February 2023 Dividend Income Update
Hey folks…welcome to a new monthly dividend income update…one of my favourite ongoing series of posts I publish!
For years now (and I mean many years now…) I’ve been tracking our monthly dividend income (projected for the year) to see just how much annual income we can reasonably generate, to support any future semi-retirement work plans.
Well, today’s post builds upon my forecast in January whereby I highlighted some major changes in how I/we will report things each month moving forward.
I continue to share these updates not to express any sort of surperior investing approach or other. Rather, I share this information every month to help other investors make their own investing decisions including figuring out the best approach to meet their own desired financial goals and dreams….
Read on to learn more this month!
February 2023 Dividend Income Update – Small Wins Matter
People often overestimate what they can accomplish in one year. But they greatly underestimate what they could accomplish in five years.
— Peter Drucker, organizational management guru
It really doesn’t matter if you’re trying to get up earlier in the morning, eat better, exercise a bit more or take more self-care. The reality is, anything worth doing and anything really important tends to happens slowly.
The challenge is, something I personally struggle with now and then, is I want things to happen now.
But I’m sure I’m not alone in that desire for more immediate results…
Whether we want to admit it, or not, most of us struggle with results. We struggle time-to-time with work/work-life-balance, managing our personal relationships, trying to grow a company/stay in business, manage friendships and more.
I’ve read and learned over time there two major reasons why we may all struggle with our internal drivers for immediate results:
- We don’t embrace process enough, long enough, process is in inherent conflict with any natural hard-wired tendencies for results today, and
- We don’t want to recognize we need to live, behave and act in the present and accept it.
These challenges are not easy to overcome and they have a direct impact on how you and I invest.
If we take concept #1 a bit further, we would all likely acknowledge that often the best investing results come from having a plan in place, in the first place. Meaning, good processes and good behaviours over time matter. That also means investing and related financial plans should come WAY before choosing investing products.
But how often, especially when just starting out with investing or trying something new with investing, have we jumped between this fund or that fund, this stock or that stock, only to look back and refrain “what was I thinking”?
Ya, been there, done that.
But that hindsight bias happens far less frequently now since we’ve built our investing approach around dividend investing. Dividend investing, including dividend growth investing, offers part of the process solution to accommodate my desire for investing results today. I/we can invest:
- For income – our portfolio delivers income to us, now, without doing anything in our part.
- In a manner that supports us psychologically – delivering meaningful income without selling any stocks or ETFs regardless of what the stock market does or doesn’t do.
- In a way to save significant money on money management fees – saving us thousands of dollars per year, every year, money I can use vs. paying a financial advisor to help manage our portfolio.
Related to the second financial challenge to overcome, especially as I age, I’m more appreciative that I need to live, act and behave in the present. I cannot tell you if a stock will soar in price or tank next month or next year, let alone what could possibly happen 10 years from now. Nobody else can tell you either.
Because I can only live for today, I’ve embraced dividend income investing to help deliver tangible income from our portfolio that we could use, today, if we wanted to. As such, dividend investing offers us the chance to:
- Spend money as we please, today or reinvest it, keeping the capital intact – for higher income and/or growth potential in an unkwown future.
- Mitigate semi-retirement cashflow risk.
The smart folks at Morningstar recently wrote this about cashflow…
“A long-term, cash-flow-driven approach to your retirement portfolio is key to success.”
“The ongoing debate about an income approach versus a total-return approach continues, but in our mind it misses the point. Aftertax cash flow is most important—not necessarily how you achieve it. Specifically, retirees want to make sure they can generate enough cash flow to meet their short-term needs and any emergencies while preserving their capital base. It shouldn’t matter whether this cash flow is generated from an asset that delivers high levels of income or by reducing the capital of an asset. In both instances, the capital base remains broadly the same (a dividend reduces the price of the share by the amount of the dividend). This dynamic only changes when the tax treatment is different for income and capital.”
Self-improvement, including any personal work you wish to undertake related to investing on your own terms, can be rooted in the solutions of having a defined process to follow and your ability to control your present-day expectations including sabotaging your portfolio.
The sum of these two simple but very powerful solutions over time will translate even the smallest investments made into massive differences and results over time.
The truth is: big results take time.
There’s a good reason for that. We are wired for hunting-and-gathering results right away. So I believe the more you can define and embrace your investing process (with or without dividends of course (!)) including how you can accept making the best financial decisions today for a very unknown future, the better off you will be.
