February 2020 Dividend Income Update
Welcome to my latest dividend income update for 2020.
Whoa…quite the recent market calamity right friends??
Thankfully though, this update covers February dividend income. Before the drama!
For those of you new to these posts on my site, for almost a decade now, every month I discuss our approach to investing using Canadian dividend paying stocks and the cash flow we earn from a few key accounts:
- My non-registered account.
- Our TFSAs (mine, my wife’s).
To recap, we are hybrid investors. What does that mean?
- Approach #1 – we own a number of Canadian dividend paying stocks for income and growth. This is what these dividend income reports are all about – those stocks in my non-registered account and our TFSAs.
At last count, we own 24 different stocks inside my non-registered account and within our Tax Free Savings Accounts (TFSAs). We own dividend payers because we believe buying and holding such companies will deliver some steady monthly income for future wants and needs in retirement. Again, that’s what these monthly income updates are all about!
- Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. We believe in doing so this will provide more diversification beyond Canada’s borders. Yes, I do own and will continue to own U.S. stocks like AT&T, Verizon, Procter & Gamble, and Johnson & Johnson inside my RRSP – I DRIP all of them every quarter. While I love my U.S. stocks I will however be buying more ETF units that invest in the U.S. market over time.
For the non-registered account and the TFSAs, beyond the dividend raises from Bell Canada (BCE) and Suncor (SU) last month, we got some juicy dividend hikes from Great-West Life, TD Bank, TC Energy and CIBC.
Those raises helped the dividend income. Big time.
February 2020 Update
Thanks those dividend increases above, reinvesting dividends paid, we’re on pace to earn $20,600 in dividend income from three accounts this year.
To put that income into perspective:
- That’s like making $2.35 for every hour of every single day even in my sleep.
- That income, when we decide to get the dividends in cash vs. reinvesting dividends like we do now (because we never actually see this money today) should pay for our Ottawa condo property taxes for life ($6,000 per year in 2020 dollars).
- That income, beyond our property taxes, will also cover our condo utilities such as heating, cooling, water and electricity costs for life (about $1,200 per year in 2020 dollars).
- And that income will pay for more and more…
But Mark – “dividends don’t matter!”
Yeah, I’ve heard that before.
In theory, a corporation should only seek to distribute after-tax cash to shareholders when it has exhausted all capital expenditures that meet its required rate of return.
Jason Pereira recently wrote that refrain.
But instead of harping about why dividends don’t matter, because they do matter, just like capital gains matter, share buybacks matter, paying down significant amounts of debt to increase shareholder value matter – maybe we should change the conversation.
- help investors stay invested,
- enable investor confidence to buy lower when markets correct, and just as importantly,
- grow over time to deliver a tangible income stream to spend at some point.
I can speak to this last bullet since these updates are all about that. See the chart. It’s very real.
In the end, dividends are just one factor or element in your overall portfolio or income plan. They are not everything and they are not magical. They are not any unicorn-like source of tax-efficient income. But they are a growing pile of income for me.
I look forward to sharing March dividend income updates and beyond with you – good, bad or indifferent!
Do you dividends or distributions matter to you? Why or why not?