June 2019 Dividend Income Update
Welcome to my mid-year June 2019 dividend income update.
Six months down, six months to go in 2019. Time (and summer in Ottawa) is flying by…
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 us with the necessary income to realize semi-retirement. The income goal from our TFSAs and non-registered account is $30,000 per year.
It’s a big number but it’s achievable I think. I feel that way because these monthly income updates are demonstrating this.
Two big financial goals
I write about dividend investing often (every month on this site as part of these income updates) but it’s worth reminding readers this approach is just one method regarding how we invest as we kill off mortgage debt.
Essentially, we have two big money goals:
- Become debt-free. $0 debt. Ideally, never take on debt again once debt free.
- Own a $1 million investment portfolio (outside any existing workplace pension assets, excluding any of our home equity).
We believe, realizing goals #1 and #2 above will allow us to work on our terms, essentially making us financially independent in the coming years.
Had we not decided to buy the condo we now live in, I suspect we would have been semi-retired now in our 40s. FIRE (Financial Independence, Retire Early) is a pretty cool concept but home/condo ownership was important to us as part of our financial plan, so we continue to work full-time and pay off debt.
A frugal life of FIRE may or may not be right for you.
About the $30,000 income goal
That income goal is on my Dividends page here.
Readers continue to ask me why I focus so much on dividend income and why we don’t discuss our RRSP assets very much – related to some semi-retirement dreams.
Well, my answer goes something like this:
- The passive income goal of $30,000 per year will provide tax-free and tax-efficient income for life – without needing to spend the capital or at least we can spend the capital on our own terms. I see it this way: $30,000 per year will pay for the following for as long as we live (2019 after-tax dollars):
- food/groceries, basic household supplies = $8,000 per year or $667/mo.
- condo utilities (heat, hydro, water, internet, cell phone bills) = $6,000 per year or $500/mo.
- condo property taxes = $6,000 per year or $500/mo.
- condo fees in Ottawa = $6,000 per year or $500/mo.
- 1 car expense (insurance ($50-100) + gas ($50-100) + car maintenance (flexible)) = $3,000 per year or $250/mo.
- healthcare costs (various).
Assuming just half of our portfolio increases their dividends over time, I’m confident this is enough income to provide the basic necessities of life even if inflation rises between 3-5% for decades.
- Certainly dividends are not magical but they are pretty darn good. You can quote me on that! The income derived from our portfolio will be our money to keep, to spend or reinvest on our own terms. This is why I like dividend income so much. I don’t have to worry about what management might do with their cash – as a shareholder of a dividend friendly company, I get some of it to do as I please without worrying about market timing or selling shares. A reader recently asked me:
What are your favourite or top-5 Canadian stocks?
Well, I’m a big fan of dividend friendly companies like these.
I believe you can own the same Canadian stocks the big mutual funds and ETFs own – like this.
Earlier this year, I bought some more of my favourite Canadian utility stocks. I’m glad I did. One of them is up almost 15% year to date.
- Investing this way is a form of forced savings. What I mean is, I’m striving for certain income-level in semi-retirement. Cash flow from our portfolio will be king. To achieve our cash flow requirement, I know that with a simple 4% rule: every $1,000 invested in a company that yields 4% in dividend income will pay me another $40 per year. So, every year as an example, my wife and I strive to max out our TFSA contribution room to invest in more Canadian dividend paying stocks. Earlier this year, in January 2019, we invested $12,000. That $12,000 invested will likely increase our dividend income by another $480 (give or take) by December 2019 – or at least $240 year to date. I can assure you this is happening when combined with dividend increases along the way:
- From December 2018 to end of January 2019, our dividend income jumped from $17,221 by over $500.
You can read more background here.
- From early February 2019 until now, our dividend income climbed again, by hundreds.
As of June 2019, we’re on pace to earn $18,900 this calendar year from those key accounts (TFSA and non-registered), about $100 more than just 30 days ago by sticking to our plan.
Wild isn’t it? I did nothing and our forward dividend income increased by $100 in just four weeks…
The simple combination of buying and holding Canadian stocks that pay stable and increasing dividends, and maxing out our tax-free investing accounts, every year, has done a world of good towards helping us realize some of our money goals.
Any new investments on the horizon?
Not really. Not now.
You might recall one of our 2019 money goals is to save yet another bit of money to max out TFSA contribution room for January 2020. We’re a little behind on that particular savings goal (based on the recent condo move and expenses related to that), but we hope to make up that savings in the fall.
