February 2022 Dividend Income Update
I must say, I love these updates!
Welcome to my February 2022 Dividend Income Update.
But I’m biased. I mean, I’ve been on a path of trying to generate ever growing income for the better part of 15 years now. This is a long-game thing, this investing thing. I enjoy the journey…
What are my monthly dividend income updates all about?
I’ve been getting more questions from readers of late about my journey, what I invest in, why I focus so much on the TFSA and taxable investing account for these updates, so for this month’s update, I will revisit those Q&As.
Mark: I’ve been reading these updates for a few years now and it seems the income is going up every month. Is that really true?
Yes, it is.
My/our monthly income is on the rise thanks to two key factors:
- The dividends paid to us are reinvested every month and quarter, to buy more shares and units commission-free (i.e., money that makes money, can make more money), and
- I contribute to my TFSA, striving to maximize contributions to this account every year. That’s usually about $12,000 invested each January (both TFSA accounts are once again maxed out of contribution room).
I prefer to max out contributions to my TFSA, then RRSP, before investing in taxable accounts.
Read more on investing in taxable accounts here.
If we have any money leftover, after maxing out our TFSAs and RRSPs, then we invest in taxable accounts.
Mark: Aren’t you worried that your portfolio is not keeping up with market returns?
I’ve been very fortunate, with the stocks that I own, in that they tend to keep up or beat my Canadian dividend investing benchmark: ETF XIU.
That said, if you are not comfortable with investing in individual dividend paying stocks in Canada, I believe owning XIU is one of the best ETFs you can own: for income and growth.
I actually use XIU to “skim the index” and own what I believe are the top companies in that index although the future of any one company is always uncertain long-term. This is where diversification is important.
You can read these key articles below to learn more about my index skimming approach and some of the best companies to own that collectively and continually Beat the TSX 🙂
How I built my Canadian dividend portfolio.
How you can Beat the TSX is found here.
Mark: Do you think you’ll surpass your $30,000 per year income target before the end of 2024 like I’ve read about?
I hope so 🙂
Oh course, I don’t know for sure what dividend increases (or dividend cuts) will happen in the future. I mean, I have endured some dividend cuts in the past and changed part of my portfolio accordingly.
You can read about a previous example here – one particular stock is long-gone from my portfolio!
Then again, by sticking with many Canadian dividend paying stocks for years on end, I’ve also been rewarded. Some dividend stocks have not only recovered from their dividend cuts but I’ve also received a healthy capital gain as well.
The guys at Stocktrades.ca and I have discusssed this very possibility over the last year or so when thinking about some companies that may thrive coming out the pandemic. In some cases, we were very spot-on!
All this to say, I don’t know for sure (at all!) what will happen in the future. I do know, by sticking to a plan I believe in and keeping a good savings rate for investment purposes, good things should happen over time.
The same can apply for you.
You can read about why I have this $30,000 per year income target on this page here.
Mark: Will you ever share your total dividend or distribution income? I read the reasons you don’t share everything here:
I don’t know, maybe…. Never say never?
I do appreciate readers understanding my reasons but I do share as much as I can!
February 2022 Dividend Income Update summary
- Maintain a disciplined savings rate.
- Do #1 again.
That’s pretty much my process!
With stocks and ETF units DRIPping along nicely, our money is always invested for potential growth.
As of this month, our forward dividend income is $25,864 for the calendar year ending 2022 – what we might earn at the end of this year when all income is talled from a few accounts….
To put that ever growing income stream into perspective and context:
- Part of our portfolio is essentially a job – earning almost minimum wage over a 40-hour work week.
- We earn almost $3 per hour of every hour of every day (income/8,760 hours (24 hours x ~365 days)) even in our sleep. That $3 might not sound like much, but that translates to earning about $71 per day from part of our portfolio; about 50% of that income is tax-free.
Coupled with other income streams, we are getting closer to semi-retirement.
Here are just some of the companies that rewarded me/us this month:
- Real Estate – Riocan Real Estate Investment Trust (REI.UN)
- Financials – Bank of Montreal (BMO), National Bank (NA), Power Corporation of Canada (POW)
- Utilities – Emera (EMA)
I look forward to sharing more updates soon!
