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.
- 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!
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.
On those themes, before today’s / this month’s forward dividend income tally, I thought I would answer a few reader questions.
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?
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.
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.
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.