May 2017 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 my approach to investing using Canadian dividend paying stocks and Exchange Traded Funds (ETFs), and how reinvesting the dividends paid from these Canadian holdings are helping us reach financial freedom – one month at a time.
The strikeout above was purposeful. I no longer hold any Canadian ETFs in my portfolio. Why?
Well I explained this last month but let’s revisit some other reasons.
- I’ve essentially created my own Canadian dividend ETF
In owning all big Canadian banks, major pipelines, biggest four telecommunication companies, largest utilities and energy conglomerates, and some Real Estate Investment Trusts (REITs) I’ve basically created my own Canadian dividend ETF. Although I’m certainly missing out on many other (smaller) Canadian companies traded on the TSX, I do feel this basket of stocks is modestly diversified in our market to yield long-term gains and weather market downturns alike.
- I’m seeking income and gains from our portfolio
Just like the financial experts I cannot predict the future with any accuracy. So, capital gains in my opinion are hardly guaranteed. While I hope for price appreciation over time (and this should occur over many years of equity investing) the market is in the short term a voting machine – filled with speculation. Instead of relying on just price appreciation I’m striving for more dividend income from our portfolio. Money I can use and not draw down the capital – unless I want to. With dividend growth investing we’re basically building up our “income machine” for future spending years. That income machine is reliable every month – and it’s growing. It’s been nice to see no less than 19 Canadian stocks we own increase their dividends year to date.
Where do we stand?
- We hold 30 Canadian stocks (no ETFs or other funds) inside our TFSAs and non-registered account for growing dividend income. This is what these updates are all about.
- We hold a few U.S. stocks and a couple of U.S.-listed ETFs inside our RRSPs for income, long-term tax deferred growth, and diversification far beyond Canada’s borders. I do not (yet) include this information as part of these updates. I might change my mind at some point!
Thanks to the Canadian companies we own, we’re on pace to earn just over $14,700 in dividend income this calendar year – money we don’t dare touch because it’s earmarked for our financial future. This is a full $2,200 more than this time last year. Our dividend income has increased due to mainly TFSA contributions, investments in companies that reward shareholders via dividends, and yes, those precious dividend increases.
Getting paid (and getting some raises from time to time) for doing nothing but staying invested feels good. Dividend investing provides cold hard cash into our bank account. This is money we will eventually use. I believe this approach is a great complement to assets held inside our RRSPs, some small workplace pensions, and in the next few years a fully paid off home.
What’s your income plan for retirement looking like? Got questions for my approach? Comment away. Thanks for following.
I simply love your blog. Tons of useful information! I am fairly new in the game and trying to learn from experienced guys like you.
Is there a reason you have not published your portfolio? I am sure many of your keen readers would like to see that 🙂
Thanks for being a fan Muki. I feel I share a great deal of stuff on this site and I don’t necessarily want to make myself a target of anything online. That said, I will attempt to disclose a bit more in the coming months – stay tuned.
I appreciate the kind words 🙂
Mark, how do you deal with the up’s and down’s of the 30 or so positions in the portfolio?
Understanding that you DRIP the dividends as well as add cash to the RRSP, TFSA & any non-registered account – are you at all concerned about the up’s & down’s of the portfolio (asset protection/market correction) or more concentrated on the dividend income?
Lastly, if & under what circumstances or how often do you change out your portfolio inventory?
I don’t really worry about the ups and downs at all John. I simply ride them out.
I do DRIP all stocks possible except for the non-reg. now since I don’t want to worry about the ACB (Adjusted Cost Base) as much. I know my base costs now and that makes it easy to determine if I decide to sell in the future (i.e., just need to calculate gains from market value).
As I get older, although indexers hate to read this stuff :), I’m more concerned about the income generated from my portfolio vs. the capital. I figure a $1 M portfolio + paid off home + pensions + government pensions should be close to being “enough money”. Time will tell!
I don’t often change my portfolio. My plan is largely to buy and hold and reinvest dividends. So far, so good since the non-reg. portfolio alone is close to churning out $8K per year.
@ mar…quote [quote] As I get older, although indexers hate to read this stuff :), I’m more concerned about the income generated from my portfolio vs. the capital. I figure a $1 M portfolio + paid off home + pensions + government pensions should be close to being “enough money”. Time will tell![/quote]
Absolutely, you can count on it …
Thanks John. I will continue to save, invest, stick with my plan and by age 50 – if we are able to have those things re: $1 M portfolio + paid off home + workplace pensions + government pensions (ages 60+) then I think we’ve done OK.
I’m just curious if you have any products / stocks to protect for a market correction / decline? I gather that you have a few years before retirement so you could ride out a dip. I’m a little older and do have some BMO ETF’s as they seem so provide a good dividend (with a little growth) but do provide some downside protection. Should the market decline I may sell and buy into the market directly as the theory is that these ETF’s would not decline as much as the market. This strategy is more asset protection (with a good dividend).
I figure we’ll have enough money saved for retirement when we reach the Crossover Point.
If were to retire at the traditional age of 65 or so, we have at least >20 years of work ahead. Not sure I want that – although I will continue to work – I want it to be on my own terms.
