March 2020 Dividend Income Update

March 2020 Dividend Income Update

“I look forward to sharing March dividend income updates and beyond with you – good, bad or indifferent!”

That was the statement in my February 2020 dividend income update.

My, my, my…have things changed…

Dividends while good are never guaranteed

As regular readers of this site are aware, I take a two-pronged approach to investing:

  • I strive to build a passive income stream using our non-registered account and TFSAs, investing in mainly Canadian dividend paying stocks, and
  • I strive to invest in U.S. stocks and low-cost ETFs inside our RRSPs, for income and growth.

These updates are and continue to be about that first bullet. 

I focus on that reporting because a) I’ve always reported it that way for about 10 years now and b) because I will eventually draw-down the capital inside our RRSPs as part of our semi-retirement plan.

I continue to believe should the passive dividend income derived from our Canadian stocks in our non-registered account and TFSAs eventually exceed $30,000 per year, our long-term goal, I am confident without any debt my wife and I could semi-retire.

This is because I believe coupled with our RRSP assets and other savings we are pursuing we will have reached our Crossover Point.

Once all income from our invested capital comes close to matching our monthly expenses, I believe we’ll have enough money to change our working habits:

  1. We can work part-time or remain full-time.
  2. We could consider drawing-down our RRSP assets over a multi-year investment timeframe.
  3. We could “live off dividends” from our non-registered portfolio and keep TFSA assets intact for older age. 

Basically, we would have financial options…  That is the goal here. 

Dividends can and do get cut – sigh

Since my February update, I’ve incurred one (1) significant dividend cut to my portfolio so far: Inter Pipeline (IPL). With that, Inter Pipeline’s decision to chop their dividend by a whopping 72% (as responsible as a decision that was) that slash hurt shareholders like myself who have enjoyed multiple years of dividend increases.

Dividends did double in the last 10 years. I’ve owned IPL for all of them including monthly dividends paid from 2019:

IPL Dividends April 2020

Data from Inter Pipeline.

So should I change my dividend investing approach?

With that dividend chop to my portfolio I’ve lost about $200 in annual dividend income for our key tax-efficient and tax-free accounts. Far from ideal.

Instead of our forward dividends from our non-registered and TFSA accounts looking like $20,600 for this calendar year it’s now looking like $20,410.

March 2020 Dividend Income Update

This of course assumes all companies will continue to pay their dividends as they normally would. Again, no guarantees. In fact, I do expect a few more stocks that I own might cut their dividends in the coming months. This is a significant economic catastrophe unfolding.

We are headed towards a global recession and you and I should prepare for it. 

This begs a question: should I change my dividend investing approach?

My answer is a resounding “no” for a few key reasons:

  • While scary this is actually a great pre-retirement income test for me. Although dividend cuts are not ideal, I’m embracing this market crisis as a HUGE opportunity to learn how I’m reacting and managing my portfolio. For years, I’ve considered the notion to “live off dividends” to some degree. This market climate is going to test that approach and my emotional resolve. Of course, in semi-retirement, I will have other market risk mitigation tactics in place (such as at least 1-years’ worth of expenses saved up in cash). Yet in living through things right now, I will clearly see what companies will cut their dividends and what companies won’t. That could be a great indicator for how to adjust my portfolio moving forward. 
  • Regardless of the outcome, I’m getting some stocks on sale right now. The beauty of participating in dividend reinvestment plans (DRIPs) is that whether the market is running hot or tanking I’m reinvesting my shares commission-free. So, during this economic crisis, thanks to DRIPs, I’m buying more shares without incurring any transaction costs at lower prices. I’m in my asset accumulation years after all – buying more shares at lower prices is a very good thing. If or rather when dividends are reinstated or increase again, and they will eventually, I’ll have purchased many more shares at far cheaper costs than I could have months before. While dividend cuts are far from ideal, I’m embracing this opportunity to buy more stocks at lower prices before they rise in value again.

Keeping an iron stomach and next steps

This economic collapse is by no means easy. I worry about the long-term economic impacts of this crisis. I worry about my job from time to time. I’m actually very concerned about the boarder economic implications of what’s happening including how on earth  the tax base is going to pay for all this lost productivity…

It is my sincere hope leaders will start putting plans in place to get people working again in the next month or so. A recovery will take longer…

It never feels good to see your portfolio value tumble. There are likely more surprises to come…

But, market volatility even with some extremes is normal.

