February 2021 Dividend Income Update
Hey folks – welcome back – to my latest dividend income update for 2021.
Before I get to this month’s update, for any new readers, some reminders…
We take what I’ve coined as a hybrid approach to investing.
That is:
- Approach #1 – we own a number of stocks (and ETFs) for income and growth across our portfolio. In fact, for these monthly updates that only focus on our taxable account and Tax Free Savings Accounts (TFSAs), we own 22 different Canadian stocks. We also have a new addition – XAW. I can explain more in a bit.
- 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 because investing this way provides extra portfolio diversification beyond Canada’s borders. We’ve been on a journey for a few years now to own more U.S. ETF units inside our RRSPs in particular for such diversification, and we hope to buy more ETF units as 2021 rolls on.
I’ve coined the term hybrid investing to describe my investing approach well over ten years ago now because I believe it nicely describes what I’m trying to achieve long term:
A balanced blend of individual stocks and low-cost equity ETFs – for passive, growing income and diversified long-term growth.
So far, so good but market calamity always ensues!
Market calamity
I mean look at this, quite the chart.
Did you see the rebound from spring 2020 coming?
Heck, I didn’t.
2021 is off to a pretty decent start year to date all things considered.
Reader questions about our investing approach
For many, choosing an investing approach let alone a retirement income strategy is a difficult challenge. I don’t pretend to have it all figured out yet and I’m sure my thinking will mature more with time.
Like I wrote about last month, we devised this hybrid investing approach years ago in our asset accumulation years because it means very little should change as we transition from working full time to semi-retirement in the coming years. We will have our income streams already set up while we continue to work. The cash wedge will also be in place.
I can essentially work part-time and live off dividends and distributions to some degree.
You can read about our cash wedge approach more in detail here.
On those themes, before today’s / this month’s forward dividend income tally, I thought I would answer a few reader questions.
Here goes….
Hi Mark,
Do you think you’ll surpass your $30,000 per year goal from your taxable and TFSAs, before 2025 or 2026, like your most recent chart says? If so, why or why not?
Thanks for your question. Geez, I hope so!
To be honest, I have no idea. I really don’t.
That target in the coming years is just that and we may or may not hit it. Reaching that target depends on a lot of factors including the following:
- Can we continue to max out contributions to our TFSAs every year?
- Do we invest in more low-yielding (e.g., XAW) but higher-growth ETFs instead of stocks?
- Does it make sense to invest more inside the taxable account given limited RRSP room every year?
- Should we borrow to invest inside in our taxable account?
- What will be the dividend or distribution growth rates from investments inside those accounts?
All wildcards.
I will say our financial independence plan says some of the following for the coming years:
So, we’ll tackle some of those things above.
Hi Mark,
You seem to be rather private with your holdings? Can you please share a bit of what you own?
Sure, a bit. You can read more from my dedicated Dividends page but I invest in Canadian bank stocks, pipeline companies, utilities, and telecommunication companies as well. That’s on the Canadian side. I do hold some U.S. assets.
I keep some of my holdings and definitely quantities of my holdings private since I feel I disclose a bundle on this site. It is the internet after all. I do share what I can and comfortable with.
Mark, why not disclose your net worth? You could be more popular if you did like people who share their first $100,000 or pay off their student loan debt. You could be on CNBC! You’re missing out big.
Yes, I suppose it could make me far more popular on the internet – like it has blown up other blogs. I don’t run this site for pure publicity. I mean, I want it to get popular and grow pageviews for sure. Yet broadcasting my net worth is not me, it’s not my personality. Maybe I’m the one that has it wrong.
In fact, instead of broadcasting net worth, I would encourage investors to focus on growing their passive investment income before obsessing over net worth. If you do the former, net worth should take care of itself.
So, I still don’t post any net worth updates.
You are welcome to try and convince me otherwise and I might always change my mind.
February 2021 Dividend Income Update
Our plan has been and will likely be for the foreseeable future to continue tracking our forward dividend income as passive income motivation for any semi-retirement dreams.
As of this month, that forward annual income is now up to $21,389.
It was a nice jump over last month with thanks to two key dividend increases in February: BCE and TC Energy. I am optimistic more dividend increases in 2021 are coming too…
To put that income more into perspective:
- Almost half of that annual income is tax-free. Yes, all true. We will not pay tax on that income when we decide to withdraw monies from our TFSAs.
- That forward dividend income is rising by about $50 per month without doing anything. Compounding is now doing the rest of the work. Dividends and ETF distributions are paid, money is invested, moving the bar higher next month. Assuming I don’t get any additional dividend cuts in my portfolio (always possible?? – I see you COVID-19!) the income should be higher next month without any new dividend increases or additional investing. I just stay invested. That’s it. Something to keep in mind for your investing plan.