To answer your question I don’t have any particular assets to protect for a market correction. If/when that correction happens I’ll simply buy more stocks of what I already own: more stocks, more dividends at cheaper prices.
I came to the same conclusion a while back after looking at a REIT ETF and working out the yield of the individual REITs held independently, and it’s at least an extra half point to a point in yield, for the work of doing 10 or 15 mouse clicks at 10 bucks each. However, since my portfolio is oriented toward income not growth (long term share price growth equal to inflation is sufficient as long as it pays out 6 points in cash for me to spend), I do own a number of ETFs that do covered calls, like ZWU. I’m fine with paying a management fee that is a bit higher than a regular ETF because of the extra work put in writing call options and the income it brings in more than offsets the cost, and I’m ok with the price growth forfeited by the CC strategy, since I’m primarily interested in cash flow.
Also for international exposure ETFs are the way to go as you said, as long as they dollar hedge.
I’m with you John, re: REIT ETF. I’ve long since unbundled mine. Risks? Sure. But no on-going money management fee and collectively earning 5% or so in distributions per year.
As I hear from more and more DIY investors they seem to do something similar – focus on income vs. growth. A passionate reader here cannew has told me this for years. I recall he’s earning close to $100K per year and will never outlive his money, now in his 70s. I suspect he’ll have a very large estate (we won’t) but I can appreciate what he is saying for sure. Meaning, the ability of your portfolio to churn out income in any market climate is a very good safety net to have. I hope we get to our $30K goal inside TFSAs and non-reg. accounts – that would certainly be great and I believe with other assets “enough” money for us.
Thanks for being a fan.
I agree 100% with Cannew’s approach. Our growing dividend income is nowhere near his $100K, its closer to $30K, but we don’t need that much to live comfortably anyway because of our company/government pensions and benefits.
Well, that’s our goal, hope to match you Bernie! We’re almost halfway to our goal ($30K per year) – I hope we can get there by the end of 2017 🙂
If you’re income focused as you state and like the extra income bump provided by covered call ETFs have you looked into international exposure along the same path via ZWH (U.S.) and ZWE (Europe). I own ZWH and may add ZWE at some point in time. They’re nice income/low volatility diversifying compliments to my DGI stock portfolio which is also low volatility (overall beta 0.55). I imagine BMO will add anther international CC ETF to their lineup sometime as well.
I thought I would share a post on the ETF hedge or not decision. Everyone should reach their own conclusion but there is a good topic on it at Canadian Couch Potato.
Thanks for sharing.
You are just trying to beat the market. 😉
That’s the response I get when I talk about why I don’t own dividend ETFs, but prefer to hold the stocks directly.
Wow! SMH 🙂 The Flat Earth Society still exists.
Yes, if I had a nickel every single time I heard that…I would be retired by now…
Nice! Keep it compounding!
Excellent work, keep u pthe good work and keep that snowball rolling along. Well done to you!
Things continue to move along, thanks!
New reader and first time commenter here. Bear with me here just getting started in investing now at 50. Two questions, first, I’ve noticed you have changed from hybrid type to all in with dividend growth investing. Can you expand on that from your summary above. Second, curious as to why your CDN equities are in a TFSA non registered account. Does not the registered TFSA have less tax implications or it is about timing thru the years or the favourable capital gains and dividend tax that works out better in the year that I am not seeing.
Keep up the great articles and maybe next year for the Sens….it was fun to watch.
Thanks for reading Kevlar. Hope to see you come back often.
I remain a hybrid investor but given I own 30 CDN stocks now, I figure I need to own more U.S. and international assets. I figure some of the best ways to do that is via low-cost ETFs. I will probably always be a hybrid investor.
Why CDN equities inside TFSA? I like the idea of tax-free dividends.
Why CDN equities inside non-reg. account? I like the idea of tax efficient dividends and favourable capital gains long-term.
Hope that helped clarify!
I am much the same as you are. Staying away from all ETF’s but one while owning individual equities and fixed income products. I am on pace to earn $80,000 from my investment portfolio just from the dividends. My portfolio is just under two million dollars. Most of it is self directed. I love the dividends and right now the Canadian banks are on sale while raising dividends. My goal is $100,000 per year in dividends then it will be time to retire and enjoy the fruits of my labour.
Geez, that’s impressive Joe – very well done. $100K per year in dividend income means your portfolio is at a very healthy value. I suspect you intend to leave a legacy?
Your investment strategy is slightly different than mine but our goals for a comfortable growing retirement income with a cushion safety factor are similar. Nicely done so far Mark, you’re well on our way!
Thanks Bernie. Doing what I can!
It’s great to see your progress Mark. Keep up the good work.
Thanks very much 🙂
Kinda related…Since watching the dividends closer, I find myself hoping for declining prices at ex-dividend dates versus being excited about higher prices. Earnings announcements with the potential for dividend increases are anticipated more than birthdays and holidays. I need to get a life!
LOL. @Lloyd, I find myself doing the same.
I also hope for a decline, that would be nice. Might get it this summer, we’ll see! In the meantime just trying to save some cash if (?) those days come.
Good work Mark. Keep concentrating on the Income generation.
Thanks cannew – the journey is slow and steady.