This is my third major correction as an investor. My first was when the tech bubble burst some 20 years ago. My second was living through The Great Recession just over a decade ago. Now, this crisis.

I can’t say what you must do for your portfolio but I continually remind myself why I need to stay invested.

This means I won’t be selling anything including any IPL stock. I will continue to hold this one.

As savings will allow, I will however be looking to add more shares in various companies. I’ve highlighted the sectors I am focusing on and why below:

  • Utility companies – because people will always want to heat and cool their homes, enjoy electricity, use the internet and technology, and enjoy clean water.
  • Healthcare companies – because people will always strive for (or least want to have) health.

March 2020 dividend income update

While March 2020 dividend income has dropped, we’re still doing pretty well thanks to many years of disciplined investing and saving for our future selves. It’s also comforting to know our overall dividend income continues to go up if I was to include other assets such as RRSP investments.  

To put roughly $20,400 per year in tax-efficient and tax-free (thanks TFSA) money in perspective:

  • Using a metric I started here on this site, that is gaining traction with other bloggers in terms of an hourly passive income rate:
    • $20,400 per year in dividends earned translates to earning roughly $2.33 per hour of every hour of every day ($20,400/8,760 hours (24 hours x ~365 days)).
  • In terms of an hourly wage:
    • That dividend income earned per year could be considered earning the equivalent of $9.81 per hour assuming I work a 40-hour work week ($20,400/2,080 hours (40 hours x 52 weeks)). Then again, some of that income is tax-free (thanks TFSA).

Will more dividends get cut?

How might I need to alter my dividend income approach to “live off dividends” in semi-retirement?

Will I need to change my investing approach as larger market crises loom?

Lots of questions to be answered. We’ll see what the future holds. I will have another update in April. Until then, send me lots of comments on this post about your thoughts.

Stay well and stay at home,

Mark

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're inching closer to our ultimate goal - owning a 7-figure investment portfolio for semi-retirement. We're almost there! Subscribe and join the journey. Learn how I'm getting there and how you can get there too!

38 Responses to "March 2020 Dividend Income Update"

  1. Mark, I love the metric that I’ve seen you use over the months of dividend income your portfolio earns each and every hour. To think that you are close to hitting $10/hour on a 40-hour workweek is even more staggering.

    IPL aside, you and your wife have done a lot of the right things, and I’m sure your focused approach to long-term investing in good quality dividend names will succeed even if the current market lasts for an extended time. The good thing is that you have time on your side.

    Reply
    1. I hope so Ash. I mean, we’ve tried to live below our means, have fun, and save money along the way but you never really know if you do things right until hindsight hits!

      Thanks for the kind words.

      Doing OK during this crisis?
      Mark

      Reply
  2. I greatly appreciate you savvy advice and insight. After many years of mistakes in managing my modest RRSP and now RRIF, it’s so much easier to hold mostly blue chippers and use the DRIP approach. In following equities that I hold where there market price is fluctuating significantly, (which haven’t been ) is there a % payout factor that represents a red flag. I am still a long holder of TA which many, including yourself, sold off a while back when they cut their dividend. I’ve continued to DRIP it and it reinstated a low dividend and appears to be moving into a recommended BUY position. Any thoughts? Thank you.

    Reply
    1. I’ve got a few “on watch” in my portfolio whereby the yields have really climbed up due to fallen prices.

      Good memory, yes, I sold off TA a long time ago and haven’t bought any since.
      https://www.myownadvisor.ca/now-transalta/

      I won’t be buying TA myself but have you considered the renewable arm of TransAlta? RNW?

      Stay well George!
      Mark

      Reply
    2. I lost $300 due to ipl dividend cut. I had wanted to sell ipl before the crisis because it had negative div payout ratio and cashflow but didn’t get a chance to.
      I read that pembina is a better company than ipl with a stronger balance sheet and better div payout ratio.

      Reply
      1. Yes, it sucked, but what can you do?? I think other pipelines such as PPL (Pembina) are potentially in trouble for some potential dividend cuts as well.

        We shall see!?

        Hang in,
        Mark

        Reply
    1. Good to hear from you…yes, not a major hit given we only own a few hundred shares. I hope IPL will come back in time but you never really know as you know!

