March 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 in some key accounts. 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.
If you caught my post last month you’ll know a number of stocks we own increased their dividend.
This month, we also received another nice surprise:
Power Financial (PWF) increased their dividend.
(This makes me believe a dividend increased from Power Corporation might be on the way later this year as well…we’ll see!)
Thanks to more cash flowing from the companies we own, we’re on pace to earn $16,150 this calendar year from Canadian dividend paying stocks held in our tax-free (TFSA) and non-registered accounts. Again, after many, many years of diligent saving and investing – to put that income in perspective – we believe that income could pay for the following today (if we wanted it to):
- All home property taxes this year, and every year going forward for the rest of our lives. (I just paid our first interim tax bill for 2018, that was $2,100. Another bill for another $2,100 will be due in June.)
- All home utility bills – for life. (Our heat, hydro, water, internet, cell phones, other utility bills cost us anywhere between $600-$650 per month; about $7,800 per year. With the dividend income earned this year, and likely some dividend increases in future years, we should be able to keep up with inflation. Dividends earned from various heat, hydro, telco and other stocks are intended to cover our utility bills – for life.)
Beyond property taxes and utility bills to operate our home, dividends will also need to cover more than that if we want a modest retirement.
I’m optimistic our dividend income, if it can grow in the coming 5-10 years (basically double what it is today (a reminder our goal is $30,000 per year)) will easily cover the following:
- All home maintenance and improvements/condo fees ($600 or so per month)
- All auto needs ($300 or so per month which includes saving for a used car every 10 years)
We’re now more than halfway to our goal to largely “live off dividends” – but there is considerable saving and investing to do.
Ideally, our goal is to use dividends (and distributions) earned from our investments each month to cover all home, personal, and day-to-day expenses.
When that occurs, and we’re debt-free, we’ll stop working full-time since we know even some small part-time work or seasonal work will be enough to sustain our lifestyle for decades to come. We’ll also have some small workplace pensions to draw from in our late-50s and 60s and beyond. Government benefits will kick in in our 60s for some extra inflationary insurance. We’ll have options about when to take our Canada Pension Plan and when it comes to managing our personal finances.
Stay tuned for my next dividend income update and thanks for reading.
Thanks for taking the time keeping up this Blog. Curious as to what calculator you use to calculate your future dividend income?
I have a simple spreadsheet that I use. It includes/shows # of stocks owned; dividend payment; dividend frequency (e.g., 4x or 12x per year) and with that consequently the dividend income I earn every month or quarter or year. As I own more shares, dividend payments go up (or down) then the forward/future dividend income changes accordingly.
Good progress every month, Mark.
I got a raise today. TJX hiked the dividend by 25%.
Big raise! Nice and congrats.
That’s the good thing about you having a dividend portfolio as well as index funds, is that for the dividend part you can look at the dividend income, and feel rewarded upon seeing how many expenses they can cover yearly. Always nice to see dividend increases every year for the stocks you own. By the way, Power Financial must be still doing well with actively managed mutual funds, which explains why the company is still thriving and increasing dividends?
With my 100% index portfolio, it’s like watching paint dry. LOL. Also, it’s nice for you to have a pension as well to supplement. Always good to have a backup source of income.
Keep up the great work.
It’s coming along Peter for sure and the PWF structure is rather complex, so their insurance products must be doing OK with an aging population as well.
A pension to supplement any healthy personal assets is ideal. Well done 🙂
Consistently good forward progress. Great job.
That’s for sure.
Keen to keep seeing it years from now!
Seems like only yesterday we were looking at Feb Update. Nice that your income keeps growing as time passes quickly or slowly.
Indeed. I hope with more dividend increases and dividends reinvested that April will be a larger month by about $50 or so as well – with no new money added.
That is a fantastic forward dividend income. Congrats on your newest raise as well!
Keep it up and you will have no worries!
Pretty awesome that you already got home property tax and utilities covered by dividend income! I haven’t tallied our March dividend income yet but I think we might have yet another record month. Probably going to cross the $1,400 milestone for March. Hoping to hit $18,000 for 2018. 🙂
Geez, that’s great; $18,000 per year in 2018.
Oh, you have to take the pension commuted value as a lump sum if you leave before 65 years old? Do we have to? Can we just leave the DB pension with the company that manages the DB pension and then at 65 we get pension cheques from them for life? Ideally this is the type of DB pension set up we want my husband to have since I have a DC plan that’s all in a LIRA and a RRSP account.
I guess it seems like with a DB pension if you stay until 65 years old (or until your magic number is reached) then you can opt to get pension cheques for life? However, if you leave earlier than your magic number then your only option is to take a lump sum commuted value?
Well, I don’t have to but I recall I can leave the DB funds as-is if I leave the workforce.
If I leave before 55:
1) deferred pension payable from the plan, at 65, or as early as age 55 with major penalties OR
2) move funds to a LIRA, equal to commuted value.
I will not be working at my current job until age 65, I know this for sure!
Given that the pension will be at minimum, $27k at age 65, I would be very tempted to leave it in the plan and take the money at that age. That’s some modest fixed income.
“move it into a LIRA if I leave work before age 55”
We had to leave before age 50 to be able to take the pension commuted value.
This is awesome. Good job Mark.
The workplace defined benefit plan you mentioned above, where you won’t draw from it until your 50s or 60s, is there such a thing where if you decide to resign in the next 5 years you can elect to continue to contribute to your DB plan so that you will get the full DB pension amount as if you had worked until 65 years old? I’m asking cause I wouldn’t mind if my husband can do that with his DB plan and retire/travel earlier.
Good to hear from you. Yes, I can take my pension (commute it) OR I must move it into a LIRA if I leave work before age 55. I can take a reduced pension at age 55 but I’m not sure if I want to – I would prefer to use up our RRSP assets before taking my inflation-protected pension in my 60s or ideally age 65.
Based on a formula of years of service x 1.6% of salary over best (average) five years earnings – that will be my pension. Hopefully north of $30k per year by the time I leave the workplace. We’ll see!
DB is a financial tool which is, despite its name, surprisingly unpredictable. I took commuted value early last year. Had I continued with the same company for another year, commuted value would have been significantly less – due to higher interest rates on 10 year government bonds. And this year the government plans to change the rules, which would further reduce the commuted value. Meanwhile, the unfunded portion of my pension (~45%) is being paid over a period of 5 years. That part seems to be growing at a 7% interest which does not make much sense.
DB pension can certainly work out really well, but is open to the whim of the government and company accountants and one never really knows where he stands.
My DB pension is associated with ONA (Ontario Nurses Association) and other big unions so I’m not too worried about it’s stability other than underfunding (to be made up by future, higher, contributions by workers). We’ll see. Nothing in life is guaranteed other than an enjoyable Masters tournament 😉
Oh, and to clarify, there is no way that I know of to: continue to contribute to my DB plan so that I could get the full DB pension amount (as if I had worked there until age 65).