March 2024 Dividend Income Update

March 2024 Dividend Income Update

Hi Everyone,

Welcome to our March 2024 Dividend Income Update.

Similar to last month, I want to remind subscribers that we continue to follow a hybrid investing approach to manage our personal portfolio:

  1. We invest in Canadian and U.S. dividend paying stocks – that funnel income into our accounts.
  2. We invest in low-cost equity ETFs – that should deliver some long-term, price growth.  

March 2024 Dividend Income Update

To be honest, it’s been a quiet month. 

I haven’t purchased a thing since maxing out our Tax Free Savings Accounts (TFSAs) in early January. We entered 2024 with a few financial goals and so far, we’ve stuck to them. 

What we invested in was also rather boring, low-cost ETF XAW for ex-Canada investing.

My thesis for owning that single ETF is simple:

  • I/we own a world of stocks beyond Canada; it’s a simple all-in-one fund for that. 
  • I don’t have to worry about foreign exchange current conversions, I can use our Canadian dollars to buy more of it whenever I want. 
  • Owning this fund is a very simple way to invest in U.S., international, and emerging market stocks in a low-cost way without paying any money manager to do the work or advising for me; so I keep more of my own money. 🙂

I’ve owned XAW for many years and I will continue to do so:

Then and Now – XAW

What’s next?

Our portfolio is largely on pause or better put, autopilot for the coming months since we’re in savings mode.

In my recent post where to put your cash right now, I mentioned a few good ideas related to where and how to keep your cash for higher interest rates…

Where to put your cash right now

As referenced in that post, we’re doing a bit of everything in 2024 when it comes to more cash savings:

Taxable accounts

We’re using a HISA (High(er) Interest Savings Account) to earn a better rate of return on our standing/existing emergency fund balance of $10k or so. Beyond that threshold, we’re also raising our cash position, slowly, to support both near-term spending needs in 2024 (newer car, trips) and to support our cash wedge for any future semi-retirement activities.

TFSAs

While we focus on nearly 100% equities inside our TFSAs, we keep some cash available to be strategic to buy more equities when those assets go on sale…kinda like now!

RRSPs

Finally, starting in a few years, RRSP assets will be drawn first but we won’t be any selling stocks or equity ETFs on a whim to do so. Cash/cash equivalents/cash-alternative ETFs, increasingly in 2024, are becoming more important to us in these accounts.

Ideally, I’d like to be able to fund not just the first year of RRSP withdrawals but two-years’ worth of upcoming RRSP withdrawals without touching the equity portfolio at all, say in 2025 or 2026 or whenever we decide to do that. 

Are Cash-Alternative ETFs Right for You?

March 2024 Dividend Income Update

With the mortgage dead and the portfolio largely on autopilot, there is not much to update this month in terms of higher dividend income – but it did happen actually thanks to a special dividend in our accounts. 

That incrementally pushed our Projected Annual Dividend Income (PADI) higher to the following:

March 2024 Dividend Income Update

To put this monthy income update into perspective:

  • That’s averaging about $3,757 per month.
  • Since I like to treat part of our portfolio like a job, working for us (!), that equates to earning about $21.67 per hour (assuming the portfolio works 40 hours per week x 52 weeks and I never tell my portfolio to take a vacation – which I won’t). 🙂
  • We earn about $5.15 per hour of every hour of every day (income/8,760 annual hours) even in our sleep. 

A reminder this is our projected annual income for the year, from mostly taxable investing and our RRSPs and no TFSAs at all. This also assumes no dividends or distributions get cut and/or no additional dividend or distribution increases occur. Finally, this also means I don’t invest anything for the rest of the year, but we’ll see!

Without any RRSP contribution room left, it will take some time and investing through the form of more dividend increases and/or more investing inside our taxable accounts in particular to inch the income stream higher. It’s a point I knew we would eventually arrive at since we stopped running any DRIPs (Dividend Reinvestment Plans) inside our non-registered accounts many years ago AND we no longer have any DRIPs running inside our RRSPs – given our preference above to build the cash wedge.

