January 2018 Dividend Income Update
Welcome to my first dividend income update for 2018!
For those of you new to these posts on my site, for the last few years, every month I discuss our approach to investing using Canadian dividend paying stocks. **Warning** that approach, while effective, is rather boring. I hope you read on anyhow 🙂
Many years ago, we decided to take a hybrid approach to investing:
- One approach – we own a number of Canadian dividend paying stocks for income and growth. About 30 stocks actually. We believe buying and holding this bundle 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.
- Two – the second pillar of our investing approach – we own a few low-cost Exchange Traded Funds (ETFs). We do so for extra diversification.
These updates focus exclusively on our Canadian dividend paying stock journey using our TFSAs and non-registered account. I suppose I could include income updates from other accounts but I’m lazy when it comes to currency conversion and other factors for such updates. For now, you’ll just have to deal with these updates the way they are and ask me questions about anything else!!
Why dividend investing?
I could write many posts about this, and I have – I believe it works for me, but the answers to this question are many:
- The income received from these companies we own is real; I do not have to hope for just stock price gains to fund our retirement. I see the cash coming into the account. It grows over time to buy more shares. I also see the money used to buy more shares commission-free thanks to dividend reinvestment plans that many companies establish and maintain.
- I can count on many of these companies to increase their dividends over time, helping to protect us from inflation. Just as an example, here are the companies that recently increased their dividends within the last month!
Manulife Financial (MFC) increased their dividend by 7%.
Brookfield Renewable Energy (BEP.UN) increased their dividend by 5%.
Suncor (SU) increased their dividend by 12.5%.
Bell Canada (BCE) increased their dividend this week.
Let’s not forget Great West Life (GWO) increased their dividend by 6%.
Brookfield Infrastructure Partners (BIP.UN) increased their dividend by 8%.
These increases occurred at the time when the stock market was supposedly “crashing” by losing over 1,000 points in a single day. People were thinking the financial sky was falling, again. Honestly, who cares. This is what stock markets do. They go up, they go WAY down and they tend to go up again over time. Get used to it.
Are there other reasons to invest the way we do? Why yes there are….!
- With our dividend income investing approach, seeing the income flow in each month and quarter (and the capital appreciation from these companies over time), that helps me stick to an investing plan I believe in. This psychological factor is huge. Investing guru Preet Banerjee told me personal financial success is 90% psychology and about 8% math. The missing 2% is a quirky reminder of the insignificance of the math. Sticking with a plan is important and the same goes for you. Financial plans come before financial products after all.
There are also other benefits of holding dividend paying stocks directly:
- I can control the portfolio turnover, or lack thereof, with a buy-and-hold approach for many our companies. I don’t have to pay a money management fee for someone else to do that.
- Dividend-growing companies tend to be solid performers so you get dividends AND like I mentioned above, capital gains over time.
- Dividends might make you re-consider selling a stock at the wrong time, at the first word of bad news for an example. Don’t sell. Buy more!!! You should celebrate falling prices as a long-term dividend stock investor.
- Dividends instill management discipline, you can read Warren Buffett’s older 2012 shareholder report here for evidence of that. (Buffett and his shareholder reports will be forever more famous than I will.)
Those are just some of the reasons I/we own dividend paying stocks – and we’ll continue to do so.
Thanks to dividend increases over the last month and healthy contributions to our TFSAs at the start of this calendar year, our dividend income as part of these updates is approaching $15,700 per year.
To put that income into perspective, without touching the capital OR using any money saved from our other retirement accounts, that income should pay for the following for life:
- Enbridge gas bill – we are now earning enough dividend income from Enbridge stock each year to pay for the Enbridge gas we use in our house.
- Hydro bill. Between various stocks, our hydro bill is covered today and going-forward by dividend income.
- Property taxes. Even if property taxes increased by more than inflation, our dividend income should offsite those taxes, for life.
We’re now more than halfway to our income goal thanks to over a decade of dedicated monthly savings; no trading and remaining patient with our financial plan:
Buy, hold and hold some more.
What will the rest of 2018 bring?
Let’s hope for more dividend increases in the months to come from our Canadian banks in particular. More dividend income from those companies (and others) would mean more shares could be reinvested for free and more money that can be reinvested for free will deliver more income over time. This is the beauty of compounding in action. We should all take advantage of that to build wealth in any way we can.
Thanks for being a fan of these updates. Comment and share away. Good luck to you with your investing plans throughout 2018 and stay tuned for mine.
Yay CM! I think you said that.
As for EIF. My FA had been suggesting EIF for many years but due to conflict of interest I couldn’t buy it until I retired in 2015. Picked it up at around 21ish. When it hit 43 I said that’s nuts and bailed. Got sellers remorse and bought it all back at 41 and then that short seller dude in the State went to town on it and it fell to 25ish and here we are at 33. I have no idea where it’s going to go but I guess I’m along for the ride.
It has been a slow “increaser” but I haven’t bought any yet.
I prefer the larger, bluer-chippers in Canada. Basically owning the top-20 or so in ETFs like XIU and XEI (banks, telcos, pipelines, utilities, infrastruture, etc.). Otherwise, as you know, I buy mostly low-cost funds for diversification.
I think we’ll see the other big-4 banks increase their dividends as well 🙂
And today RY 3% raise 🙂
It’s been a spectacular month!
More good news coming next week 🙂 Yes it has!
Your increase since the beginning of the year works out to 3.63%. With those funds reinvested and the expected increase from your other holdings, I would estimate your final yearend income increase close to 9%. I doubt any etf would provide the same income increase.
I hope I get some more juicy dividends this year cannew. I bet you feel the same!
Love your strategy. I know it works because I’m living with it. And, although I wish I would have waited a few weeks before investing the TFSA transfer (waited until after the downturn), as you say, the dividends will be working for me almost immediately and in time these new investments will be in green territory. Thanks for your words of support and reminder of why the strategy works so well to keep your mind at ease.
I wish I would have waited to make my TFSA contribution as well Paul, but heck, I can’t predict the future – can you? 🙂
I will follow this hybrid approach until I can prove it doesn’t work = meaning I don’t see rising income from my portfolio. I hope those days never come!
Hey, that’s kinda jumping the gun there Mark. 🙂 January update showing February increases?
And as a bonus, those Brookfield increases are in US currency.
Well done and lets hope for more good news from BAM and the banks!
Well, it’s forward dividend income. Meaning, “…thanks to dividend increases over the last month and healthy contributions to our TFSAs at the start of this calendar year, our dividend income as part of these updates is approaching $15,700 per year.” We should earn that by the end of this year given those increases are coming our way. It’s hard to predict the future 😉
Congrats on the income and hitting your halfway point. All those dividend raises you got are nice too!
Any reason u dont state which companies paid ya and how much? Always cool seeing that stuff
Anyways like the writeup about dividends. Even if they pull back you know you are getting the income and could potentially drip more stocks. If i owned non dividend stocks i would be more tempted to sell at the ” perfect” time to lock in profits.
Well, I figure I disclose lots (plenty) here Rob.
For reference, we own a few hundred shares of ENB. So, you can do the math on how that covers our Enbridge bill.
I’m more than happy to see another pullback. Lower prices mean I’m buying these companies at lower prices – that most people will continue to rely services on to live. Maybe if I was in my 80s I would be happy to see all-time highs but for the next 10-20 years at least, I’m happy if stocks tank every few years to load up on lower priced goods. That’s just me.
How is your investing journey coming along?