Welcome to my latest dividend income update.
For those of you new to these posts on my site, every month I discuss our approach to investing focusing on Canadian dividend paying stocks. We believe buying and holding a number of Canadian dividend-paying stocks in our tax-free (thanks TFSA) and non-registered accounts will, over time, provide some steady monthly income for future wants and needs in retirement.
A new year and more dividend increases…the plan continues to work…
Although Enbridge was a bit late with their dividend increase from 2016, early last month they did not disappoint – with a 10% increase. Algonquin Power also increased their dividend by 10% last month. Raises like these without doing anything except sticking with the plan continues to be a positive reinforcing factor with my Canadian buy, hold and collect dividends approach.
Maybe so much so, I always get reader questions about my investing approach – which I’m happy to answer as part of these updates.
Question #1 – I’m curious about your $30k dividend income target. What is your annual contribution?
We strive to max out contributions to our Tax Free Savings Accounts (TFSAs) every year. This means, if we are successful this year, that’s another $11k invested. Give or take about $11k invested churns out about $440 or so in dividends per year – moving us closer towards our goal here.
We also invest in our non-registered account but that’s only if there is any money left over after investing in our TFSAs, then Registered Retirement Savings Plans (RRSPs).
Question #2 – Why don’t you include your U.S. assets in this update?
I suppose I could, but then, that complicates things with a fluctuating U.S. and Canadian dollar exchange rate. In addition to that, these updates have historically focused on tax-free (TFSA) and tax-efficient (non-registered) dividends from Canadian stocks only. Third, while I could easily include projected RRSP-withdrawals as income for these updates I have no idea how I’m going to manage that yet. Will I withdraw just the income generated from the capital? Will I withdraw more? Probably the latter but I have no idea at this time. In any event, rightly or wrongly, I’ve decided to report just Canadian dividend income from certain accounts.
Question #3 – Aren’t you concerned about diversification in your portfolio with only Canadian dividend paying stocks?
Not at all but these updates may be misleading you.
We hold a number of blue-chip Canadian stocks inside our TFSAs and non-registered account. Those are the biggest companies in Canada. If they all go under, we’re all doomed in this country. In addition to Canadian stocks we hold a modest amount of U.S. dividend paying stocks and U.S.-listed ETFs for U.S. and international diversification. In addition to that, we are on our way to owning our home – another asset. Finally, we invest heavily in dividend paying stocks and a few low-cost industry leading ETFs because we are fortunate to have workplace pensions. We consider these pensions a big bond and for that reason we hold no bonds whatsoever in our personal portfolios. So, all this to say, we’re have assets beyond just Canadian dividend paying stocks.
Thanks for your questions. And thanks to Canadian companies that reward shareholders like me, whereby I can reinvest all dividends paid to move future income higher, we hit a new income milestone in January 2017. We’re now on pace to earn over $14,000 this calendar year in dividend income from Canadian stocks, in other words, about $1,200 per month cash for life.
We look forward to reaching a bigger milestone later this year, hopefully halfway to our long-term goal.
Got questions? About our journey? About investing in general? Send them my way and I’ll do what I can to answer them.
Note: I had some site issues on the weekend and I needed to restore the site from the previous day so some comments were deleted due to the recovery process. I apologize for that – so if you left a comment and now don’t see it – that is why. Thanks for understanding.
Additional question. Do you show your portfolio somewhere? Can’t find it on the site and I would be curious. 🙂
I do not since I share a number of details on my site that are rather personal. You can get some insight here though:
Thanks for being a fan.
Wow, great dividend amount. 1200 a month already. Keep it going and you’ll reach the 30k a year mark in notime!
We hope so!
Mark, great progress as usual. I like dividend raises and find myself checking the news more often the past couple weeks as a few of the companies I hold have started releasing their 2016 results. I’m on track for about the same in dividend income, but unfortunately mine is almost all within the RRSP so will be fully taxable when I pull it out. TFSA dividends are nice of course but with only $5500 contribution per year it’s somewhat limited
I hear ya…I like getting the dividend news but I don’t sweat over it. I figure if I can get a raise every year, at least once from most of my stocks, then that’s great. Otherwise, in the end, it’s total return that matters.
Most of my RRSP is now in US stocks and ETFs – I will probably always keep it that way.
Great to hear from you Dan.
Of your total portfolio, what percent Canadian equity, us equity, int’l. equity and also what percent fixed income? Tks very much dave
If I include our pensions (which I consider future fixed income) that’s likely close to 40% of our portfolio. Of the 60% equity then, likely too much of a home bias; with 50% Canadian and the rest U.S. and international equity. My long-term goal is to maintain more stocks than bonds (maybe 70/30 split).
Just to clarify…the $14k dividend income does NOT include the dividends from your RRSP?
Correct. The goal is to have $30k in tax-free and tax efficient (non-reg.) dividend income + RRSPs on top of that for a comfortable retirement including a paid off home. I am optimistic the RRSPs could churn out up to $20k per year after tax for 20-30 years before CPP and OAS kick in around age 65 or maybe 70; if deferred to maximize this government benefit.
Again, it’s all a plan…things could change.
Looks like you are headed in the right direction, that’s for sure. On pace for $14k this year is a serious sum and with reinvestment it will only compound faster. I reinvest all my dividends automatically for faster compounding. Thanks for sharing.
It’s coming along. Thanks Hut. I find reinvesting dividends very helpful of course and raises help as well. ENB, AQN, BCE, etc. already this year. Buy and hold the top stocks the big ETFs own, DRIP them, and then tune out everything else. That boring strategy is working for us.
How is your journey coming along?
Can’t complain about my journey. Each year since becoming a dividend growth investor I have been able to put up year over gains. It’s fun looking back and seeing your passive income grow. Of course, this is in large part to tuning out a lot of noise and just sticking with my monthly buys.
Absolutely. Your growth is largely due to your savings rate and staying invested. Your portfolio should be as exciting as watching your laundry dry.
Had not realized you were not including your RRSP. Makes sense as you plan to semi-retire before 65. Looking at your total dividend income, you’ll be in great shape when you do decide to or if you wish to draw down the registered portions. It’s the income generation that makes it work, not seeking the winners to grow the pot.
Correct. The RRSP has mostly U.S. assets and it’s too painful (rather, I’m too lazy) to include it in these updates. It’s just easier to focus on a couple of accounts, tally it up and share.
Our plan is absolutely to draw down RRSPs before non-reg. and non-reg before TFSAs. Any pension money will be a “bond” and I hope to have part-time work/income after age 50.