February 2019 Dividend Income Update

February 2019 Dividend Income Update

Welcome to my latest dividend income update for 2019 folks – happy to have you on the site.

For those of you new to these posts on my site, for the last few years, every month I discuss our approach to investing using Canadian dividend paying stocks.

To recap, we take a hybrid-approach to investing. These posts are only a portion of those updates.

• Approach #1 – we own a number of Canadian dividend paying stocks for income and growth. We hold these stocks inside our non-registered account and within our Tax Free Savings Accounts (TFSAs).  These updates are all about that!
• Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. We do so to diversify our assets beyond Canada’s borders for portfolio diversification (I didn’t always feel that way but I do now!)

These monthly updates focus on our Canadian stock portfolio and my big hairy audacious goal to earn about $30,000 per year from the income delivered by these stocks held inside our non-registered account and TFSAs.  We figure that should be “enough” beyond other assets for semi-retirement.

In recent weeks, I’ve received a number of emails about our investing approach, what stocks in particular we own and how our portfolio compares to a Canadian ETF or index benchmark.  All great questions!

So, let’s answer them as part of this dividend income update.

Mark,

I know you keep saying you disclose a lot on your site, and you do(!), but I’ve often wondered what exactly you own in what accounts.  Can you shed any light on that for your readers?

Sure, a bit.  First of all, thanks for respecting the fact that I don’t and won’t ever share every detail on this site.  Some things, financial or otherwise, are private and personal.

Second, I do disclose many of my holdings.  You can find them there.

Third, if you want more details, then you should be aware I hold mostly financials in my non-registered account and a mix of Canadian bank stocks, pipeline stocks, utility stocks and Canadian Real Estate Investment Trusts (REITs) in our TFSAs.

Our portfolio is very simple – I’ve largely unbundled the top-20 holdings of this big ETF for income.

These top-20 stocks (in XIU) have been paying dividends and delivered capital growth for many years.  I follow the wise-words of this investor:

“I also do not believe in buying companies that do not pay attractive dividends.  Nobody can forecast the future.   But it’s obvious that companies that have a strong uninterrupted record are more interesting than those that have not.” – Stephen Jarislowsky, The Investment Zoo.

Also, instead of paying money management fees close to 0.60% to own the REIT ETF XRE or even 0.39% to own Vanguard’s REIT ETF VRE, I’ve decided to unbundle my Canadian REITs as well.

At the time of this post we own about 8 different Canadian REITs directly.

Hey Mark,

Love the site!

You do know that one dollar of dividends is equivalent to one dollar in capital, right?  Money is money?

Meaning, is there a reason why you’re not yet ready to accept indexed ETFs as the best way to invest – given you should ideally be indifferent between the two – dividends and capital?  A stock like BCE that pays 6% dividend yield and doesn’t really increase in price (of late!) provides the same return as a stock that doesn’t pay any dividend but that stock price increases by 6% – see what I mean?

Reader, you’re right.  But on a more psychological front, I like seeing that cash flow and I stay motivated from it over time – so much so that I don’t trade or sell my stocks very often.  That includes when the prices tank.

Will I own more indexed or low-cost ETF units as I get older?  Possibly.  I mean, I’m buying more units of VYM every year in fact.  But for now, on the Canadian-side, my journey is what it is!

You can find some of my favourite low-cost U.S. ETFs here.

Hey Mark,

I’m curious if you report your benchmarked results anywhere?  Thanks!

You bet, although I don’t micro-manage my portfolio.

I shared some benchmarking information in a previous post here.

In 2018, my Canadian stock portfolio was downright miserable – but I held on.  Over the last 12 months I’m up almost 14%.  My 5-year returns are around 8%.  Since I started tracking my Canadian stock portfolio, approaching 9 years later this year, annualized returns are just over 8%.

For comparison purposes, since I mentioned I own a number of stocks in the low-cost ETF XIU, I use XIU as my Canadian benchmark.  5-year returns for XIU at the time of this post are 6.2%.  10-year returns for XIU are close to 10%.  It will be interesting to see in a couple of years if I’m ahead or slightly trailing XIU as my benchmark.

Where am I now?
Thanks to dividends paid and mostly reinvested every month and quarter, our dividend income is growing.

At the end of February 2019, we’re on pace to earn $18,400 this calendar year in dividend income.  For diligent readers following along, that’s over $2,300 more than this time last year.

I predict if we keep up our very boring ways in another 5-10 years, we’ll realize our HUGE goal of earning $30,000 per year from our non-registered investments and investments inside our tax-free accounts.  That will be extremely good since if we’re debt-fee by then we’ll surpass our crossover point.  Our choices about working or at least working part-time will be wide open.

Wouldn’t that be wonderful???

Dividends are never guaranteed.  There are risks with my approach.  This approach is not for everyone but I’m optimistic our income should grow next month.  Stay tuned to find out and thanks for reading.