February 2023 Dividend Income Update
Last month, I shared I’ll report our projected annual dividend income moving forward only from our taxable accounts and RRSP accounts to help fund semi-retirement with. This makes much more sense to me and hopefully to you, the reader, because those are the accounts we aspire to “live off dividends” with first, keeping TFSAs intact for years to come.
Without further delay as of this month, here is our updated tally and chart for the year:
This means, on average, we earn about $3,359 per month from the capital invested inside these accounts. We don’t have a firm goal in mind, rather, part-time work in semi-retirement should supplement this income stream.
- “End 2022” – actual income earned to track going-forward.
- “PADI Update” – this is our Projected Annual Dividend Income (PADI) for the year assuming no dividends are cut, no dividends are reinvested, and no new purchases are made inside these accounts.
- “2023 Forecast” – assumes some dividend increases may occur and/or some new purchases are made this year.
- I/we report U.S. $ income and Canadian $ income at par (1:1) for simplicity even though it’s not perfectly accurate let alone there are future taxation implications associated with taxable investing and RRSP withdrawals. Your mileage may vary.
To put this income stream into perspective and with some additional notes:
- $3,359 per month means about $110.42 per day.
- I’m forecasting about a 6-7% year-over-year income increase between 2022 and 2023.
- We don’t intend to invest any money inside our taxable accounts at all, this year. We are focused instead on maxing out our TFSAs (first, like we do every year) and then maxing out RRSP contributions in the coming months. We will save money (hopefully?) later this year for 2024 TFSA contributions to be ready to roll as of January 2024. This is directly aligned to our previously posted 2023 financial goals.
In closing this February 2023 Dividend Income Update, I hope you enjoy these report changes moving forward as part of my routine monthly updates.
I look forward to sharing my next update in March including any new transactions!
Morningstar reminds investors that cashflow is king when making investment decisions for retirement or semi-retirement.
If you tend to spend your RRSP-generated tax refund, well, investing inside your TFSA will make more “cents”.
I tell readers how much they need to retire to spend $7,000 per month starting at age 51.
This is my standing Dividend page whereby I list some of my stocks and why I own them.
Another great report. Thanks for the detailed numbers, Mark.
You bet. I really enjoy your collated updates from the community. Very inspirational to see folks taking matters into their own hands.
Way go go Mark! Really like your report of expected annual dividend income from your taxable and RRSP accounts. Keep it up 👏
Coming along and thanks for the feedback, Moe!
On the topic of time and being patient, worked out with great coincidence that another newsletter I subscribe to shared this Stoic quote today.
“No great thing is created suddenly, any more than a bunch of grapes or a fig. If you tell me that you desire a fig, I answer you that there must be time. Let it first blossom, then bear fruit, then ripen.” – Epictetus
Very wise words and better than I can write about! 🙂
Hope all is well, Chris. Looking forward to the snow being gone so I can get out on my bike and golf more too.
Hi Mark, I love this site; your story is inspiring!
I’m brand new to this world and have sold my house with the intention of generating dividends to pay my expensive Vancouver rent.
Is there a good resource for stocks that pay out monthly instead of quarterly? Would I be sacrificing too much for this benefit? Ideally I’d like the dividends to pay my rent while I reinvest my paycheck.
This will be in a taxable account so while CASH.TO is giving me what I need now, I’ll be paying for it come tax time.
Thanks for your time.
Thanks for the kind words! 🙂
Monthly vs. quarterly vs. other payment frequencies really don’t matter that much since it’s all about total return.
That said, here are some considertions:
Ideally, you want the highest total returns but I can appreciate that dividend income, steady and growing dividend income, is key 🙂
Have you looked at BTSX stocks?
The CASH ETF is very interesting and I’m likely to own some, at some point, but I would think registered accounts would be good for that.
All my best and glad you are following along!!
Hi Mark: You are right on the money as I’ve always said that my favorite saying when it comes to investing is GET RICH SLOWLY. My only exceptions are what I call Special Situations. That is stocks that you would never usually buy but are trading out of favor for some reason. I have come across four and didn’t act on them. The first was in the GE and I met the plant photographer and he said that GE was a great company but you couldn’t buy it because it was a private company. I argued with him that you could and that night I looked in the stock pages and there it was so I cut it out and took in in to show him. The price was 62 5/8 and seemed high for me but if I had bought 100 shares which would not be egregious I would have made a mint. Two years later in ’87 the shares were at $125.00 and the company split the shares 5/1. The company also split the US shares 3/1 so with the 500 shares I could buy 300 US shares. In ’92 the shares were 2/1. In ’94 the shares were split 2/1. In ’97 the shares were split 2/1 and in ’01 the shares were split 3/1. My initial 100 shares would now be 7200 shares at $50.00 per share. A good time to sell as GE hasn’t seen that growth in two decades. Another was the spin off of Nortel from BCE. ACB was around $16.60 but the price was $75.00 and quickly rose to $124.50. This too would have been a great time to sell and a nice profit made. Tech was the next as it got caught in a credit crunch as it had a large debt coming due. this was in the great recession and banks were not lending. The shares sank from $40.00 to $3.25 and I watched it as it steadily rose to $3.85. I could have bought 10000 shares and it would only cost $38500.00. But I didn’t and in April of ’10 the shares were trading for $45.625 which would have been a profit of over $400000.00. These I call special situations but on the norm I stick to solid Blue Chip stocks that pay dividends and grow the dividends year after year. I may seem dull and boring but it works and fast and exciting can get you in trouble.