My best wishes and thanks for your readership. Ask any questions, at any time!
A Cash Wedge remains a great way to navigate any market conditions.
You can see how close we are getting to our Financial Independence Plan here.
Here are some ideas in how to invest to combat higher inflation (as in now).
Great site, Just wondering about Drips , How would yo go about selling Drips.
Well, you can certainly stop DRIPs but not sell them per se. I hope that helps!
Congratulations on your dividend income update!
If you don’t mind, I have a couple of question on EMA’s future dividend growth (targeted at 2% to 4%) and dividend growth and inflation in general. A dividend growth rate of 2% to 4% is much less than current inflation rates. Are these low dividend growth rates “normal” for utility companies? And, how does an investor who is planning to live off dividends (no DBP pension income) ensure their dividend income keeps pace with inflation when they hold utility stocks like EMA? Does one try to ensure their dividends from their portfolio as a whole provide higher rates of dividend growth to keep pace with inflation?
Thank you for your thoughts.
Great questions JF. A DGR rate of 2-4% is usually fine except when inflation is running higher!
That said, there is also capital appreciation for any stock to consider. There is also the optimism that other stocks in any given portfolio raise their dividends higher than 2-4% like EMA alone is targeting. Check out the recent dividend increases for CNQ, CNR, BIPC, BEPC as just a few examples.
Personally, I want my overall portfolio (of stocks and ETFs) to be increasing with total returns (dividends + capital gains) in mind: hopefully 6-7% over the coming decades. That’s about as good as I can do I belive.
I hope that helps!
Thank you, Mark, for taking the time to respond.
Hi Mark, I may have missed someone talking about a TFSA increase this year but I read somewhere that it is increased to $12000 this year. I’m probably wrong but thought I would ask.
All the best, enjoy reading your articles, it helps me on my path to a worry free retirement.
It might go up later this year David, beyond $6,000 to $6,500 per person thanks to inflation factors but right now, here is the contribution limit.
New 2022 TFSA contribution room is $6,000 per adult.
Thanks for your readership!
With the recent article in the Globe on Emera and the heavy debt load it is carrying, and the possibility that it may have to cut its dividend, or have a share price drop, what are your observations. (David Milstead Globe article of March 09, 2022).
I don’t know much about this Milstead guy but it appears his big thing is board diversity rather than actual investing. I don’t have a Globe subscription so can’t read the article but I think he’s out to lunch and just doing the usual media grabbing attention thing.
In 2021, EMA had adjusted earnings of $2.81 and paid out dividends of $2,60. The 92.5% payout ratio is high but not out of the ordinary for a utility company. I actually think there is a negligible chance of a dividend cut and in fact, Emera has said they are targeting a 4-5% dividend growth through 2024.
Emera is a terrific company and one of my favourite steady-eddys. My wife & I have had a full position in EMA since Jan, 2010 and have done incredibly well with it.
Take her easy
I read the article. Here are some points:
Emera had more than $14.2-billion in long-term debt at the end of 2021 and another $1.7-billion in short-term borrowings. It also had $682-million in derivative contracts, and Emera says in the event of a downgrade to junk status, it could be required to post collateral for them. Emera had $394-million in cash at year-end.
Well, why not downgrade, then? For one thing, utilities, with their steady, regulator-approved revenue, are seen as safer than less-regulated businesses. Two, Moody’s is now looking forward, not backward, and expected Emera’s high-growth Florida utility, Tampa Electric Co., to produce improved profits thanks to a rate case that it indeed won last October. Mr. Cassella expects Emera to hit Moody’s investment-grade target of funds from operations to total debt of 12 per cent in 2022 and sustain it thereafter. (About 65 per cent of Emera’s profits come from the U.S., nearly all of that from Florida.)
“The only reason I have a sell on it is that it is not valued at a discount and it has this risk,” he said. “I can probably get comparable returns on another utility like Hydro One and not have this … kind of clouded credit risk maybe you don’t need to take.”
So, essentially, warnings about EMA high-debt load.
