June 2018 Dividend Income Update

June 2018 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 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.

By adding this income to our RRSP assets (that focus on U.S. stocks and low-cost ETFs), we believe we’ll have a comfortable retirement once the mortgage debt dragon is slayed!

Last month, I answered a number of reader questions – and more reader questions pour in.

Mark, are you worried about over-saving?  Owning a $1 million portfolio seems to be more than adequate.  Thoughts?

Great question (and a pointed one at that)!

For your honest question here is our honest answer – this is our goal and not anyone else’s.   So, while it may make some sense compare our needs (and wants) in our financial future to someone else, the reality is, it doesn’t matter.

Our financial goals may or may not be the same as others.  That goes for personal finance or anything else in life.  Therefore when it comes to money management we save, we invest and we spend money that is leftover.  That might not work for you – but that’s how we live our life.  We intend to follow this approach until we realize our big portfolio goal.

Here is a question via Twitter:

Twitter

Thanks for your question.  You’re right, you won’t find details about that on this site or within any one blogpost because I feel I already disclose a great deal about our financial life online.  I will continue to write about our dividend income goal, various money subjects over time but I hope you respect my decision.  Should you have specific questions about stocks, ETFs, bonds, where to find great deals on a variety of things – let me know.  I’m happy to help and offer a perspective!

I have a clarification question or two… when I look at your “goal chart” since 2009, every year is indicating your annual income from dividends. So these figures every year are actual income that you’ve earned from your stocks? I understand you are aiming for $30,000 annually in dividends. I realize you may keep some cash (earned via dividends) in a cash account but what I’m trying to get my head around is….is this annual income from dividends only OR from reinvesting some of these dividends?  I’m not sure I’m asking these questions very clearly!

Hopefully this can help clarify.

As you have referenced, our longer-term dividend income goal is $30,000 per year from Canadian dividend paying stocks.  These updates provide evidence that we are more than halfway there; which is awesome.

To answer your question, re: is this annual income from dividends only OR from reinvesting some of these dividends – it’s both.

Our income keeps growing every month inside our TFSAs and non-registered account largely because of reinvested dividends.  Money that stays invested can make more money over time.  There is a modest ‘bump’ in the dividend income earned each year, between December and January in particular, because of maxed out TFSAs, and stocks purchased each January that pay dividends.  Otherwise, beyond the January contributions, pretty much all of the dividend income is growing thanks to the power of compound growth.

As a footnote to the reader’s question, it looks like we’re going to surpass $16,500 in dividend income this calendar year in some key investing accounts by doing nothing but staying invested.  I’ll keep you posted (including if we surpass that milestone) on this journey in the coming months.

Mark Seed is the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $500,000 - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

42 Responses to "June 2018 Dividend Income Update"

  1. RBull (59, retired, married, rural coastal NS) · Edit

    Some good questions and fair answers.

    You’re right it’s an individual goal for you and your wife and not a one fits all plan and method. But it’s a good one that many could aspire to!

    Good luck. Maybe you’lll even crack 17K by year end.

    Reply
      1. RBull (59, retired, married, rural coastal NS) · Edit

        Yep. Changed some things up so we’re doing it now in TFSA’s. Unregistered – no- want to use the income and also don’t want to deal with cost tracking. A small drip in LIF, no other in registered.

        Reply
          1. RBull (59, retired, married, rural coastal NS) · Edit

            No, have been looking to diversify more for a while – cash > new positions. Now we’re getting closer on holdings so dripping what’s there.

  2. Saving too much is a fair question. On the spectrum of saving vs spending there are definitely people who spend too much, but there are also people who save too much as well.

    I would probably put myself close to the “save too much” side. It’s just a natural tendency. Having a budget actually helps me make sure I’m not too frugal with my spending.

    Of course, saving too much is the better problem to have.

    Reply
    1. Funny you mention that. I would probably put myself on the “spending” side too much. I mean, I don’t need to own a home but I do. That’s a huge cost right there.