With dividend reinvestment plans for most of the stocks we own on autopilot, shares DRIPping commission-free every month and quarter, we might just surpass $19,500 in dividend income from our non-registered and TFSA accounts by the end of 2019.
As always with my plan, I’ll keep you posted!
I hope you are realizing some of your mid-year goals. Let me know when you have questions about ours and I will do my best to answer them.
See you on the site!
Nice to see you are ahead of your goals. Great work, Mark.
Good work on adding more utilities at the year beginning. I need to buy more utilities too but they are all near their 52 week high.
It’s coming along May but to be honest, it’s getting very boring now. I just need time, dividend increases and some addition money invested to do it’s thing.
Yes, glad I bought a few hundred shares of AQN earlier this year. I predict that’s going to be a $20 stock in the coming year or so.
Oh my. Then I should really buy some more now.
Well, I’m just guessing. Don’t take my word for any sure thing!!
Amazing stuff Mark! $100 more than what you were tracking last month means a lot of dividend growth. Congrats!
We crossed a major milestone in June – hit the $2k per month mark. Only a few cents off $2.1k mark. Woohoo! 🙂
Yes, excluding RRSP income – things are coming along slowly. Thanks for the encouragement.
It doesn’t make sense for me financially to be adding lots of money to our non-registered account when my wife has some RRSP room left. If things go to plan, her RRSP will be maxed out by the end of 2020. That means we’ll have x2 TFSAs maxed, x2 RRSP maxed and a modest non-registered account full of stocks and ETFs collectively.
Slowly…things are coming along but damn it takes time!
Congrats on your new, upcoming milestone!
I still say you should be converting your $US dividends to the $C, it would give you a more impressive number. 😉
Ya, it might 🙂 These updates exclude RRSP assets which have those as you know, U.S. holdings in them.
All that to say, beyond the TFSAs and non-reg. account I am hopeful we’ll hit our $30k per year goal in another 5 years or so.
I track these accts too and have 2 Brookfield postions (.un) converted at BOC rate. So I do track @ CDN $. Varies a bit but no biggie.
My spreadsheet is written so that I enter the $US – $C rate and the payments all change. True, it isn’t noticeable on a day to day change, but when taken at par, it amounts to just a hair over $5K on the total income. The Brookfield family and AQN are fairly substantial in the overall portfolio.
Difference here (currently) would be right about $500- 10% of yours. Not large positions- especially BPY
Same. Currently using 1.32 I think for my spreadsheet. The Brookfield family continues to roll 🙂 I still see BPY being quite undervalued. Hope to buy more of that mega-company.
BPY is buying back shares now and they figure its 33% undervalued to fair value. Plans to increase divvys 5-8%/ yr and yield is good. They also plan to sell 1-2 billion in mature stable assets each yr.
I dunno. I thought it was undervalued too but haven’t figured it out now. Going nowhere! I drip in TFSA
BIP on the other hand I really like. Might buy BAM at some point.
Big fan of BIP. Own a few hundred shares of that one and likely always will unless they do something crazy with their dividend policy.
BAM is the parent, just owns the kids for now for income/higher dividend.
Ya, odd, I thought it would have climbed some time ago! Oh well, I’ll keep buying more via my DRIP in the meantime.
BIP I like too! And BEP!
Great progress Mark. Best wishes with the forward March to your dividend income goal and on retiring the debt for good.
Yes, for sure – the combination of a good portfolio, no debt and other assets should be wonderful feeling eventually! Thanks for the kind words.
Yes, even better than the (deserved) good feeling you have now.
You are welcome.
Congratulations on your dividend growth Mark, it must be very satisfying to see that steady growth.
I must admit that I didn’t really focus on dividends until recently. I have been following the Couch Potato ETF approach for many years and have been focusing on contributions and growth of the total value of my portfolio. Part of it is because I have no real need for dividend income now, since retirement is still about 10 years away. I’ve also been swayed by indexers’ claims that dividends shouldn’t matter and are already priced into the cost of the shares (they seem to focus on dividend payers, not dividend growers).
Your blog and the copy of Cannew’s excellent book that I ordered and devoured have helped reframe my thinking on this front. I’ve already proven to myself that I can sleep through market gyrations so generating reliable, growing and tax efficient income in retirement will by my primary goal since I don’t have a pension. As I mentioned on the weekend post, I’ve stopped contributing to HXT in my taxable account because of the government’s announcements and I am planning to explore Cannew’s methodology to select dividend growers for new contributions. I’ve also been paying more attention to the value of my dividend income from my ETFs in my monthly statements and have been pleased with the progress.
