January 2020 Dividend Income Update
Welcome to my first dividend income update for 2020!
And this month was a major milestone month! More on that in a bit.
For those of you new to these posts on my site, for almost a decade now, every month I discuss our approach to investing using Canadian dividend paying stocks and the cash flow we earn from a few key accounts.
To recap, we are hybrid investors:
- Approach #1 – we own a number of Canadian dividend paying stocks for income and growth. This is what these dividend income reports are all about. At last count, we own 24 different stocks inside my non-registered account and within our Tax Free Savings Accounts (TFSAs). We own these stocks because we believe buying and holding our DIY bundle of Canadian dividend-paying stocks will, over time, provide some steady monthly income for future wants and needs in retirement. Again, that’s what these monthly income updates are all about!
- Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. We believe in doing it will provide more diversification beyond Canada’s borders. (I believe that now, I didn’t always think that way.) By reinvesting all the distributions paid from these ETFs every quarter, we are focusing on long-term growth inside our RRSPs. Sure, we still own some Canadian stocks and some U.S. stocks inside our RRSPs, (names like AT&T, Verizon, Procter & Gamble, and Johnson & Johnson to name a few) but we’re buying and holding more U.S. ETF units every year going-forward.
Yet back to approach #1 – the dividend income flowing from our non-registered account and TFSAs – things are rolling so far in 2020.
In just the last 5 weeks alone, we managed to get two key dividend income increases inside these accounts from Bell Canada (BCE) and Suncor (SU). I have no doubt that more dividend increases are on the way later this year…
Why dividend investing?
This is a question I get often. As in almost every month.
I could write dozens of variations of posts to answer that question but in a nutshell this is why believe this approach works for me:
- The income received from these Canadian companies we own is real; I do not have to hope for just stock price gains to fund our retirement.
- I can count on many of these Canadian companies to increase their dividends over time, helping to protect us from inflationary pressures.
- The dividend income earned inside our non-registered account and TFSAs, helps me stick an investing plan I believe in. This behavioural benefit is huge. Investing friend, guru and all-around-good-guy Preet Banerjee once 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.
- I can control the portfolio turnover, not a fund manager I have to pay money to.
- Canadian dividend-growing companies tend to be solid performers so you get dividends and capital gains over time.
Those are just some of the reasons I/we own dividend paying stocks – and we’ll continue to do so.
Since my last December 2019 update was posted, where I highlighted we finished the year at this income level below, I received a few new questions about my investing approach in my inbox. I thought I would take a quick opportunity to answer some of those questions today.
Q1: Hey Mark,
With your dividend income flowing in as you say, are you a millionaire yet?
A1: I don’t disclose my net worth (or my wife’s), or our combined net worth on this site for a few reasons, but I can tell you based on the mostly common used definition of net worth (total assets over total liabilities), I have been a millionaire in terms of net worth for a number of years now, since age 40 I would say.
To be honest, I don’t stress nor monitor our net worth very much. I think you should focus on this stuff instead.
Q2: Hi Mark,
I would like to replicate your portfolio, why don’t you share all your assets in detail?
A2: Great question and while I feel I share tons of free, valuable let alone personal details on my site, you’re right – I don’t disclose every holding I have in detail for two big reasons.
- I wouldn’t want anyone to just copy what I’ve done, that might not work for you or your family anyhow because namely #2,
- I think you should think for yourself.
I’m always happy to share what I know, what I don’t know or mess up in some cases, but I think my readers are far better served by reading about my journey and using their own brain to make up their own mind and their financial decisions. You’ll be far more invested in your own decision-making this way with likely far better outcomes. If you do ever want to see any of my Canadian or U.S. stock holdings you can find some of those assets here. I keep updating this page regularly.
Do you think you’ll change your investing approach when you reach your dividend income goal of $30,000 per year from these accounts? Will you invest more conservatively?
A3: Nope. No really, I don’t think I’ll change my approach. So far, so good since I’ve decided to unbundle one of my favourite Canadian ETFs (iShares XIU) for income and growth.
Until our Canadian banks, utilities and telco stocks stop increasing their dividends every year or so, I probably won’t consider switching my strategy. I’ve basically built my own Canadian dividend ETF except it doesn’t cost me any ongoing management expense fees.
I recently calculated my portfolio might cost me $500 in money management fees per year, including all my transaction costs to buy more stocks every few months. I figure that’s pretty good approaching a 7-figure portfolio.
January 2020 Update
Thanks to a few dividend increases already this year, with our TFSAs maxed out in early 2020; owning more of these stocks I wanted to buy (and I did buy some of these), our dividend income expected from Canadian dividend paying stocks in my non-registered account and our TFSAs just passed a major milestone:
$20,000 per year.
