May 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. 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.
This month, I’ll answer a few reader questions about this portfolio and these updates.
Mark, if you own about 30-40 Canadian stocks, you’ve essentially created your own Canadian dividend ETF outside your RRSP. Do you have any intention to sell these stocks and just own a Canadian dividend ETF for simplicity? Seems like a lot of monitoring unnecessarily.
Not at this time.
You’re right though, in owning all big Canadian banks (7 of them), major pipelines (4 of them), our biggest telecommunication companies (3 of them) and the largest utilities and energy conglomerates in Canada, as well as some Real Estate Investment Trusts (REITs) I’ve basically created my own Canadian dividend ETF. You can see some of my holdings here.
Monitoring the portfolio really doesn’t take much work. These are the same blue-chip stocks most of the big Canadian funds own.
Do you keep any cash inside your TFSA or non-registered account, just in case the market tanks? Why or why not?
I keep a bit although not very much. Why?
- We put a high priority on maxing out contributions to our Tax Free Savings Accounts (TFSA) every year. Given that, we’re actually starting to save a bit of money for our TFSA contributions for 2019. Otherwise, we’re fully invested.
- We put a high priority on contributing monthly to our Registered Retirement Savings Plans (RRSPs). (I am out of contribution room now but my wife is not and so we’re working on that).
- We put a high priority on killing our mortgage – there is absolutely a mental side to debt for us. Paying down debt reduces my stress to be honest.
After that we live our lives. My latest example of this is an upcoming trip to watch the U.S. Open golf tournament just outside New York City this week. That should be fun, and I can’t wait.
Any idea how many shares are DRIPping inside your portfolio – not just the accounts you mention as part of these updates?
Actually, I never thought about that until this question! (See, I really don’t monitor my portfolio very much.) I recently did the tally so here are the results: if I were to reinvest all dividends paid inside all accounts across the portfolio, including my non-registered account that is part of these updates, I would be reinvesting over 500 shares back into the portfolio per year.
Do you believe reaching your $30,000 dividend income will be enough money? Retirement can be expensive.
Yes, for us, earning $30,000 in dividend income will be enough money – from our TFSAs and non-registered account for sure. Add in some RRSP withdrawals/income in our 50s and 60s; factor in some small workplace pensions coming in our 60s (after all the RRSP money has been spent throughout our 60s) and with some CPP and OAS income starting in our mid-60s, we figure we should be “good” given our expense projections. The key for us will be getting out of debt before age 50 and owning our home/condo sooner than later. We’d like to work part-time in our 50s if we can.
Worse case, we’ll work a bit longer than stopping full-time work at age 50 or so. I hope to update this freedom target post this summer.
Where are we now?
Compared to this time last year we’re earning $1,700 more per year. This increase is largely due to two big thing: 1) A laser-like focus on maxing out our TFSAs every January and letting those investments grow inside those tax-free accounts. 2) Leaving those investments alone inside our TFSA and non-registered account and simply watching the dividend increases roll.
At the time of this post we’re on pace to earn about $16,400 in dividend income this calendar year. Needless to say, we’re pleased with the progress.
See you around the site and I look forward to your comments.