      Reply
      1. I think I will always NEED to own a home so that I feel safe and comfortable in my home, can do whatever I want, never worried rent increase or being forced to move. I spend so much time in my home so I think it’s worth it to spend a bit more to make it as cozy as I like.

        Owning a home is both spending and investing I believe. Actually in Metro Vancouver, families with similar income could get big gap on net asset wise only by how early and how much they have bought in RE. We are big losers on this side.

        Even without considering appreciation, you are also forced to save money by paying the mortgage. So this time I don’t agree with you, Mark. You are not on the “Spending” side too much only because you own your home.

        Reply
        1. I guess I should clarify…I mean…I just think about all the borrowing costs, capital costs, maintenance costs and upgrades I’ve done on various houses over the years. Surely I would be further ahead if I didn’t try to own my home – but such is life!

          We’re getting close to the point whereby we actually own about 2/3 or 66% of this house. That’s great – so home ownership in the true sense is actually getting closer every month 🙂

          The good thing is – are you’re right – home ownership is a form of forced savings but it’s also a major expense. It depends on the lens you are looking through I guess – as an asset or an expense or a bit of both!

          Thoughts?

          Reply
          1. I think it’s both. I think housing is always a major expense no matter you own your home or not. We have friends here in Metro Vancouver who rented for last twenty years, not because they cannot afford to buy, just because they calculated the number and conclude renting is cheaper than buying. The numbers were right every time when the calculations are done, but the decision was always wrong. They are so much more behind than anybody who bought. Vancouver’s market was totally insane so it might not be a good reference. But I think in the range of one’s affordability, buying gives you more security then renting, right? Instead of helping your landlord to pay off the mortgage, normally you are better off to pay it towards yourself.

            I also think it’s a MUST for retirement that you own your home debt free. I saw too many seniors in the line when I volunteered at Food Bank. It’s sad. One major reason is they cannot afford the rent any more, it’s up much faster than their income. In retirement, I think you want to avoid that kind of situation as much as possible.

            That’s why although I think young people should be independent financially, but I am prepared to help with down payment for my kids if necessary and if I am able. I’d rather they pay their own mortgage instead of rent.

          2. We agree on the debt thing. To the extent possible, I will work full-time as long as we have debt. Once we have no debt, hopefully in 5 years (?) then I suspect REAL life will begin 🙂 I will then work because I want to not necessarily because I have to (like today).

            It’s not like we are suffering or drowning in debt now. I could cash in my non-reg. account and be debt free (still have TFSAs and RRSPs) but that’s not a good move tax-wise nor long-term – so we carry debt (mortgage) and invest at the same time.

            Very sad about some seniors. It sadly happens. I hope to volunteer at our Ottawa Mission in some capacity in the coming years.

            Buying absolutely gives you more security and for that reason it costs more.

            Folks in VanCity that bought 20 years are laughing at the bank right now. They won the lottery. Not everyone is nearly as lucky.

          3. Useful remark of May regarding some seniors that are faced with exorbitant rent costs.

            Selling the house and investing the proceeds is part of my retirement plan starting my mid 70’s. The risk in question here is the income from this investment may run insufficiently to cover my rent due to the insane increase of real estate and thus its rental costs. This is as a result of the fact that real estate and equities are negatively correlated asset classes. Probable mitigation is to diversify the portfolio even more into REITs which is a proxy to real estate. Distributions from REITs will increase in time of superior real estate performance, increasing the success rate of the ability of my portfolio to cover the rent charges for my condo. Partially, I have the right asses class in my portfolio corresponding to the type of my living expense. Thank you May.

          4. I think selling the house and investing the proceeds – can be a worthwhile way to fund the latter part of retirement.

            I have and will continue to do so…diversify the portfolio using REITs – but I simply have to be careful I don’t overweight my portfolio too much – likely to keep REITs to <15% of my overall investment value. Thanks for your comment Calm!

        2. May, you have a great point about the soft benefits of owning a home, especially being forced to move as a renter. Now that I have a family and children entering school age I want that stability for them and I’m willing to pay a bit extra for it.

          Reply
      2. RBull (59, retired, married, rural coastal NS) · Edit

        Not at all. We were less focused on savings and spent more during our working years, than you.