In fact, it’s on target to deliver $20,300 this year.
To put that income into perspective:
- That’s like making $2.32 for every hour of every single day without doing anything for it. Money is making money in my sleep.
- That income, when we decide to get the dividends in cash vs. reinvesting dividends like we do now (because we never actually see this money today) should pay for our Ottawa condo property taxes for life ($6,000 per year in 2020 dollars).
- That income, beyond our property taxes, will also cover our condo utilities such as heating, cooling, water and electricity costs for life.
- Now that we’ve downsized, owning just one car since June 2019, that income also covers our car maintenance, gas (as much as we barely drive our car) and insurance costs for….you guessed it…for life.
With all the praises of dividend investing and my success with it over the last financial decade I must tell you this is certainly not the only way to invest. In fact, if you have any hesitation about owning any stocks directly, just index invest.
I mean, if it’s good enough for Warren Buffett’s estate plan here it’s good enough for you.
Furthermore, while getting paid to remain a shareholder has major benefits, stocks provide no guarantees of long-term dividends; companies can cut their dividends, companies can change their Dividend Reinvestment Plans and in some other rare cases, companies can cancel their dividends altogether. Stock selection is not without risk.
That said, I feel as long as we diversify our stock selections across many Canadian companies and continue to invest in more U.S. and international companies over time within our RRSPs, I believe it’s a sensible income-oriented strategy that can deliver wealth to you too.
I look forward to another year of dividend income raises to share along with new portfolio heights!!
Thanks for your questions and your readership.
What is your strategy for the upcomong recession……..almost sure to happen
Stay the course! No changes to be made Colin.
Are you making any?
wow congrats Mark!
Is there any link where you share your portfolio in detail or with breakdowns of the stocks etc. to see your secret recipe.
I wish I had a secret recipe. It’s really about having a plan, executing that plan, and staying invested for many years on end without fail.
Here is a page where I list some of my holdings.
Congrats Mark, you’ve set yourself up for a great start to the year 🙂
Thanks very much! Stay tuned for your article in my Weekend Reading. Simple indexing works very, very well.
Thanks Mark! Looking forward to it.
Couldn’t agree more about indexing, it has been good to me, even from a DGI perspective
Absolutely a great way to invest. Just not the only way!
As I mentioned on my blog recently, there’s no perfect one size fits all portfolio, it’s whatever suits your personal style/ risk appetite and you can stick with for the long run 🙂
Good stuff. Just included your post in my latest Weekend Reading!
Thanks Mark, I love your story and look forward to reading from you each month. I love the fact that you stress everyone need to develop a plan that works for them. I love the combination of dividend investing with real estate with a long-term focus to create long-term sustainable income that will outlast you! What I lack is the discipline you’ve built into your investment plan by setting goals, tracking and sticking with an investment philosophy. I find that very impressive so keep up the great work and please keep sharing as this is very encouraging. My wife and I have built up a nice rental real estate portfolio but we now need to put in some discipline to start building a solid portfolio of dividend stocks to compliment this. The possibilities are endless. Thanks again!
Kind words Ken!! Thanks for your readership and keep me posted on your plans!
Great continued progress Mark. Well done.
Best wishes for hitting or exceeding your 2020 year end goals.
Have a great trip.
Congrats Mark. I like the way you allocate the earnings toward costs. I am going to work that out for myself this summer.
Is that correct that your property taxes on your condo are $6000? Or is that condo fees and property taxes?
I hope I haven’t asked that before! It just seems so very high to me, compared to what we pay in BC. MInd you, we get a bit of a break because the assessment doesn’t know that we finished the lower level of our house after purchasing it. Our property taxes are about $2600, nice house, 3200 square feet, nice neighbourhood, cul-de-sac, but lots of far fancier houses here for those who are out to impress others.
Yes, it’s correct. Crazy eh? Our property taxes in Ottawa are about $6,000 per year ($500 per month) for this condo. Condo is 2-bed, 2-bath about 1,200 sq. ft. excluding a 300 sq. ft. terrace.
In our former Ottawa-south single family bungalow they were $4,400 for 1800 sq. ft. on a 0.5 acre lot.
Ottawa is not cheap to live in!
There are some single family homes nearby in our area that have property taxes approaching $1,000 per month.
I meant to add our condo fees are on top of that…
Great job Mark. I wish more people would think for themselves with their personal finances – great line.
Can’t convince my son to individual stock invest but that’s ok. He decided to buy XBAL to set and forget. All he has to do is feed it.
