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.
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.
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.