- $21,389 in annual income translates to earning roughly $2.44 per hour of every hour of every day in my sleep (i.e., income/8,760 hours (24 hours x ~365 days)).
2021 continues to move on like 2020 ended but there is some vaccine program hope on the horizon.
Regardless of what the dividend income does or doesn’t do this time next month, I hope we all stay healthy first and foremost. I truly feel health is really the ultimate form of wealth.
Stay well folks and thanks for your readership.
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and now investing beyond the 7-figure portfolio to start semi-retirement with. 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.
I did some reading on this before I set things up and like you said, lots of information and differing opinions out there. They way we set up is with a joint HELOC, used exclusively to fund investments in joint taxable account which we set up for this. Important to keep HELOC used only for investments to be able to claim interest paid for taxes. Interest on HELOC is paid from joint chq account.
Keeping everything joint allows you to (within reason) set the %’s for taxes. This is our first year completing taxes with this set-up and after some review we kept it simple at 50/50 split – ie. my wife and I each claimed 50% of the interest paid on the HELOC and 50% of the dividends received from the investments in the account. A lot of ways to look at this % split but with a view to the longer term when we aim to have similar retirement incomes we kept it as 50/50. From what I understand CRA does not take kindly to you adjusting this ratio to try and manage taxes year to year!
In terms of investments in the taxable account we focused on blue chip CDN dividend companies. I understand the argument that long term capital gains can have some tax advantages, we were just more comfortable with this approach – and the fact that with interest rates so low currently our annual dividends more than offset our interest costs (although we don’t withdraw the dividends).
Anyhow, just my two cents on how we set things up – going to be different from everybody.
That’s correct. I have been advised from a tax accountant in the past to avoid that: CRA does not take kindly to you adjusting this ratio to try and manage taxes year to year. There are flags in their system and variances in taxes owning are one of them. Best to stay boring, legit and consistent as much as possible…
In my taxable, I only have and likely always will have only CDN payers due to the dividend tax credit. I haven’t borrowed to invest yet since we still have a mortgage but I am considering it in the coming years.
For now, I/we try and max out x2 TFSAs + x2 RRSPs and then I consider investing in my taxable account after that. I figure I have some savings to do between now and end of the calendar year to save up for 2022 TFSA + RRSP contribution room. At least $12K for the TFSAs I want to have ready. That’s saving $1,000 per month right there 🙂
Hi Mark,
Just curious on how you track your dividend income…do you use a spreadsheet or some other way?
Thanks.
Fred
Thanks for asking Fred. I built one in Excel for a reader many years ago based on their question. Very simple but added to my Helpful Sites page at the top then and I have kept it there since.
https://www.myownadvisor.ca/helpful-sites/
Enjoy!
Another great month, nice work.
Regarding net worth, I actually don’t even know mine, LOL. I only pay attention to my invested assets, how much investment income it generates, and how much I could withdraw if I retire now.
That’s how I see it May. It is my hope our investments reach a Crossover Point per se whereby most expenses are covered by investment income and then I know I will have enough to retire even if I eat some capital along on the way.
3.5 years until PT work begins and hopefully not much longer until the Crossover Point.
I meant to add a thank you for that and keep pushing yourself – you’re getting there it seems!
There are many astute comments from the community re: to tell or not to tell – I agree that the number (net worth) is irrelevant at this point. What is deemed “enough” differs from person to person, so a number might cloud or discourage an early participant to the direct investing world.
Empowering through the teaching process is what’s key here…and that is what your blog is about. Keep on informing and empowering, Mark.
Kind words Karen and thanks very much. Sometimes you second guess yourself, you know?
Hope all is well with you and you are enjoying that cabin!
Hey Mark,
Great update. I like your breakdown of the wildcards—the same ones we’re pretty much all facing. There are a lot of uncertainties, but if you have a solid plan and can make “mostly” the right decisions, everything works itself out over the years.
Take care,
Ryan
That’s the thing eh Ryan, so much of the future is unknown! Plan for the worst, hope for the best maybe?
Keep me posted on any new content. I try and follow along but so challenging to keep track of everyone’s blogs. Happy to link to any upcoming post – just ping me!
Thanks for the kind words, all the best,
Mark
I definitely appreciate that, Mark. I know the feeling—so much to read from everyone in the blogsphere… but always great to make the time when we’re able.