XBAL is still pretty good. Hard to go wrong with that for the next 30 years as a balanced fund. Just tell him to read my site and see how he can eventually earn a few thousand bucks tax-free. That should get his wheels turning 🙂
Thanks for the kind words.
Very insightful! Congrats Mark!
Thanks very much Dave!
My understanding is that his target for 2021 is 21000, and he is already 20300 at this moment. So 700 away to achieve that target.
Correct, I think I can hit $21k by the end of the year, I’m already at $20,300 after TFSAs maxed out and investing again.
Nicely done Mark. In the chart you had $21,000 but you stated $20,300 for this year. Was that a mistake? 🙂
We are aiming to hit $30k this year. It’s going to be one heck of a challenge.
No mistake my friend. I think I can hit $21k by the end of the year, I’m already at $20,300 after TFSAs maxed out and investing again.
Once at $30k myself (non-reg + TFSAs mind you) I should be able to work part-time. RRSPs are not included in these updates.
Ahh ok that makes more sense.
“In fact, it’s on target to deliver $20,300 this year.”
Is this a typo? I see your Dec 31 2019 was at $19,558 and your annual increases have been slightly over 2K/year.
No typo. I think I can hit $21k by the end of the year. I’m already at $20,300 after TFSAs maxed out and investing again. The jump between $19,558 and that new number after a few weeks is the sum of TFSA investments + dividend increases alone. That’s it.
I guess I took “target” as being in the future, something to aim for. Now I comprehend you’re using “target” to mean already on *the path*.
I’ll make a forecast that if you stick with what you’ve got you’ll easily hit just a hair shy of 21,900.
Yes, I use that word interchangeably in that context. I can’t guarantee all dividends will be paid let alone increase in the future so I can’t say for sure my portfolio income will grow from now ($20,3k) to my desired target of $21k by the end of the year. It very well should thanks to reinvested dividends alone but who knows…
The future is unknown and I’m a conservative investor by nature. It’s probably a huge factor why I’ve been income-focused for the last decade and will likely not change this approach for decades to come. I’ve always been fascinated with the money my portfolio can generate vs. what it’s worth since the latter has lots of volatility.
I liked your dividend post ‘preamble’ encouraging readers to think for themselves. It’s been great following your journey, congrats on hitting the milestone so early in the game in 2020 already!!
Same. I follow your journey with great interest as well. Although we all hold some different stocks in different quantities it’s very interesting to watch how everything is unfolding for us.
All the best GYM and congrats on your TFSA and other recent milestones as well!
#1 I wouldn’t want anyone to just copy what I’ve done, that might not work for you or your family anyhow because namely
#2, I think you should think for yourself.
Totally agree, people should learn how to evaluate and decide which stocks suit their needs and forget what others recommend.
🙂 Thanks Cannew.
Wow, Mark, you will exceed your 2021 target of 21000 for sure, congrats.
I have deployed quite some cash from last December to this January to bring down my FI to 40%. So my investment income has increased quite a bit too. With the market up so much, right now my FI is less than 40%. I am hesitating whether or not I should rebalance. I feel my FI plus investment income right now is good enough to defend sequence risk so maybe not necessary to stick with 40%.
I calculate it this way:
$(FI)/10 + Investment Income > basic annual expense
So I am safe 10 years after retirement. After that, kids already out of home and our expense will go down a lot and we can begin to claim CPP/OAS early if really necessary.
Maybe that’s wrong decision, should stick to my investment plan. Or maybe my investment plan should be agile. Debating myself right now.
I think so May. I just have to stay invested and the income goals should largely take care of themselves.
I like your formula and that seems to be working for you.
I figure when our investment income is > expenses then we’ll consider part-time work. All debt must be gone as well for part-time work to occur. We have a ways to go to kill our debt. Just shy of $133k I recall.
May, you seem to be in a very good place now. Lots of future safety in FI, good amount of equity, continuing savings, market drop rebalancing potential, CPP/OAS future flexiblity – numerous good options overall.
I expect to stick at my 70/30 for a while which is up from 60/40 a year plus ago. Enough income from investments, pension and ability to do some rebalancing whenever something bad happens.
Thanks, RBull. I feel I will be very comfortable to retire in three years as I originally planned two years ago. Anytime before that it’s still doable. Having worked on our financials for two years with help from Mark and other readers like you really make a big difference. I owe a big thanks to all of you.
Awesome to read that :))
Impressive stuff May. Very nice to read.
Thanks for the kind words. Its a great place and I know has been helpful to me too.