June 2017 Dividend Income Update

June 2017 Dividend Income Update

Welcome to my latest dividend income update.  For those of you new to these posts on my site, every month I discuss my approach to investing using mostly Canadian dividend paying stocks and how reinvesting the dividends paid from these Canadian holdings are helping us reach financial freedom – one month at a time.

A reminder from last month’s update the strikeout above was done on purpose.  I no longer hold any Canadian ETFs in my portfolio.  Why?  Essentially I’ve created my own Canadian dividend ETF that has no ongoing or pricey money management fees.  In owning all big Canadian banks, major pipelines, biggest telecommunication companies, largest utilities and energy conglomerates, and some Real Estate Investment Trusts (REITs) I’ve basically created my own Canadian dividend ETF.

That brings me to this.

Over the years, many readers and emails to the My Own Advisor inbox have asked about the specific stocks in our portfolio. Today’s post will finally highlight more details of that.

Banks and Lifecos

We own all big-six (6) Canadian banks across various accounts (non-registered, Tax Free Savings Accounts (TFSAs), and Registered Retirement Savings Plans (RRSPs)). 

We’ve owned TD, RY, BNS, BMO, CM, and NA for many years.

I anticipate these companies will pay dividends (and increase their dividends) for decades to come.

We also own the top-3 commonly life insurance companies held by institutional investors:  SLF, MFC, and GWO.

Pipelines

We own a few pipeline companies in the energy sector.  

As long as these companies continue to reward us via dividends we’ll continue own them. 

In fact, Enbridge (ENB) was actually one of my first dividend stocks.  It remains in our portfolio today.

We also own TRP stock.

Telcos

Heard of “Robellus”?  That’s the moniker assigned to the biggest telecommunications companies in Canada:  Rogers (RCI.B), Bell (BCE), and Telus (T). 

We own all these companies since I figure if you can’t beat them, you might as well join them.  

Utilities

Instead of holding any utility Exchange Traded Funds (ETFs) like XUT (that charge us fees) we decided many years ago to hold the top-stocks in such funds and avoid any ongoing fees. 

For many years we’ve been adding to our positions in FTS, EMA, CU, and AQN.

By investing in these companies we’ve experienced both solid dividend growth and capital appreciation. Fortis (FTS), Emera (EMA), and Canadian Utilities (CU) in particular tend to increase their dividends every year.

Energy

Unless you’ve been living under a rock for the past few years you should know by now that the energy sector can be very cyclical and rather volatile.  History has also proven this – there are many peaks and valleys when it comes to pure energy play stocks. The oil and gas industry in particular seems to have a crisis every decade or so.  At the time of this post oil prices remain very depressed.  Despite that however, I remain invested in SU.  I think Suncor (SU) will thrive once again and if I’m remotely correct there will be a sizeable capital gain to deal with in the future.

REITs

One needs to be careful with Real Estate Investment Trusts (REITs).  They can be somewhat cyclical as well.  Then again, if you’re looking for income I believe this beats being a landlord.   

EITs are not generally required to pay Canadian income tax if they distribute all of their net income for tax purposes on an annual basis, so that tax is passed on to you and me, the investor.  For this reason, I suggest owning REITs in registered accounts such as RRSPs, RRIFs, RESPs, and TFSAs. 

We a few commonly known (and commonly held) REITs across many accounts, examples include REI.UN, CAR.UN and others.

Now, before you run out and copycat this portfolio some words of caution.

  1. These dividend income updates focus on our non-registered account and our TFSAs only. There is a bias to owning Canadian dividend stocks in these accounts for a few reasons.  However, I need to remind you we also have RRSPs full of U.S.-listed content.  My RRSP is maxed out with mostly U.S. and international content.  We do this for diversification.  I would strongly suggest any investor also invest outside of Canada’s borders for diversification.  We use predominantly ETFs in our RRSPs for this diversification although we hold some U.S. stocks for dividend income as well.  Companies in the healthcare and information technology sectors are there.  As are huge, multinational companies in the consumer discretionary sector where Canada has been historically weak.
  2. While we are striving to earn $30,000 per year from our Canadian dividend paying stocks for an early retirement – with the intention to “live off dividends” – I know we will eventually spend our capital. Therefore, total return (not just dividends) is important consideration for all investors in my opinion.  Especially those investors who are in their asset accumulation years and not necessary looking at capital preservation.
  3. This strategy is not without some risk. As you have seen, we own financials, energy, utilities and other companies from various Canadian sectors but there are no healthcare stocks nor information technology stocks to speak of, from a Canadian content, in the portfolio.  This means, potentially, this DIY Canadian dividend ETF might be missing out on returns from companies like Extendicare or Shopify if they do well in the future (just as examples).  Will I fail to beat the index?  Time will tell however I’m confident we have a collection of dividend payers and dividend growers in the portfolio that will serve us well long-term with minimal oversight.  (So far, returns prove this.  Our returns are in line with the TSX and slightly ahead depending upon the time frame you look at.)

So there you have it.  A deeper look inside the Canadian content of our portfolio.  Thanks to Canadian companies that continue to pay us every month and quarter, and sometimes increase those dividend payments each year, our dividend income is growing towards one of our financial goals.

As of end of June 2017 we’re on pace to earn close to $14,750 this calendar year from dividend income in selected accounts.  We don’t dare touch this money because it’s earmarked for our financial future.  It’s now growing at roughly $50 per month thanks to dividends reinvested and dividend raises throughout the year – without any new capital invested.  (We will invest new capital in January 2018 – we intend to max out our TFSAs then.)

