March 2022 Dividend Income Update
Where does the time go?
Already three full months gone – poof! – into 2022.
Welcome to my March 2022 Dividend Income Update.
What are my monthly dividend income updates all about?
Last month in my February dividend income update, I answered a handful of reader questions on that.
This month, my update will be more subdued as I work on more answers to reader questions including a future case study. I look forward to publishing that case study soon!
2022 market turmoil
- I’m not spending anything from my portfolio right now. So, because I don’t need the money I know the best way to ride out any market volatility is to stay invested.
- Despite a downward start to the year for the U.S. market, my overall portfolio is doing just fine as I approrach more all-time highs.
- I know some market volatility is absolutely normal and downright healthy. What is not normal is watching tech stocks and other sectors fly higher in any uninterrupted fashion over time. Corrections (of 10% or more) can and should happen. People tricked into believing that stocks can only go up will get burned eventually if they don’t have any common knowledge of market history. This means early 2022 market turmoil is healthy and hardly anything of significance to be worried about.
When it comes to our investing plan to ride out market volatility:
1. When our dividends and distributions are paid, they are reinvested. This can trigger more income to be generated in future months. Revinesting dividends and distributions also curbs my enthusiasm – I don’t have to think about what to invest my money in because this decison-making is already done for me!
2. I contribute to my/our TFSAs first, striving to maximize contributions to this account for us every year. That’s usually about $12,000 invested each January (both TFSA accounts are once again maxed out of contribution room). Putting that money to work sooner than later is generally smart when you consider the advantages of lump-sum investing over dollar-cost averaging.
3. We contribute to our RRSPs after the TFSA is maxed out. Tax-deferred investing (via the RRSP) is still an excellent way to build wealth after tax-free investing is done every year.
4. We aim to keep a healthy (and growing amount of cash) we call a cash wedge in place – as we work towards some semi-retirement dreams…
March 2022 Dividend Income Update summary
With stocks and ETF units DRIPping along nicely, our money is always working.
As of this month, we are anticipating we might earn $26,061 in forward dividend income for the calendar year ending 2022 from some of our investments.
(For those keeping score at home, that’s approaching $5,000 more than this time last year….!)
Reference: March 2021 Dividend Income Update.
To put that income more into perspective:
- Almost half of that annual income is tax-free. Yes, all true. We will not pay tax on that income when we decide to withdraw monies from our TFSAs.
- Our forward dividend income is rising by about $50-$100 per month thanks to compounding power alone. Like I mentioned above, when dividend and ETF distributions are paid, that money is reinvested, moving the bar higher next month. We just stay invested. That’s it. Something to keep in mind for your investing plan.
- $26,061 in annual income translates to earning roughly $2.98 per hour of every hour of every day in my sleep. That $3 per hour payment might not sound like much, but that translates to earning about $71 per day from part of our portfolio; again, about 50% of that income is tax-free.
If our goal is to earn $30,000 per year in the coming years, compounding alone might just do the trick!
I look forward to sharing the next dividend income update with you.
Thanks for reading and sharing. Bring your comments and questions for any future updates!
Further Reading:
What stocks do I invest in? I’ve owned stocks that tend to Beat the TSX (BTSX) for well over a decade now. You can too!
This is how I built my dividend portfolio.
Do you aspire to retire at age 55?
If so, how much do you need to spend $4,000 per month for decades on end?
How might your portfolio stand up to higher inflation over time?
Read on this recent case study below!
You can always find many (many more!) retirement case studies on my site via this page here.
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. 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.
Hi Mark,
What are your thoughts on dividend reinvesting (drip) in retirement? Does it make more sense to stop reinvesting the dividends to limit how much you’ll need to sell at the end of the year for spending needs in retirement? Or is it better to take a total portfolio approach where you continue reinvesting the dividends and then at the end of the year just withdraw how much you need from your portfolio and rebalancing.
Thank you for your insight.
Great question TT. I had a very similar question for another reader and I will answer in my next dividend income update.
Here are my thoughts:
I’m all for Nay if you need the money. My intention is to stop any DRIPs when I need the money. Otherwise, I’m taking a total return approach: reinvesting as much as I can until I need the money. I will likely however stop all DRIPs in my taxable account and maintain all DRIPs possible in my TFSA for as long as possible. I just love the idea of tax-free dividends compounding away.
