February 2024 Dividend Income Update

February 2024 Dividend Income Update

Well Hello Again!

Welcome to our February 2024 Dividend Income Update.

As many readers will recall, we continue to follow a hybrid investing approach for over 15 years now, around the same time I launched this site (give or take a few months):

  1. We invest in Canadian and U.S. dividend paying stocks – that provide income growth. 
  2. We invest in low-cost equity ETFs – that should deliver some long-term, price growth.  

February 2024 Dividend Income Update

I had this post drafted and ready to roll a few days ago, but I decided to revamp this monthly update post after drawing some inspiration from Tawcan’s interview with Dividend Daddy recently. As part of that Q&A format, I’ve provided a few answers to the questions Bob asked his interviewee with some slight adjustments below. 🙂

It’s really cool to see your progress over the last few years. You’re currently tracking towards $X dividend income annually. How long have you been investing in dividend paying stocks?

About 15 years. 

Enbridge was my first, individual stock for our portfolio and we still own some to this day. 

I’ve been investing (seriously) since my mid-20s but I didn’t become a more serious DIY investor, My Own Advisor, until I fired my financial advisor about 15 years ago. 

You recently stated that you invested $X in new capital in the stock market in 2023. Have you been investing consistently about the same amount of money each year? 

I don’t have the same income-level as some bloggers or DIY investors but I/we do try to save a meaningful amount each year towards our goals…

We have a bias to maxing out our TFSAs (x2) every year and thankfully, we’ve been fortunate enough to do just that. A reader also asked me a few weeks ago what we invested in.

Well, we saved up money in 2023 and invested $14,000 this past January 2024 to max out both accounts. We bought low-cost XAW like I said I would. 🙂

“Since fund launch by iShares, I’ve long since listed XAW as one of the many great funds to own on my dedicated ETFs page.

“So, I’m eating my own cooking. I bought more XAW inside my TFSA during the pandemic and since the pandemic was declared over.”

Lessons learned in diversification – reducing my Canadian home bias

After our TFSAs are maxed out of contribution room, we tend to invest inside our RRSPs.

We are in the process of saving up to invest inside our RRSPs this spring/summer and we hope to have those accounts (x2) maxed out later this spring, as part of our 2024 financial goals.

Can you provide a detailed breakdown across non-registered and registered accounts? Which dividend stocks do you own in your portfolio?

You can read more about what we own and why when it comes to individual stocks on this standing page here.

These are not recommendations for purchase, rather, some stocks we own.

Unlike other DIY investors, including Dividend Daddy, we are not real estate moguls. We do not own any real estate assets beyond our primary paid off home.  🙂

That said, his vacation property in Mexico looks amazing…kudos!

via GIPHY

(Not his place, added for fun.)

You invest in both individual dividend stocks and index ETFs. Why’s that? 

For the same reasons many other DIY investors do in fact, a very good reply from Dividend Daddy and I share a similar Canada vs. the world investing thesis:

“Outside of Canada, it’s next to impossible to replicate the world by purchasing individual stocks. This is why I use index funds for global diversification in the United States and internationally.”

Like many other DIY investors I know, I also own some individual U.S. stocks since I’m not a pure indexer.

In recent years, I’ve sold off many of our U.S. stocks. In fact, I’ve only got a few left now. I’ve simplified the mix of ETFs in my portfolio over the years. Part of my boring portfolio is in QQQ.

Then and Now – QQQ

I believe you’re quite close to reaching the goal of living off dividends. Can you share with us your dividend income target? How did you derive this number? 

It seems everyone has a different retirement income number – which only makes sense. 

Kudos again to Dividend Daddy on this one:

“My annual spending is pretty low as my home is mortgage free. I can live for fairly cheap and this doesn’t include my rental income or ability to earn very decent consulting money in early retirement.”

For my wife and I, we’ve calculated that earning over $48,000 per year from (part of) our portfolio might be enough to stop working full-time but we must continue to work part-time to supplement other income needs and wants. That’s just not enough money for us to fully retire on.