Thanks,
Ryan
Hi Mark. Noticed your point about should we borrow to invest in our taxable account. Wondering how much thought / evaluation you’ve put into this – haven’t seen any recent posts on leveraged investing. I had been considering it for a bit when Covid hit last spring; I took the plunge and set up a Heloc to fund some investments in our taxable account. Unfortunately account set ups took forever with banks at start of Covid and I missed the bottom…but what I did buy is still up nicely, so can’t complain. Anyhow, would welcome any future thoughts or discussions on this subject. Keep up the good content!
I’ve done a few posts referencing taxable investing but nothing in particular about borrowing to invest in a taxable account BK.
https://www.myownadvisor.ca/should-i-invest-in-taxable-accounts/
https://www.myownadvisor.ca/should-you-make-debt-tax-deductible/
I actually plan to write about this more, this year, because I’m entering a place whereby I might consider it. Pros and cons of course.
On one hand, might kill the mortgage then borrow as I wish to invest.
On the other hand, might borrow a bit and invest as the mortgage drops to 5-figures very soon.
Not sure. I certainly want to make the most of any upcoming semi-retirement plans but I guess I also figure maxing out RRSP, TFSAs, for the next few years is also “enough” = $3K per month of saving and investing so might as well have some fun with my life after that. Life is short.
Thoughts? All saving and investing makes Mark a dull boy!
Yep, nothing beats a pros and cons list. We have been concentrating on RRSPs and TFSAs, this is first taxable account we’ve opened. Figured with the low interest rates for borrowing and the Covid market dip it was too good of an opportunity to pass up.
Look forward to any further information on this subject going forward.
Great, I’m inspired and see what I can work on in the coming months BK.
Great post by Mark. I am also planning to invest (through HOlc). Just set it up. My trying to find an answer of a question I have. Since HOLC is joint- should we open joint taxable account or individual? One spouse has high tax bracket and one is low. ?
Thanks Vsk. Pros and cons like everything. I have a taxable account that is my own. My wife doesn’t have one yet, but we are considering opening up one for her since she is out of TFSA and RRSP contribution room. This will allow even more financial flexibility in time.
Pros – while you are alive; taxation of jointly held investments is simple = taxes are paid on the investments according to the original contribution ratio to the investments. So, depending on your ratio of contributions, 50/50 or 75/25, you are taxed.
Cons – the tracking of those contributions to determine taxes owed for a joint account could be a PITA.
Also, when the spouse passes/predeceases the other, with joint the investments should automatically become yours but with capital gains to deal with. Market value at time of death needs to be calculated, etc.
I can’t advise but I’m not sure it makes too much sense to have joint accounts unless you pursue a hack that I’ve read about – have two joint-accounts but each account is in the name opened by each SIN number at the first owner per se. This way, you can manage any surviving-spouse money avoiding probate easier. When you have one taxable account in your not and not the spouse’s, I believe (sometimes?), probate is involved. This could be an issue if there are significant funds.
Check this our for considerations on beneficiaries:
https://www.myownadvisor.ca/beneficiaries-for-tfsas-rrsps-rrifs-and-other-key-accounts/
Again, not advice, something I have to think through as well but just not today 🙂
Thoughts?
Mark
Thanks Mark. In case borrow to invest. I did lot research but there is no definitive answer. For example – to get tax write off from borrow to invested money, it’s good to invest in lower income spouse to low the taxes on capital gains and dividends etc. But same time since heloc is on both names, technically it’s joint 50-50%. So taxes and deductions would be in same ratios. Also 50-50 is easy to calculate with different ratios. Also investing is another thing in taxable account with borrowed money. ETF vs dividends stocks. I am almost set to invest. Accounts are setup and just need to pull the plug. Thanks for your blog. I love it.
Yes, I feel it gets complex right? So, I’ve left my wife out of it to date and just have the one taxable here. That’s just me. I want to keep things simple for her and I where possible.
If the taxable grows to a nice amount ($300K-$400K) in the coming years, I will certainly look at drawing that down first; keep RRSPs/future RRIFs growing and keep TFSAs growing as well. This way, I can spend dividends and realize fairly efficient capital gains all things considered.
Lots for me to think about since I’ve recently incorporated to avoid blog or other income in my personal taxes. A good problem to have but comes with lots of complexities!
Thanks for the kind words about the site and I enjoy it.
Mark
Without context, a net worth disclosure is mostly useless (not to mention it could be totally made up). I’d also opine that even a dividend/distribution income figure without context isn’t really very meaningful. Sure, it’s something, but without context of what it involves, it’s just a figure.