        Hard to say on the home being a huge “cost” in your market vs renting. You’d have to do some serious calculations and consider are you comparing apples to apples or a reduced lifestyle in say a much smaller apartment.

        My guess is without debt & need to save in semi or full retirement you’ll have a lifestyle increase. If true would you want to spend less now for even more later?

        Reply
        1. I guess I look at all the money I’ve spent on mortgage, capital costs, upgrades, etc. Life would have been far easier and less costly to date if I rented.
          The reason why we want to own our home is security. That security comes at a cost though!

          I do struggle with the spend now, worry about it later vs. spend less now and enjoy semi-retirement sooner equation. I don’t mind writing about that and telling people that. I guess I second-guess myself often if I’m “doing it right” or well enough… The blog is a good outlet to share my thoughts!

          Reply
          1. RBull (59, retired, married, rural coastal NS) · Edit

            Possibly true on easier and lower cost if renting. But is it the lifestyle etc you want and there could be some real issues with renting too. We could be WAY further $$$$ ahead if stayed at my second (very nice) home we built but I don’t look back. We own a home for the lifestyle, privacy, freedom and security. Very hard to rent what we have/had. Cost = yes. Value = priceless YMMV. There may well be a time when we want to rent.

            I can see that with the blog, reflecting on choices/priorities and reading other input. I am certain it would have been benefitted me years ago.

          2. That’s the thing eh – hindsight is 20/20. You make the best decisions you can and then you wake up the next day and start all over again. I really don’t have any regrets – simply trying to learn from any past mistakes or decisions so I’m better prepared/more knowledgeable next time!

          3. The thing about renting is that you can be kicked out at any time. Of course there are official rules about how that can be done, but it does happen and you read about people getting so upset. Most people like to be able to put down some sort of roots, and this is much harder when you rent.

            Although there can be situations like this: my Dad was brought up in a house that was rented for over 50 years! It was sold by whoever owned it after my granny moved out when she was quite old, and then a few years later one of my cousins bought it, so it was still in the family. When I was a child, there was a barn in the backyard, even though it was right in the city. It was about a kilometre from some railroad tracks and my granny fed everyone who came to the door during the depression era, as my grandfather was never out of work. They considered themselves very lucky.

  3. When one is considering DG or just starting,the hard part is the initial SLOW growth of the income. Especially if one invests a small amount and add small amounts. One should concentrate on:
    – Is the Income greater than before, as Mark does with his updates
    – is the dividend growing (calculate the growth %)
    – noticing that the income continues whether the market is up or down
    – do you add more funds when the market is down, growing your income even faster
    – is one adding as much as one can (not over saving and excluding enjoying life)
    – don’t chase high yield stocks to speed up the income, as the dividend will probably not grow

    Reply
    1. Good points. I’ll answer for me but I think you know these answers already:

      – Is the Income greater than before, as Mark does with his updates.
      (This helps me psychologically – I focus on higher income regardless of what the market does or does not do.)

      – is the dividend growing (calculate the growth %)
      (I actually don’t calculate this very much. I focus on buying and holding growers, primarily, that increase their dividends every year. That’s it. I have no control over how much the dividend may or may not grow so I don’t track it.)

      – noticing that the income continues whether the market is up or down
      (As above, this is huge for savers I think who might be like me, they might panic when stocks fall in price by 10% or more. I’ve learned to treat most of those scenarios as excellent buying opportunities!)

      – do you add more funds when the market is down, growing your income even faster
      (I’ve learned to do this in my 40s but I wasn’t that smart in my 30s).

      – is one adding as much as one can (not over saving and excluding enjoying life)
      (Well, I suspect we could be “retired” if we saved everything and lived more frugally but then again, I want to enjoy life and have experiences when and where we can. Life can be short sadly.)

      – don’t chase high yield stocks to speed up the income, as the dividend will probably not grow
      (nope. Anything over 5% yield is usually a sign of trouble in my book.)

      Reply
    2. @cannew Thanks for all the help with setting up investment for my kids.