Dividend investing is not without risks.  Yet having a financial plan that includes dividend investing as one part of a much broader approach has been a rewarding journey. Dividend investing provides cold hard cash into our bank account.  This is money we will eventually use.  I believe this approach remains a great complement to assets held inside our RRSPs; maxing out our RRSPs with international content, some small workplace pensions to draw from, and in the next five years a fully paid off home.

What’s your take on our approach?  Got questions about this post or these updates in general?  Fire away.   Thanks for reading and sharing.

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and now investing beyond the 7-figure portfolio to start semi-retirement with. 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.

31 Responses to "June 2017 Dividend Income Update"

    1. I really don’t see any JT. I mean, you could consider oil but I remain in a hold position on that (Suncor). Suncor is tempting around $30-$35.

      BCE is looking cheaper.

      I’m boring, buy and hold what I have (30-40 CDN stocks) and reinvest dividends in my registered accounts. 🙂 What about you?

      Reply
      1. I like to buy and hold as well, most likely our portfolios would look very similar. Right now I’m struggling to make the best use of capital. I have cash on hand that I would like to get into the market, but everything seems overvalued. I added some AQN a few months back, and recently PSK prior to earnings, but looking for other opportunities.

        Reply
        1. I hear ya. I think AQN certainly has some long-term upside. I wouldn’t be surprised if the stock price increases 5% or so per year going forward AND the dividend increases by 5-10% every year as well.

          Reply
  1. Nice update Mark. Congrats again on the progress. Excellent line up of equities that should continue to serve you very well over time.

    Reply
  2. Dear Mark,

    Thank you so much for sharing the details of your investments!

    Thoughts on fast food/restaurants? I own Pizza Pizza, Sir Royalty, A&W and Boston Pizza (although I plan on selling the last three at the end of the year to help simplify my already confusing tax filing). I own Boston Pizza in a registered account as well.

    I also own REITS in a non-registered account (non-registered as well), ugh. Live and learn.

    I own Sunlife, Manulife and Power Financial.

    Are you not worried about being so exposed to specific industries? I am. Maybe I shouldn’t be. Thoughts? What do the talking heads say?

    Regards, Sarah.

    Reply
    1. Good to hear from you Sarah. I personally find the restaurant industry fickle but I wouldn’t rule out owning A&W. I like their burgers 🙂

      As for the exposure to specific industries, like energy, I am not. Long-term I don’t see oil going anywhere although the consumption model will change for sure. I try not to worry about what the talking heads say. I don’t believe they can predict the future better than anyone else. Otherwise, why aren’t they all rich and retired?

      Reply
  3. Good stuff, Mark. I basically do exactly the same as you, across RSP, TFSA and unreg, however. Planning to retire next year and will also move my DC plan at work into my SDRSP and diversify into the US and international via ETFs. Everything else is divvy paying maple blue chip.

    IE telco, banks, pipelines and utility.

    Reply
    1. Charles – are you able to move your DC plan into an RRSP at retirement? Is that a feature of your plan or am i missing something as I was unaware that could be done?. Really interested to know. Thanks.

      Reply
      1. Yes it is, Mark. I really don’t like the investment options and lack of information, like MER’s, that the insurance company that administers it, at all. I’d much rather control where the investments specifically go. I have an aversion to any Mutual Funds they offer.

        Reply
        1. Yes, I find that with many insurance products or insurance-sponsored mutual funds, the disclosure is just not clear but they’re only forced to do what CRM2 tells them to do. It’s unfortunate. The mutual fund industry is a dying breed although there are some Mawer funds that deserve great credit.

          I don’t hold any mutual funds myself and don’t intend on it for as long as I live. Individual stocks and low-cost ETFs all the way.

          Reply
    1. Yes, I am 🙂 I just don’t report it since I haven’t historically done that on this site. Besides, the RRSP assets aren’t all mine unlike the non-reg. and TFSAs. I owe a bunch of tax on the RRSP eventually. The TFSA is all mine and the non-reg. has less tax complications.

      Reply
    1. Based on what I’m seeing looks like some REITs are trending lower and that’s a good time to buy assets – when they are struggling historically. I have plenty of REITs so over time, my general plan is to increase US and international assets via ETFs.

      Reply
  4. From one of the forums the following statement was made:
    “Yes, I don’t think one should put all their hopes on dividends. They are just a mechanism for extracting cash out of an equity portfolio. I agree they are extremely convenient (automatic) but they don’t make capital stretch any further than it would otherwise”…”.But for most of us, who are trying to stretch our capital to generate sufficient retirement income, I think you should be careful about relying too much on dividends.”

    I totally disagree with the statement because dividends are paid from earnings and companies would not pay and increase dividends unless their earnings were growing. Further, if earnings are growing so is the value of the firm (capital). The difference is that during stock market drops the value or price of the shares may drop and therefore if one is extracting capital, they may be extracting much more. With dividends it is likely the income will remain the same, some may cut, others hold while a few continue to increase the dividend.
    Each to their own, I’ll stick to dividends.

    Reply
    1. They surely think that income based on market prices and so based on trade behaviors are so much better.
      It is funny to rembember that this kind of people in 2008 and 2009 were pretty…silent, for must of them.

      Reply
    1. I tend to own Brookfield assets in my RRSP. That’s just where I’ve always held them. Besides, I think many Brookfield companies pay dividends in USD – something to be mindful of!

      Reply

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