It may be the cynic in me but for the most part, the proliferation of financial blogs and vlogs has gone overboard. Any Tom, Dick or Harry can make up one of these and do the endless linking loop to other bloggers/vloggers to generate traffic. I can’t count the number of ‘look at how we amazingly retired at 45/35/25/15/5 years old’ click baits I’ve seen over the years.
(boy am I grumpy today) 🙁
Grumpy – bad sleep?!
Ha.
There is a lot of clickbait Lloyd so you’re not alone there. Maybe I have it wrong not to advertise as much as I could?
“bad sleep?!”
Probably has something to do with the switch to decaf. Just a guess though. 😉
As an aside, I finally made a decision and mailed in the application for CPP to start this June. No specific reason, just figured I might as well.
You made the right decision 🙂
Probably feels good to make the decision. This guy waits.
I figured once it’s done it’s done and I can quit arguing over it with myself. I hate issues where I can see almost equal merits of both paths.
I totally get that for you.
There certainly is merit either way. I’ve just decided to shelve it for another 3+ years (for both of us, that she is also good with) and then think about it.
lol…I brought the subject up with the wife to get her input (she’s not a fan of financial stuff but I figured what the heck). Explained the ramifications of taking it early/deferring with the figures I got from Doug. She asked what the plan was for the funds in either case and I said it would go into the endowment funds. She pointed out that the charities that get the annual endowment grants could probably use the increased grants sooner rather than later and it would be more personally satisfying to see it being useful now. In her subtle way I think she was telling me to stop being an idiot over this and just make a choice.
Couldn’t argue with that so I took the plunge.
LOL. Smart, you listened to her. I do the same around my place too!
Smart!!
They are so wise. Very nice to read your decision will help others Lloyd. You folks are very kind.
Most often around here its me deciding things by default, but when m’lady speaks I listen!
That is an excellent way to make the decision. Your wife is one smart lady and you are smart to listen to her. One more checkmark on your to do list.
“One more checkmark on your to do list.”
🙂 I write stuff on my “to do list” that I’ve already done (or like to do) to make it look like I’ve been (or will be) real busy.
Your postings are about teaching the process to building an investment portfolio. You chose the path of dividend growth and some ETFs and explain how your decisions are made. Your net worth is irrelevant to your purpose. Does it matter if your net worth is $100,000 or $1,000,000? No. A teacher provides material to teach his/her students, not the answers to the exam questions. You are helping people with the process and showing them now it works for you so they can see how it might work for them too. If a reader wants to know your net worth to get benefit from your postings, he/she is just nosy and missing the point.
Keep up the good work of educating the rest of us. Thank you for teaching me along the way.
Very interesting observation Jan re: “Your net worth is irrelevant to your purpose.”
I kinda feel the same. My site is about my journey, my process, my mistakes but also my success stories.
That was a gem: “A teacher provides material to teach his/her students, not the answers to the exam questions. You are helping people with the process and showing them now it works for you so they can see how it might work for them too.”
I appreciate your insights…
Mark
Hi Mark
From my perspective, the purpose of these posts is to show readers how to invest and how the process works. It should be irrelevant what your net worth is. Does it matter if it is $100,000 or $1,000,000? The process is what matters. A teacher teaches the material, not the answers to the exam questions. You are trying to teach your readers, that is the point. If readers are interested in your net worth, they are missing the benefit of and reason for your musings.
I learn a lot from you. Keep up the good work.
Great stuff Jan. Also replied to your other comment. Well put and understood here 🙂
I greatly appreciate you give us so much information, help and suggested stock & ETF ideas. We need to do some of our own work. If we truly want to follow the process and stay on top of things, we need to select, buy and sell our own stocks, ETF’s, etc. as well as carefully monitor at least every quarter how they are doing. We need to learn by doing. It will make us much better.
Your total new worth is your business, we do not need to know it.
Question: Would you not want to consider purchasing more US High Growth Dividend stocks as purchasing ETF’s might move you towards a more mediocre portfolio?
Have fun,
Guy
“We need to learn by doing. It will make us much better.”
Isn’t that the truth Guy!
I have considered buying VIG or buying VYM again but I’m happy with some total return in my RRSP at this point. I owned VYM for about a decade actually. Is that the U.S. ETF are you referring to?
Mark
Great work Mark. Nice looking income chart. You’re making the right moves.
It is interesting to look at your own hourly income rate, especially in retirement. I tease my employed neighbour friend with my pauper wage sometimes since mine is less than 10% of his working wage although I’m comparing my 24/7 week to his work only hours. And it comes when I’m sitting there drinking beer with him. Lol
LOL. I figure if I can get to $5 per hour of every day even in my sleep, with a portion of my portfolio (re: these updates) I will have done well.