      Focusing on growing income definitely helps a lot this year with the bumpy market. Our organic growth this year so far is around 4.7%. We have quite some bonds so that part doesn’t grow too much. With the market is still on high end, I feel more comfortable to have fixed income in my portfolio.

      Reply
      1. @May: Glad to help. Our granddaughter rarely checks her DRIP but continues to add money monthly and she deposits Xmas money she receives. Her dad makes the entries and shows her the increases of income and she says “Great” and ignores everything else. Her account is growing nicely, as will your kids I’m sure.

        Reply
      2. Great to hear May and well done Cannew – he knows his stuff and is a great asset to the site (even though we disagree on some things)! Kudos to both.

        Reply
  4. I suspect we are in the over saving group. We have almost always lived on roughly one salary only except the years I have been on maternity leave. We are first generation immigrants and we want to retire a little bit earlier than 65 years old, so it leaves our working years much shorter than people born here. Saving more is a must to retire comfortably. Also, we are working in high volatile industry, it provides lots of comfort that we know we don’t need to change life style a bit when one of us is out of job. It happened a couple times already. I don’t think we are too frugal either. We just do not chase luxury things. When we needed a new car in 2009, we did not buy an Acura mdx, although it’s on big sale that time, $10K off already and you can negotiate further. We bought a Rav4 instead. It’s still a very good car, full loaded, satisfying all our requirements for a car. We try to buy good enough cost-effective things, not the expensive ones.

    Will we end up to have too much money? Our plan is to retire once we have enough, and try to spend all the money before we die, no matter how much or how little it is. LOL. But if we really have too much money saved, we can help our kids when necessary, we can contribute to charities and give back to society. There are still many people less fortunate than us in need of help last time I checked. Lots of good things one can do. I don’t worry about it at all.

    Reply
  5. I think the $1 million goal is completely reasonable. I don’t think savings are something you want to risk being under on. While it takes away from your current income there aren’t too many negative outcomes of saving too much.
    Another factor I think everyone should take into account before setting retirement goals is the uncertainty. There are so many things that will be out of my control I would rather have significantly more money than any chance of too little.

    Reply
    1. Good to hear from you Laura. Your point about uncertainty is probably why we’re very focused on this long-term goal and once we realize it, it will alleviate some stress related to retirement.

      Reply
  6. Lloyd (58, retired (but farm a bit), married, rural MB) · Edit

    At 58 I now know I have too much saved. Having said that, I saved with the plan to retire at 50 and have a fifth wheel/nice truck to travel the country. I would have been pretty close to the mark based on that plan and savings. However, life intervened and things beyond my control changed. I would not have done anything different, but there may be reasons for having too large of a portfolio.

    Reply
  7. Lloyd (58, retired (but farm a bit), married, rural MB) · Edit

    “pretty much all of the dividend income is growing thanks to the power of compound growth.”

    …and dividend increases from time to time. 🙂

    Reply
  8. RBull (59, retired, married, rural coastal NS) · Edit

    Definitely not “oversaved” here. We had some life curveballs thrown in our careers that delayed retirement and eliminated addional savings (stopped at age 44), and also made some decisions on property that reduced available future cash flow. But it’s all good and we’ve been fortunate.

    We are living fairly comfortably and securely in retirement, and I believe we can continue this. It’s encouraging to read so many stories about people doing well in retirement and those well on their way.

    Reply
    1. For sure RBull…re: It’s encouraging to read so many stories about people doing well in retirement and those well on their way.

      I personally get some inspiration from readers/commenters. Whether that is someone saving $100 a month as a 30-something or the 70-something living off $80,000 per year in dividends, it’s encouraging to know people believe some of the same principles that I do/we do and are supportive of the path but also provide critical feedback on it.

      Reply
    2. @RBull, @cannew and a few others are my role models. Hopefully we will be able to live comfortably in retirement not too long from now.

      I have learned so much here. Thanks, Mark.

      Reply
  9. RBull (59, retired, married, rural coastal NS) · Edit

    Thank you for the kind words May.

    Judging by what you write I am certain you are going to soon have a comfortable retirement.

    Reply

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