Yes, GE has definitely struggled in the last decade.
BCE has been a very good overall for income over the years. Nortel was “special” for sure!
I like a bit of dull and boring in my portfolio. Utilities from Canada and the U.S. in particular I find fit that bill since we all need electricity to live.
Mark, when you said “We will save money (hopefully?) later this year for 2024 TFSA contributions”. It sounds like you might be building up the TFSA contributions in cash. I do it a little differently. With time in the market being a critical element of successful investing, rather than put any spare cash into cash savings for our TFSAs, I send the cash to our non-registered accounts and buy Canadian stock. In January, I transfer the investments to our TFSAs. Any capital gains will be taxed at 50% of our marginal rate, vs 100% for interest, and the dividends will benefit from the dividend tax credit. If the stocks are down, that’s fine, because I’ll get to claim a capital loss, paying very close attention to the superficial loss rules.
That’s a great approach. I have considered that and done that in the past (re: fund non-reg. first and then transfer to TFSA(s) in Jan.) but I’m quite busy of late with lots of tracking so I prefer to avoid moving assets from non-regs. to TFSAs and then to your point, calculating any cap. gains on top of the dividends I already report, etc.
I totally get your approach and I think that is very sound but I can also, with cash, be very strategic during the year and deploy money where it makes sense to us.
Holding back some cash makes sense for sure. I’ve occasionally boxed myself in and have had to do a lot of work moving funds around to solve a simple problem.
Ya, no right or wrong. I can totally appreciate getting the money working for you sooner than later. We’re currently saving to try and max out our RRSPs this year, then start the saving cycle in the summer/fall this year to have our 2024 TFSA contribution room ready too. We also have to live our lives too – so likely some travel in there during the year and another winter trip to save for! 🙂
Looking fantastic Mark. I am a fan of your plan!
Thanks very much and very kind. Just striving to stay invested, invest more where I can and pay down all remaining mortgage debt. 15 months to go!
Wow Mark – that is fantastic – well done! Now you mention that this is from your taxable accounts + RRSPs. I don’t know what the split is (and don’t expect to know) but let’s consider the scenario where most of these dividends are generated by your RRSP (and eventually RIF). Recognizing it’s a first world problem, what methods can one use to try and substantially wind-down your RRSP/RIF if, in fact, the dividends that are being generated from all your accounts is more than enough to cover your “target income” for the year? Even if you defer CPP and OAS as late as possible, you still may be in a situation where you can’t substantially reduce that major “tax deferral” vehicle. Here’s an example – let’s say you have 1M in RRSP that generates 30K in dividends, taxable accounts that generate another 10K in dividends, and TFSAs that generate another 30K for a total of 70K. If that’s more than enough to live, then you’re not having to reduce (sell) any of the holdings that are generating this income – which is fine for TFSA – but not for RRSP! Do we just have to “bite the bullet” and realize the big fat tax payment to the govt is inevitable or are there other techniques to help in that situation (and yes I recognize some people buy very expensive life insurance to cover that inevitable tax bill but wondering if there are other techniques)? Thoughts?
Again, mentioned before, just trying to stay out of my own way 🙂
Yes, x2 taxable and x2 RRSPs.
You can read more about any drawdown ideas here but essentially, going to live off the income my portfolio deliverss in my 50s and work part-time. That’s the plan. Always has been for about 20 years!
Happy to read your thoughts on that!
So, to your point, if I/we defer CPP and OAS (as late as possible) then I can wind down some of the RRSP/RRIF in the meantime.
And “Yes” is the answer: we just have to “bite the bullet” and realize the big fat tax payment to the govt is (somewhat) inevitable but if you smooth out taxation like I intend to do….it’s not going to be a major hit in any given year 🙂