      Geez, $30k per year would be outstanding for you guys. You must be investing a bundle to get that YOY growth. Well done. 🙂
      Mark

      Reply
  3. Mark,
    I don’t own IPL.
    I am thinking, IPL will come back by this time next year. If you are not selling on loss, you may be able to get some benefit next year.

    Reply
    1. Not selling at a loss right now. Buy and hold and reinvest dividends including IPL as much as possible.

      Doing OK through all this mess? Take care,
      Mark

      Reply
  4. Slow and steady right?

    I plan on adding to our telcos at the moment as they are still a little cheaper and ppl will keep their phones. Imagine this lockdown with no internet?

    Interesting times for sure. Ford has been a solid leader though.

    All the best Mark

    Reply
    1. I think so Rob! I consider telcos as utilities per se so they are in my list. 🙂 Can you imagine the carnage without internet, little to no business transactions??? Geez. Makes you think though of what to own!

      Stay well and yes, VERY surprised at Ford to be honest. I didn’t see that coming!!
      Mark

      Reply
      1. My son, who just graduated with his PhD in December, has been working at home. He started work on March 9th and the next day his company ordered everyone to work from home. Pretty forward thinking for the USA and as a mom I was so relieved he wouldn’t be on public transit in a big city.
        Anyhow, they had a huge windstorm in Boston today and he just texted me photos of the huge tree that came down knocking out their power–and their internet– for many days. He can’t work without internet….

        Reply
        1. Yikes. Well, glad to hear he is OK and doing well overall Barbara.

          Yes, we certainly cannot live without the internet these days…

          Stay well,
          Mark

          Reply
  5. Hi, we have been going against conventional wisdom for the last 15 yrs by being all in on blue chip dividend paying stocks in all our portfolios – no bonds, no GICs, no money market funds. But by not having a financial industry recommended balance of fixed income to stocks (suggested 60-40 at my age 60), we have also gained substantially more than if we took the “safe” approach all along. Risky, maybe but we are substantially farther ahead (aka richer) now because we took that route.
    So we can’t really moan too much right now because that is the risk-reward deal we accepted when we signed up for this crazy ride!

    Reply
    1. No bonds or GICS or money market funds. Interesting, I recall that. How have you been holding up so far Peter?

      It sounds like you are definitely wealthier now for it…based on dividend growth and capital gains over the years vs. the traditional 60/40 balanced portfolio recommendation for most early/near retirees.

      Are you worried about your dividend income and do you have plans to cut back if dividends are cut to conserve spending/expenditures?

      Crazy ride indeed!!

      Stay well,
      Mark

      Reply
      1. Holding up OK so far. Yeah, was down about 35% YTD just a few weeks ago (holy crap!), now somewhere at 20% less. So now back to the portfolio $ total I was at 3 yrs ago in Jan 2017. However, dividends have all been paid (and also increased) in that time frame.

        Over the last month, took the opportunity to trim back on REITs like Riocan and CAR and bought some other boring stuff instead (ENB, CPX, Verizon). Not sure if it was the right move but retail and rental will be soft for a while yet in my opinion and available cash flow will be tight for these REITs. But again, what do I know?

        Not worried about dividends really but don’t expect any increases for a couple of years. Will I see some cuts? Not sure, maybe…either way, I am very fortunate that we have 12-18 months of available cash to live on.

        Reply
        1. Good stuff Peter….re: portfolio climbing back. Mine is as well…so far…

          I actually am tempted to buy some beaten up CAR. I think they manage their company very well. For now, just saving what I can and trying to pay down some debt/mortgage.

          Boring stuff like ENB, CPX and VZ is smart. Can you image a world where we don’t have AT&T, VZ and BCE and Telus providing our wireless and internet? There would be absolute chaos…

          I hope to be like you and keep at least 1-years’ worth of major expenses in cash in a few years (that’s $50k for us) to start any semi-retirement with. We will still work throughout our 50s ideally. I think this crisis has me thinking I might need a bit more…

          Stay well!
          Mark

          Reply
    2. Hey Peter

      Good stuff!! My wife and I are in the same boat – 100% TSX listed dividend income/growth stocks with a couple year cash wedge. It has worked out amazingly well for us. Since retirement in mid-2013, we’re up around 58%. Also, since Jan 1, 2019, we’re still up about 9%,

      This type of portfolio isn’t for everyone but it sure has worked for us.

