February 2023 Dividend Income Update

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

Indeed.

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:

1. We don’t embrace process enough, long enough, process is in inherent conflict with any natural hard-wired tendencies for results today, and
2. 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:

1. For income – our portfolio delivers income to us, now, without doing anything in our part. 
2. 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. 
3. 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:

1. Spend money as we please, today or reinvest it, keeping the capital intact – for higher income and/or growth potential in an unkwown future.
2. Mitigate semi-retirement cashflow risk. 

The smart folks at Morningstar recently wrote this about cashflow…

From Morningstar:

“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:

Chart:

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. 

Notes:

1. “End 2022” – actual income earned to track going-forward. 
2. “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.
3. “2023 Forecast” – assumes some dividend increases may occur and/or some new purchases are made this year. 
4. 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!

Mark

Related Reading:

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.