We’ll see what happens moving as we start to pivot (a bit) for some future adventures, something I hope to share more on as 2024 rolls on….

We’ll also see how the TSX and some key stocks within it might increase their dividends in 2024. It’s been a tough few years for many sectors like financials, utilities and telcos. I suspect like many DIY investors, whether you hold some Canadian stocks or ETFs or other assets in Canada, we’re all hoping for a bit of a rebound. Not sure yesterday’s federal budget helps.

Weekend Reading – TSX turnaround edition

As always, I look forward to your comments on this post since I read everything sent to me including my inbox!

Mark

Related Reading:

With diligent, multi-decade savings for retirement, I believe many Canadians can build a decent retirement nest egg using low-cost ETFs if they don’t want to invest in any individual stocks. I am very happy to be back as panelist reviewing the Best ETFs for 2024 for MoneySense. Until that new edition is published, you can check out my previous contributions as part of the Best ETFs for 2023 with my peers and colleagues at MoneySense here. 

In this recent post, a reader asked how much should they take out of their RRSP?

How much should I take out of my RRSP?

How much do you need if you want to retire on $6,000 per month including with modest inflation?

You can always find more retirement essays from folks that have successfully “been there, done that” on this Retirement 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.

18 Responses to "March 2024 Dividend Income Update"

    1. Yes, XAW tends to hold >50% U.S. stocks so a good home for XAW is registered accounts IMO, while foreign withholding taxes (FWT) will apply.
      You can of course own XAW in taxable account and FWT will apply but can be recovered…since withholding tax occurs on non-Canadian dividends paid into a Canadian-listed ETF. The FWT may range from 15 to 25% of the dividends earned by the fund/ETF.

      So, in a taxable non-registered account, you get credit for this withholding tax by claiming a foreign tax credit on your tax return to reduce the Canadian tax otherwise payable on the income.

      Just too messy for me so I don’t own ETFs like this in my taxable accounts but some investors do!

      Hope that helps,
      Mark

      Reply
      1. I’m confused. I thought, no matter what account you hold XAW in the ETF itself is subject to the 15% dividend withholding tax.

        How would one apply for a tax credit if they held XAW in a non-registered account?

        Reply
        1. XAW holds both U.S. ETFs (e.g., IVV) and other ETFs that have international holdings (e.g., XEF) (just reviewed to double check)…so my understanding is even though I haven’t done it…Canadian ETF that hold some U.S. ETFs – in a taxable account – while withholding taxes will apply they are recoverable.

          This makes U.S.-listed equity ETFs no more tax-efficient than Canadian-listed ETFs that use U.S.-listed equity ETFs so it would make sense for Canadians in general terms to just own Canadian-listed ETFs (whatever they may be) in their taxable accounts…

          https://www.blackrock.com/ca/individual/en/literature/brochure/withholding-tax-reference-guide-en-ca.pdf

          https://www.investmentexecutive.com/newspaper_/strategies/etfs-and-foreign-withholding-taxes/

          I hope those links help!
          Mark

          Reply
  1. Lloyd (63, retired at 55) · Edit

    “this is our projected annual income for the year, from mostly taxable investing and our RRSPs and no TFSAs at all”

    Whenever I read this I tell myself I should adjust my spreadsheet to account for the taxable/eventually taxable from the not-taxable. The current way I have it all lumped together doesn’t really show an accurate picture. I’ll put it on my “to do” list (but I know in my heart I’ll never get around to it).

    Reply
    1. Ya, we split it up in my spreasheet so I can tally this stuff but also keep my head straight when it comes to our eventual drawdown plan.