2024 could be that transition year. I hope to share more in the coming months…

These (monthly) income updates highlight part of our financial independence journey. We have more assets that just the income I report. Further still, some of the stocks and ETFs we own pay little to no dividends/distributions, so we’re hoping for some growth over time. Portfolio growth should happen but you never know…low-cost ETFs like QQQ and XAW are designed for growth vs. income but there are never any guarantees when it comes to portfolio growth. There have been Lost Decades with investing. That’s a long time to earn next to nothing. 

Tax planning is very important when you start living off dividends or start withdrawing from your investment portfolio. What’s your withdrawal strategy to minimize taxes? Do you have an early withdrawal RRSP strategy? 

I’ve been on record a few times to share our withdrawal strategy included in many retirement essays/case studies.

For the most part, including all the detailed work I do with my partner at Cashflows & Portfolios running low-cost, tax efficient, financial projections for DIY investors – I know the last account my wife and I will likely tap in retirement is our TFSAs. That approach might work for you too… There are lots of reasons for that. 

Reach out if you more details but I do post those details on my site in other posts. 

This means most of us should focus on portfolio withdrawals from our RRSPs/RRIFs and/or taxable accounts, first, long before ever touching the TFSAs. Keep that in mind when you do any retirement income planning. 

How has your investing strategy evolved over the years? What are some of the challenges you have faced? Do you see your investing strategy evolve moving forward? 

My strategy has evolved, slowly, owning more growth beyond Canada – especially so inside our TFSAs since about 2016. I’ve always been a hybrid investor but thankfully I’ve narrowed my list of ETFs to buy and hold and contribute to.

What’s your number 1 worry on your plan of living off dividends? 

Like other investors, will it be enough?

We look forward to our transition to semi-retirement in the coming year or so – which has been one major long-term goal of ours. That transition will be a very good test to see if the income from our portfolio + some work = “enough”…

Live off dividends

A reminder we will not live off dividends in perpetuity. That doesn’t make sense for us – for a number of reasons but in the early semi-retirement years we believe it makes sense:

  1. It helps with sequence of returns risks.
  2. It helps with a flexible withdrawal plan.
  3. We can keep some growth intact for future years – that’s part of the optionality that comes with this approach. 

February 2024 Dividend Income Update

As of this month, we’re over $45,000 in projected annual dividend income (PADI) from the accounts we report on. This is without any new money added or invested in 2024 since my last update a few weeks ago…since we’re also saving up for a new(er) vehicle this year to be paid off in cash or worse-case, paid off after a very short-term loan that might last for a few months. 

This way, we’ll not only have a paid off home to enter semi-retirement with but a new(er) vehicle to drive for the next 10-12 years as well. 

I look forward to sharing my updates with you and I welcome your thoughts and questions about our approach too. Onwards and upwards to your DIY investing journey too!

February 2024 Dividend Income Update

Image Source: Pexels, Magda Ehlers

Mark

Related Reading:

January 2024 Dividend Income Update

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. 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.

12 Responses to "February 2024 Dividend Income Update"

  1. Hi Mark: Maybe I wasn’t quite clear on my question although I thought I was. This will appear simpler. The fund I have acts like a DRIP as each month more units are added that are given a value. EG. 80 units added at a value of $435.00. At the end of the year I get my T3 and around $5000.00 is in box 42 which is ROC. Is this sum added to or subtracted from the ACB. I use to think that I was getting away like a bandit as I was getting more units but getting my money back but I’m not that naive. Companies don’t give you shares and then give you your money back. I ask this now so I can make the change to “plan” ha!, ha! for the future. Yes I have lots of BCE. This past summer I bought 300 shares to now give me 10000. That will make a nice sum in the middle of April.

    Reply
    1. You should only have to worry about your T-slips, accurately, when completing your tax returns.

      Recall “Phantom distributions” can occur when an ETF has realized capital gains during the year. Some of these gains can be paid in cash or paid out annually as reinvested distributions.

      If you have a fund in a taxable account and that fund has a taxable distribution, you get the T3 – all T3s much be included in your tax filing.

      Now…ACB.

      An ETF may incur capital gains if an underlying security in the ETFs portfolio is sold for more than its purchase price. An ETF’s capital gains are paid out annually as reinvested distributions. In that case, no cash payment is made. Instead, it is automatically reinvested into the ETF, which results in an adjustment of the unit price, but it doesn’t change the number of units held.