Thoughts?!
I am new to your blog Mark and only heard about it from your readers (Gean) who recommended it. I am glad he did introduce the blog to me. Your journey to financial independence is very inspiring. Looking forward to reading more of your posts. 😊
Awesome, thanks so much Moe. I hope to hang out with Gean on his YouTube channel in a few weeks – stay tuned 🙂
I hope you subscribe and follow along. Just posted a great case study!
Cheers,
Mark
Great job Mark – gotta love seeing that upward curve! My questions for you are regarding your Canadian bank and insurance company holdings (which I know are a part of your investments as they are for me). As you’ve talked about on this site, many banks recently hiked dividends – which investors all benefited from. However, I’m a bit concerned about the rumblings around tomorrow’s Federal budget – and the surtax being proposed (some say 3%) on banks/insurance company profits (over $1B). Ultimately, this affects their bottom line and I’m sure the banks won’t take that lightly. So – what do you think? Do you think it will lead to the banks rolling back their recent dividend increases? or delaying ones they have planned down the road? Like you, I’m a “buy and hold” guy so am in it for the long term, but this did catch my eye. What are your thoughts on this?
Thanks MikeyP!!
I’m like “meh”, already priced in. Yes, impacted to bottom-line but not worried long-term. Higher rates are coming, banks can charge more $$ in interest payments, so it should all even out. I anticipate dividend increases in the 5-10% range for the coming years from all big-6 banks which is very good + some growth.
Overall, not worried.
Thoughts!?
Mark
Thanks for the reply Mark. Never thought of it but ya, you’re probably right that the banks have been anticipating this so have already planned for it. I said I was a “bit concerned” – but nothing that would sway me from reducing my position in this space. Thanks again.
All good MikeyP. Yes, I will only continue to DRIP all my stocks over time, until I need the $$, including CDN banks. My process has worked so far!
Mark
Expenses are very slightly lower than last year for what ever reason.
If the dividends carry through for the year I will have gotten a $3 raise per hour over last year. And I am not even unionized. LOL
I’ll be doing the income tax this week so I’ll see how much the governments want from me. Hopefully not more than the cash I have stashed away. Otherwise I get to sell some stocks to pay them off and then I’ll re-adjust the tax payment at the end of the year when i make the final RIF/LIF withdrawals for 2022.
Doubt expenditures will exceed last year as I changed out the heat pump in June so that was a major expense.
Off to Kingston mid June for a car get together so that will cost a few dollars. Will be good to get out again. You could drop down for the day Mark. June 17/18th
RICARDO
If I can make it, I will! You’re doing great Ricardo by a combination of lower expenses and higher dividend payments. A great combination to fight inflation/higher prices.
Love reading these reader comments!
Mark
Amazing progress Mark you’re almost there !! that magic of compounding is truly magic and although I think I’m a bit lazy when it comes to tracking my progress and I do rely on TDDI platform to do that for me but I can see the progress as well year on year and I love it.
Just to update you that we sold one of our rental condo and paid all debt and maxed my wife’s TFSA which is great and our goal to max both each year as for RRSP she’s got her DB pension and I have my company matching my contribution so I’m just going to stick to that because I feel having a big RRSP portfolio at retirement will complicate things I’m not sure but what I’m sure of is that we’re doing our best to balance our life between work savings helping our kids with their universitiy tuition and of course a yearly family trip.
Ya, I recall TDDI is quite good to show projected income or something like that.
Gus, that seems smart: “sold one of our rental condo and paid all debt and maxed my wife’s TFSA which is great and our goal to max both each year as for RRSP…”
With a DB pension, your company matching your contribution, maxed TFSA, etc. + CPP and OAS you will be set.
Stay tuned for a new case study. It might give you and others some ideas how much they need to spend in retirement.
Thanks for your kind words!!
Mark
Congratulations Mark for achieving another milestone!!! Well done by all means. You will be able to retire earlier than you think.
One side question if you don’t mind me asking you: when does someone have to start withdrawing from the RRIF, in the year they turn 71 or 72? For example, if the RRSP is converted to RRIF in 2022 when that person turns 71 years old, should that person start withdrawing in 2023 when that person is 72 or that person has to start withdrawing in 2022 when that person is 71 when the RRSP is converted to RRIF in 2022?