I’m not overly worried myself and will continue to own it as well Don, although I do own FTS, AQN, CPX, BEPC and SO from the U.S. for utility diversification just in case!
Thanks Don 🙂
Thanks for the details. The research I’ve done seems to indicate that EMA will reduce their debt load as time goes on (as the article did indicate). It is of zero concern for me.
On the utils side, besides our full position in EMA, we also have a full position in AQN, CPX, and FTS. (so very similar to you).
As an aside, we ended up selling the other half of our GRT.UN (with the low yield) and wanted to spread it around so actually ending up adding 950 shares of AQN at $17.95. I still don’t like the Kentucky Power purchase but I see they now have the necessary financing in place. I also see that they still plan to increase the divy by around 6% per year. I guess I’ve done a flip-flop on it. AQN always used to be on of my top 2 or 3 stocks while Robertson was CEO but I’m still not sure on this new guy.
You and I are moving in lock-step 🙂
We own hundreds of EMA shares. No plans to sell, just DRIP on 🙂
We also own hundreds of shares of AQN, CPX, BEPC and FTS each. We keep calm, DRIP on, and carry on. No plans to sell any of these whatsoever. Ha.
Great question and just replied to Don as well on this one. I will continue to own it and DRIP it along with other CDN utilities for diversification. Most utilities have high debt loads and EMA has a higher debt load due recent acquisitions in Florida, trying to get under control. 🙂
EMA just might raise utility rates to offset. Ha.
I could see lower dividend growth than what they are suggesting – just in case.
“The company has been raising its payout for more than a decade, and told Bay Street last week that it’s targeting 2-per-cent to 4-per-cent annual growth in its dividend through 2024.”
If any concerns, limit buying EMA and there are many others: FTS, AQN, CPX, BEPC, etc.
woot woot 71 bucks a day is amazing!
keep it up.
Sounds like you got some nice trips planned foe the yr as well.
Indeed. More to invest in a month too 🙂
Thanks Rob, best wishes to you!
Really great job Mark.
You set the benchmark for consistent progress!
LOL. I have to catch up to your fitness 🙂
Thanks my friend.
And you’re welcome to try!!
Nice job…I finally got my portfolio generating 7.29% dividend return equaling $36,900/yr. That’s more than my and my wife’s social security combined. It can be done. Stay vigilant.
Wow, that’s a bundle. Well done. 🙂
I will follow your words!
Solid stuff Mark and love your awesome progress. As you know, we’re aiming to get over $36,000 in dividends from TFSAs, RRSPs, and taxable accounts. We should be on track to hit that goal.
Thanks buddy. Very well done and that’s exceptional work from all those accounts.
Nice going, Mark. That’s great to hear soon you’re passive income will be making more than a full time job (40hrs/wk) at the minimum wage. That’s the long term benefits of the dividend investing machine that you have built over time. 😄 Any plans to take a vacation this year? You can pay for it with your dividend income, lol.
LOL, no plans to borrow from that income stream yet!!
Likely Punta Cana soon, Scotland this summer, Florida in the fall…so a few plans 🙂
You, how are things?
Cool. All nice places to visit. 🙂 No plans for me yet. Things are going well. I’m just waiting for the market to bottom so I can buy BLK stock, lol.
I believe my buddy Joe (Cashflows & Portfolios) just bought some BLK recently. Not advice. Ha.
I sure that you & your wife will reach $30,000 in dividends by the end of 2024! 🙏💰😃 #dividendinvesting #dividendincome
I hope so 🙂 Thanks for your Twitter machine support and readership. I try to get to your site and others as much as I can!
You are on course on hitting your target of $30,000 passive income and you may even achieve it earlier. Like you we have same strategy of maxing out first TFSA, RRSP then non-registered accounts if still able.
Our plan is to continue to invest heavily in equities and No bonds or fixed income. We consider our small DBP from work as our bond/fixed income. Although we don’t know what is in store for us in the future, we will re-evaluate our plans if circumstances change in the future.
I hope Rommel. 🙂
Yes, your plan seems very similar to mine in that contribution priority. I truly believe that is the best order for most. I’ve been doing that order for the better part of 13 years and will keep going until “I’m there”.