It’s coming along BB. But, you know, it feels like it’s taking forever. I have to remind myself to stay invested, stick with the plan, and ensure I don’t deviate to buy just any companies that pay a dividend – rather, buy and hold and reinvest dividends in the top-20 or so XIU companies.
After that, I must turn my attention to U.S. stocks and ETFs and load up on those!
Interesting enough, I’m not near any traditional retirement age. I mean, I’m 45. I should have a total return focus and if I did, I would own probably VEQT or VGRO and be done with it. But…instead of portfolio value I like thinking in terms of what value my portfolio will deliver so I can spend income as I please. So, in my 30s and 40s I’ve gravitated to be a shareholder of dividend friendly companies – so I get rewarded instead of the hope of capital gains.
That mindset (even though I don’t spend the money) allow me to stick to a plan I believe, perform less trading, and therefore keep my money working.
I’ve been told countless times by hardcore indexers to consider changing my approach but to be honest, investing for income is working for me and I suspect if I stick to my plan it should work very long-term too 🙂
Are you going to continue to hold VCN or XEF or VUN in smaller quantities as you shift assets?
I also like the call on HXT. Interesting product for sure but derivative products seem to be on a death march with our (current) government.
I’m a big fan of VEQT and VGRO – if they had come out a decade ago I would have been all over them, but since I’ve built my portfolio with individual holdings and am fine with rebalancing I may as well stick with it. I like the simplicity of them and they help overcome the behavioural bias of trying to market time the individual components. When you have a chunk of money, you just invest it into the single ticket solution and it takes care of the rest. I have two adult kids (18, 20) and they have enough of their own savings to open TFSAs so I’m going to put them in VEQT to start their investing journey.
For now, my plan is to maintain/add to my holdings in VUN, XEF+XEC in my RRSP/TFSA. I thought I was being tax efficient with these allocations but I realize from other readings that I’m creating some complications for maintaining my asset allocation during my eventual drawdowns. Lots of unknowns around HXT – the Liberals plan to prohibit them going forward but they first have to win an election. I always knew that this might be a risk when I invested in them and am not surprised they are being targeted. Since I didn’t need the income, the dividend tax-free growth was appealing to me. I suspect HXT will be converted to a standard ETF or may continue to operate as a derivative but have to issue dividend T5s to unitholders. The big question is whether unit holders will be faced with a full, unrealized capital gain tax or a tax based on the calculated dividend (+gains on dividends) portion. If it is the latter then it shouldn’t be too painful and I would have had to pay it anyways along the way.
While I could simply buy VCN, based on my readings here and Cannew’s book, plus my own interest to learn, I am planning to do my research to find high quality, dividend growth stocks to round out new monies in my Canadian holdings. I have read that the US market is very efficient and hard to gain outperformance over the S&P500, but the Canadian market allows for greater selectivity (and preferential dividend tax treatment).
I might buy VEQT or VGRO to simplify things for my wife’s portfolio actually. I won’t sell anything, rather, I’ll just start a position and slowly grow it to a few hundred units in the coming years.
Over time, as in decades from now, I can consider selling off some stocks or move assets to VEQT or whatever is equivalent of the day. She has no desire in selecting and holding stocks for income and growth. The only thing she keeps asking me is: “so, when can I work part-time again?” “just tell me when we’re 1-2 years out so I can plan – otherwise, I don’t wanna know.”
She makes me laugh.
Smart plan for your kids. Regular savings for the next few years anyhow in VEQT is all they need…
Back to you, I see, so you’ll have the ETFs but do more “explore” with dividend paying stocks – especially VCN replacement.
As you might know, that’s really been my plan. Own the top-20 to 30 CDN stocks that VCN, VCE, XIC, XIU, etc. has and then focus on U.S. ETFs and stocks thereafter.
So far, so good. I mean if even if a few of the top-20 stocks in Canada cut their dividends, let alone go under, our country is in BIG trouble. I can’t see it happening so I own some 30 CDN stocks anyhow 🙂 I also own them for the DTC as you mention in my non-reg. account.
That’s the beauty of the strategy, a growing income for just holding quality companies. Ahead of target and it’ll just get better.
Big fan of growing income cannew. Have been for 10 years and hope to be a fan for many more.