      Mark

      Reply
      1. Lloyd (63, retired at 55) · Edit

        I was reminded why my forecast income isn’t accurate anyways. I don’t enter the actual current distribution from XEI and XDIV on the spreadsheet. It fluctuates every quarter and is impossible to forecast. So I just use an average from the previous year for forecasting and use actual numbers when I enter actual distributions. For example, the Jan, Feb, Mar distribution for XDIV was $.13. For Apr, May and June it will be $.10. 2023 average was $.09425 so I just used $.095 on my spreadsheet for the forecast income. So I have an inherent error built in.

        But I should still separate taxable from non-taxable. 🙂

        Reply
        1. Ya, I could see distributions being different depending on what you own where re: taxable accounts vs. registered let alone ETF distributions can fluctuate month by month or quarter by quarter. I see that even with QQQ in my portfolio.

          Mark

          Reply
        2. CJ (57, will retire at 59) · Edit

          Hi Lloyd,

          I also hold XDIV and XEI and use the same methodology for my dividend projections.

          As an aside note, I also hold XDIV and XEI for “ballast” in my portfolio, as they complement my individual dividend paying stocks. I realize these duplicate my individual holdings but there are much smarter people out there than me so it gives me some comfort.

          CJ

          Reply
          1. Lloyd (63, retired at 55) · Edit

            Good to hear from you CJ.

            Over the past couple of years I’ve been transiting from individual holdings to mostly using XEI and XDIV. They currently make up 44% of the total portfolio so they are a very large player for us. I’ve only got BIP, BAM and REI left as individual holdings. Sure, I’m not enamored with having to pay an MER, but my wife was not exactly pleased with the helter skelter holdings I had scattered all over the place. 🙂

            The varying distributions needed to be twigged somehow so the planning spreadsheet didn’t get tripped up so I went with an average of previous year. Not saying it is a *good* plan, but I’d rather forecast a lower amount and have extra than the other way around.

            There was a time when I also had a lot of duplications as well. I don’t envision doing any more conversion, I’m generally happy with what we have.

            Take care.

            Reply
            1. CJ (57, will retire at 59) · Edit

              Lloyd,

              Great comments. I have also been streamlining my portfolio so it’s easier (ie auto pilot) for my Wife (who has very little interest) to manage someday. I think the term used for having fewer positions (or dealing with fewer institutions) is “Financial Minimalism” – it sure makes management easier!

              CJ

              Reply
              1. Ha, part of the reason we own low-cost ETF XAW since my wife is a huge fan of simplicity and lazy returns, so we own a few thousand shares/ETF units for her!

                Mark

                Reply
  2. “What we invested in was also rather boring, low-cost ETF XAW for ex-Canada investing.” I look at it differently. Just consider what is in that XAW; everything except Canada.Lots of exciting stuff going on, including the entire AI revolution. It’s like a hockey arena. Outside it’s another concrete building, but inside there’s tens of thousands of screaming people, tension, and excitement. (Not having any interest whatsoever in sports myself, that’s what it looks like on TV). And you have it all in XAW, the good, the bad, and perhaps even a share in an ex-president’s latest scam!

    Reply
  3. (RBull) deane hennigar · Edit

    Very nice on the retirement cash build, and on a great amount of dividends to fund early stage retirement!

    Fine job. Exciting.

    Reply
  4. Hey Mark,

    Congrats on the $45k!

    We just hit $55k yesterday (from all our accounts, including TFSAs). I’m looking forward to potential increases from the banks next month (and maybe PPL??).

    We’ll likely go into cash hoarding mode very soon as my wife’s temporary position ends next week and we have some planned summer vacations to save for which will keep us from investing any new money until October(ish).

    Reply
    1. Thanks very much!! Yes, nice to have it growing, if only incrementally now based on my DRIP decisions for the most part. I will potentially add more to the taxable account/buy stuff maybe later in 2024 (?) just not now = too many other upcoming priorities.

      Yes, maybe PPL raises next month? 🙂
      Mark

      Reply

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