      As a result, an investor’s adjusted cost base (ACB), which is the average cost of the purchase of the security, is increased by the amount of the reinvested distribution. The reinvested distribution adds to the investor’s adjusted cost base, resulting in a lower capital gain once the ETF is sold and ensuring double taxation is avoided.

      https://nbdb.ca/learning-centre/start-self-directed-investment/understanding-tax-implications/phantom-distributions.html

      Not tax advice.
      🙂

      Congrats on BCE. I’m behind you by about 9,000 shares. LOL.

      Reply
  2. Hi Mark: Just a quick question. Do you update your monthly dividend statement when dividends are declared or when you actually get them. Example: BCE raised its dividend in Feb. but doesn’t pay until Apr. so did you count it in your total in Feb. or will you wait and add it to April’s monthly statement.

    Reply
    1. Great question. I update my spreadsheet as forward dividend income, meaning, as soon as I know the current or future dividend payment, I update it and report it that way. So, for BCE, I updated my spreadsheet on Feb. 9 with the raise even though I won’t get the actual $$$ until April.

      It’s always been my way of estimating how much income I might earn in any given year. In this case, it could be about $45,032 by the end of the year. I use the words “projected annual dividend income” in every update. 🙂

      Mark

      Reply
  3. Hi Mark: My plan for retirement is simple, No Plan. I say this because when you are 21 than 65 is a long way in the future and the idea is just to get ahead so you invest in stocks and the dividends increase. The longer you save, buy more and sell some to buy more the more money you accumulate so you buy more. As you can see saying that at 65 I’m going to have X amount seems like a pipe dream. Life happens also like getting laid off when you are 43 which throws a wrench into any plans so no plan just accumulate cash. With the power of compounding you can go from your first work cheque to millions over time. I’m an investor and not a speculator so I will stick with dull blue chip stocks that yield at 5%-7%, no AI fad stocks for me. Mark, a question. I have a mutual fund that use to be an income trust but was switched to a back end loaded fund. Each month I receive more units which have a price and at the end of the year on my T3 it is all marked down as ROC. Do I add this amount on or take it off my ACB. I ask because I have received special dividends which turned out to be phantom shares which I understand are added on to the ACB. Clearing this up would be most helpful. Mark here is your joke for the day. At least I found it amusing. A typo. A hiker was walking his dog and happened across a huge fossil find. It has be established that the dinosaur fossil dates back to pre 6 Billion BCE. It appears that business sneaks into the main news stream.

    Reply
    1. Yes, what happens at age 21 is different than age 65 for sure!!!

      I own some fad stuff I guess, that includes my QQQ ETF.

      My understanding is you need to account for your phantom shares.
      https://etfmarketinsights.com/blog/what-are-phantom-distributions-from-etfs/

      “A hiker was walking his dog and happened across a huge fossil find. It has be established that the dinosaur fossil dates back to pre 6 Billion BCE.”

      Ha. Good one.

      I recall you still own lots of BCE stock?
      Mark

      Reply
  4. CJ (57, will retire at 59) · Edit

    Thanks for sharing, and thanks also for taking the time to compare and contrast your post to the recent post from Taw Can. Best wishes on the car purchase.

    Reply
    1. Well, I figure I have enough AI via low-cost QQQ as my tech-kicker. I have no intention of investing any further beyond that at this time.

      You? Thoughts?
      Mark

      Reply
  5. Hi Mark

    Thanks again for keeping all your followers updated regularly. This information is crucial and it helps people learn about money and investing. Your support and information is very valuable $$

    I was wondering why you call your style – hybrid investing approach ?

    Cheers
    John

    Reply
    1. Thanks JRR. Well, I figure it is a blended approach. It’s not dividend growth investing or nothing. It’s not just indexed ETFs and saying any other form of investing is “useless”. I’ve heard that from some advisors in fact. I tend to disagree with them. 🙂

      It’s a mixture of the two. I like dividend income for the optionality = I can do what I want with the income as I please without selling any shares whatsoever. I like the low-cost ETFs for growth, even though growth while expected is never guaranteed but it should happen over time.
      Best of both worlds I believe.

      Cheers back,
      Mark

      Reply

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