there, a reminder I don’t believe in any magic bullet when it comes to investing, let alone predicting the future. As such, owning any one individual dividend paying stock won’t deliver investing success unto itself but owning a basket of Canadian and U.S. dividend growth stocks should tip the scales in your wealth-building favour.
As a guideline, for any individual stock no matter how good it seems today: I tend to follow my “5% rule”.
That is: don’t let any one company reach too much higher than 5% of your total portfolio value.
I look forward to seeing what new highs this portfolio can deliver in 2023 as financial independence and work on own terms #FIWOOT draws ever so close.
Here are 5 important factors to consider when it comes to semi-retirement or full-retirement.
My Dividends page was recently updated so you can learn more about my investing journey including what stocks I own where.
I don’t intend to withdraw from my TFSA, for decades, but I do intend to tap my RRSP in semi-retirement. Read on: how and when to withdraw from your RRSP and TFSA.
Happy 2023 to you and your family.
See you around the site!