      Ciao
      Don

      Reply
  6. Always an interesting read. Thanks to you and other pragmatic financial bloggers I am viewing this “correction” as an opportunity rather than a disaster. I held all my current positions and I have added to my ETF’s as the numbers dropped. This will improve, but it will take a long time; but I have time.

    Stay safe!

    Reply
    1. Very smart stuff Chris if you can afford to invest throughout this period. I have no idea how much or how long markets might be clobbered by this crisis but thinking if it is 6-12 months and you can afford to invest throughout it, I can’t imagine if you don’t need the money now what your portfolio might look like in another 10 years. I suspect you will be VERY, VERY glad you invested the way you did into cheaper equities.

      Stay well,
      Mark

      Reply
  7. Hi Mark.
    As with Don and Peter, when I retired in 2007 I opted to maintain a portfolio of 100% equities (stocks and ETF’s) and have benefitted greatly in my RRIF, TFSA’s and non-Registered accounts. I must admit it has taken a great deal of will power to maintain these portfolios through the turbulence the markets have experienced since then.
    I have seen some predictions indicating that the Canadian dollar may retreat to the 60 cent level and I am wondering how you and your followers might change their investment strategy to accommodate.
    Thanks for your great articles and allowing others the opportunity to share.

    Reply
    1. I’ve heard from a few folks like you Jim, that have gone mostly equities with a sizable cash buffer for the last 10, 15 or more years – they seem to be doing “just fine”.

      https://www.myownadvisor.ca/cash-wedge-opening-investment-taps/

      A common denominator for these readers and investors, what I’m learning is, the income generated from their portfolio/assets MORE than covers their expenses. In times of crisis, they also cut back their spending. This combination of 1) portfolio income > expenses and 2) cutting back discretionary spending seems to be the ultimate keys in riding out this market climate to date rather easily.

      This is needless to say a VERY lesson for me in what I need to do for my financial future; learning from these retirees now.

      Thanks for your kind words about the site.
      Mark

      Reply
  8. Keep it up Mark. Sorry about the dividend cut. Just heard that I got a cut from Keg too (not surprised).

    So true about the iron stomach. It was so painful to see everything drop by 10% in one day and then again a few days later (can’t remember it seems like a blur).. but now, I want things to drop again so I can buy more!

    Reply
    1. Ugh, for sure. IPL has a cut but this morning I got some news that JNJ increased their dividend by 6.3%!

      Take the good with the bad and just trying to stay invested – saving for 2021 TFSA room now for my wife and I as much as we can.

      Doing OK through all this stuff?

      Cheers,
      Mark

      Reply
      1. Yup doing okay thanks 🙂 Initially very panicky but now it seems like a new normal. Wonder how long this shut down will go on for. Hope you are doing okay too!

        Reply
  9. My biggest concern is the rate at which the Canadian and US governments are printing money at unprecedented rates. This will result in inflation as billions of printed dollars enter the economy.

    Will the high yields we are seeing today be enough in the years to come as inflation eats in to the returns?

    Reply
    1. I hear you Garry. I have no idea how massively this is going to screw up future generations. Will it result in inflation or stagflation I wonder?

      Stay well,
      Mark

      Reply
  10. I wouldn’t worry too much about a dividend cut or two. The entire world is shut down right now. In fact, I’d expect a few more cuts before things get better (as well as another dip once earnings start getting released).

    But I agree – I still wouldn’t change anything….stick to your long term plan and you’ll be fine.

    Cheers

    Reply
    1. Yes, I can see a few more cuts in my portfolio Jordan, I think it’s inevitable.

      I will stick to my plan for as long as I can!

      Stay well,
      Mark

      Reply
  11. I think putting dividend income into a hourly wage is pretty good idea. This is the first time I’ve seen this done or at least if my memory serves me right. I am hoping to earn about 10K this year and its mostly tax Free and tax sheltered income within old 401K accounts. But we will see how the pandemic hurts the dividend total. Good luck reaching your goals.

    Reply
    1. Thanks Rich Uncle!

      I can’t take all the credit, a reader thought it would be a good idea so I started it and seems other bloggers like it too 🙂

      We will see how the pandemic crushes my dreams!

      Take good care.
      Mark

      Reply
  12. THE SAILOR
    I like dividends and invested accordingly (ENB and others)and substituted with PUT’S FOR BEYING, AND COVERED CALLS
    for selling.this works well for me with only 6% of losses ,so far.
    we see now the importens of the internet access and like SKYY , BRK.B , NVDA

    Reply

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