Thanks for sharing your knowledge.
Thanks very much Ken. Next stop $27k later this year 🙂 I hope!
The rules regarding RRSP > RRIF is you must convert the RRSP to a RRIF (or Annuity, etc.) by the end of the year you turn age 71.
That means at the start or during the following year you must start the income from the RRIF and pay taxes on that income.
Lots of reasons to keep the RRSP intact until age 71, or start drawing it down beforehand, it all “depends” on your income and tax strategy.
I hope that helps and I appreciate the kind words 🙂
Mark
To update on my MX options experiment, I have sold 2 hands of MX May 20 put strike 64. This year, I collect $1022 premium on MX and my 200 shares MX are called away at $64. I also collected $522 premium on covered calls last year. Right now MX is at $69.35, 200 shares would be worth $13870. I have got $14344 in total, so that’s $474 ahead. But who knows, maybe MX will go up from here and I will be behind then. The point is, I feel MX is a little bit too expensive right now. If I got it back at $64, then my cost actually will be under $57 which is pretty reasonable. If it runs away from me, I will look at other stocks I feel priced more fairly.
This is only a very small percentage of my portfolio and I am doing this for fun.
Very interesting. Do you see MX going under $60 now? Can’t see it. Will you do more calls at $70 even knowing they might get called away there as well?
Thanks for the update May. Haven’t done call writing myself.
Mark
My put has a strike price of $64. My MX already called away for $64, if I will be put for $64, then I still have the same amount shares of MX, but collected quite some premium, which means my average cost on MX has reduced quite a lot. MX is not my core holding, that’s why I am playing with it.
When I wrote calls, I wrote at the price that I don’t mind if the stocks are called away. The fact is I don’t know where the price will be. I just wrote calls/puts that I don’t mind to be called or put.
One reason I am experimenting this is that I am wondering if this will be an effective way to offset some bear market impact in retirement time. Let’s assume at some point I have to sell some stocks for living. Then instead of actually selling the stock, maybe I can sell calls/puts.
E.g. MX was $62 when I wrote call for $170 premium and $64 strike price a hand. Let’s say I need $6200 for expense. I can borrow this from HELOC and wrote the calls instead. My current HELOC interest is 2.9%, I need to pay only $15 for one month. If MX is called away, then I will have a few hundreds more cash comparing to selling MX right away. If MX is not called away, I can continue to borrow from HELOC and sell calls on MX. Just a thought, not really will do this. My first line of defense for a bear market is dividends income. Hopefully with dividends alone I can ride out bear market.
I could see that May re: “One reason I am experimenting this is that I am wondering if this will be an effective way to offset some bear market impact in retirement time.”
Or, just focus on dividend income and increases and curb expenses as needed 🙂
Kidding aside, I might try this myself, maybe, eventually, we’ll see. I’ll come to you for support.
Mark
Great progress, well done.
This year I have given up to track the anticipating dividends, instead, just tracked the investment income I actually received from different accounts. I know for sure our basic expenses will be covered at the time we retire, so that’s enough for me.
This year our expenses have been up 50% from last year for the same period. So far received investment income before tax exceeded that a bit, maybe still can cover it after tax.
Ya, our expenses are up as well May. I’m very curious to see how dividends (dividend or distribution increases) may offset inflation. I’m tracking that this year and going to do some comparison work on that in December 🙂 I am hopeful my dividend income will increase by about 5% or so without any new money added – which will be great to help fight inflation in semi-retirement.
Amazing! I love the hybrid approach you don’t feel like you’re missing out at all. It’s a great strategy. You better start looking at the Over water bungalow resorts in Maldives soon!!
Ha. Yes, I love the hybrid investing approach and as you know GYM, been doing it for about 15 years now. I was looking at TravelZoo recently for some trips. Winter 2025 sounds about right with my business class flights!
I have a few trips planned this year already and looking forward to those. 🙂
Cheers,
Mark
Good stuff Mark. Can’t beat a growing income in all markets.
I hear ya 🙂 Thanks cannew for your support!
Atta boy. Onwards and upwards.
Great job and great rationale.
I own a little bit of those BTSX companies, and a few others too!
Ha, no doubt you do!
Thanks very much for the ongoing inspiration.
Mark
Pleasure!
Ditto on the inspiration my friend.