Making $5 per hour all the time doesn’t sound like very much but when some of that is tax-free and you do the math, it’s pretty damn good!
Totally agree on $5.00 per hour even when sleeping, some tax free….in retirement = AWESOME!!!
When we also include work pension that rolls in it’s pretty darn good!!!
Morning Mark;
Do you think you’ll ever get up to minimum wage (income/8,760 hours)?
Just kidding.
It would take one hell of a pile to get to that in passive income.
However if you lump in CPP/QPP and any other pensions you might receive it is quite doable if you start off early enough. Too late for me. I didn’t put in OAS because at that salary it would all be clawed back.
RICARDO
Ha, yes it would!
I really think a good goal would be $5 per hour of every day, even sleep.
(That would be roughly $15 per hour assuming an 8-hour day every day.) I think getting there would be just fine for us.
We will have our workplace pensions + CPP + OAS after that. If we get there, we’ll be fine I think. Really depends on the market!
You investing in anything in particular right now?
Mark
Great stuff Mark. A great example for those who might follow in the footsteps of your blue columns.
Keep on keepin’ on.
Dale @ Cut The Crap Investing.
Ha. Yes. You make me laugh. Will keep doing what we are doing. Hopefully $22,500 target will be met by the end of 2021. You never know, markets can be funny 🙂
I share my net worth in detail on my blog and I think the benefit from it is mixed. Some readers enjoy it, but it also alienates others – especially if it’s already large. Overall, I don’t think sharing your net worth would do much to change your blog’s readership. You already have so many dedicated readers that come back each week. I know I do!
Yes, but I think you do benefit Loonie. Folks are very much attracted to that. Heck, I like reading it 🙂
Thanks for the kind words and I won’t change anything just yet but the popularity of net worth results on the internet does intrigue me – just not overly comfortable yet with yelling about that stuff from a megaphone.
I agree on that Another Loonie, on the too large side. For myself if someone shares they have $2 million in investments (plus all the usual assets they will rattle off) I tune them out pretty much as I don’t feel there is any way i can be connected to them or what they are saying. Maybe it is because I lean towards the lean FI side of things, who knows. Anyhow, at this point Mark it makes no sense to share total values. LOL you just get people like me looking at the dividends and thinking that its time to pull the plug and enjoy life as most of us know what those numbers come from typically. (don’t worry you explained your good reasons for sticking it out, I get it)
Ya, thanks Chris.
Yes, you might be biased but we all are! re: towards the lean FI side. Nothing wrong with that.
Other than some publicity I’m not really gaining anything by sharing my net worth. In fact, depending on what people do with that information, could be more harm than good.
I will pull the plug eventually Chris – I want to be debt-free first 🙂 Agree or other? No debt entering semi-retirement seems like a good idea to me.
Ha.
Hi Mark, to accelerate compounding, do you buy more of certain stocks? Have you taken a deep look into how to optimize the compounding? Seems buying more higher yield and moderate growth (like Telus) is really powering my dividend growth
Great question.
I guess my DRIPping of banks, utilities, telcos, etc. is effectively doing what you ask about. I don’t have very many higher-yielding stocks. I have REI.UN and SRU.UN, some ENB, so that’s enough risk for me.
Over time, I’ve actually de-leveraged a bit from some individual stock selection and instead bought more VTI and more recently XAW. Right or wrong, I know our market is small and I want to see if I can juice some total returns from beyond Canada more. The S&P 500 has absolutely trounced the TSX over the last decade. I’ve done well but I could have done better by owning more U.S. content – so I am going-forward to avoid another mistake like that.
Solid stuff Mark! As you said, there are a bunch of wildcards but that’s part of the fun of investing right?
We both agree when it comes to publishing actual net worth number. Definitely no need for such popularity!
Ya, yes, a big NO for me right now. I’ll continue to publish the income journey. At least folks have to do some math on that and most people hate math!
I agree with your approach to not publishing your net worth number. Readers tend to fixate on that, make judgements of it and not how you got there. Continue to publicize how you get there with your DIY approach: By investing in dividend paying stocks, compounding, reducing frictional costs by investing in low cost ETF’s, diversification outside of Canada and minimizing taxes by investing in TFSA’s and RRSP’s. It worked for me and after being retired for 10 years my net worth continues to go up every year. I think the same thing will occur for you Mark.
Keep up the good work of educating other about investing!
Thanks Roger. Always good to hear from readers on any subjects. I don’t profess to be right on anything all the time…
I’m inspired by your message: “It worked for me and after being retired for 10 years my net worth continues to go up every year. I think the same thing will occur for you Mark.”
🙂
Mark