May 2018 Dividend Income Update

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?

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.

Mark Seed is the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $500,000 - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

27 Responses to "May 2018 Dividend Income Update"

  1. Good work Mark! The nice part is your income should continue to grow whether the market is up or down. In fact if the market drops your income should grow even faster, as your new investments will generate higher yields.

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  2. The question on cash is interesting. Also interesting is that my wife and I reached, and are easily living on $30,000 dividends and interest per year, plus OAS and CPP. Plus, we spend 3 months in warmer climates every year. On cash, we have about $30,000. That way, we will never be forced to sell, even if markets tank for several years… helps us sleep at night. And, can relax knowing that our monthly RIF transfer never runs short on cash.

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      1. Thanks, so far so good. See you walking in the woods in your photo…best idea of all. Best thing I done, like you, is keep myself fit. Keep it up!

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    1. Very well done Paul.

      Curious how you reached your goal (more than $30,000 (?) in dividends and interest per year, plus OAS and CPP).

      Is that a combination of CDN and U.S. stocks, some CDN and U.S. ETFs, other?

      Smart to keep a small “cash wedge” as I call it – that way, yes, I see the same benefits: “…..never be forced to sell, even if markets tank for several years… helps us sleep at night.”

      Here is our plan for a cash wedge. As we enter retirement or semi-retirement we want $50k in cash in a high-interest savings account. That would be ideal:
      https://www.myownadvisor.ca/cash-wedge-opening-investment-taps/

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      1. Thanks Mark. We had a small business doing marketing for the pharma industry. Owning our own business at home allowed us to take advantage of expenses that were business related. Good way to keep more in your pocket.

        Re investing, generally, same as you; CDN banks, Telecoms, REITs etc.. We have 15% or so in bond ETFs which pay about 4 to 6% dividends, (a little in the red, but not a big deal as they all continue to pay monthly). We have several US blue chips (in RIFs) who pay dividends. (J&J, Walmart, Diagio, Exon, Pepsi, Microsoft, Apple and a few others).

        We stopped almost all DRIPs and instructed Investorline to put all dividends/interest into cash. That way, cash collects at about the same rate as the RIF monthly transfer to our bank account. You can let things ride for months (or more) at a time.

        Thanks for the link.

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          1. Hi, RBull, I hold PHN high yield bond fund for quite a few years. Its mer is higher than etfs, and it’s a little bit riskier as they invest in high yield bonds, but the return is quite good. I believe the payout is around 6%, sometimes higher. It’s more volatile than normal bonds etf. I hold it for the interest, no plan to sell any time soon, so I am fine with that.

          2. RBull (59, retired, married, rural coastal NS) · Edit

            Thanks May. I’ve invested with PHN for years before RBC bought them. They are one of the most respected FI houses around and that fund has a good long term track record. Total return 5 yrs is 5.3% and 7% over 10 yrs.

            I’m looking for investment grade+ for FI in retirement now.

    1. Slowly but surely yes. Need to remain patient and continue to own more U.S. assets going forward as well inside RRSP to diversify away from CDN concentration.

      Reply
  3. Wow $16,000 in dividend income per year!!! It must be fun watching those dividends roll in, especially knowing that you didn’t have to lift a finger.

    We do hold a bit of cash in our accounts. We keep dividends until our next “financial check-in”. We do those 3 times per year, January, May and September. We like to see the dividend income during our check-in, my wife especially, I think it helps make investing real for her, so I just leave the dividends in the account until the next check-in (at the very most it’s 4 months that it sits in cash). Then I use that money to rebalance our portfolio.

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  4. Hey Mark – your recent post illustrates: “where intention goes energy flows” ( and money too!). Awesome progress- congrats. I wouldn’t be surprised if your timeline for retirement changes in your favour as you continue to focus on decreasing debt and increasing the passive dividend income. I liked to know more about your Reits – % of portfolio and holdings. I recently picked up another one TNT.un – living in a ottawa…it just makes sense! If I have to look at brown bland buildings, might as well reap a wee bit of the rental income benefits! Lol.
    Thanks for all the work you put into this great site.

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    1. Geez, thanks Karen. I often find my plan/our plan very boring now. We save, we invest; we pay down debt and then we live our lives.

      As for REITs because we have a home, or at least own 70% (the bank the other 30% for now), I try and limit my REIT exposure to about 10%. I recall David Swensen said you should keep about 20% in REITs but that seems high to me. Then again, I don’t own any bonds right now either and he advocates about 30% to fixed income.
      https://www.myownadvisor.ca/where-i-disagree-with-david-swensen-on-asset-allocation/

      TNT.UN (True North) is interesting. I’ve been tempted to buy in the past but haven’t done so yet. They haven’t increased their distributions at all in the last few years and I worry about commercial getting hit given more teleworker-work is becoming more popular. Thoughts?

      Reply
  5. Hi Mark,

    Thank you for sharing.

    $16,400 per year in dividend income is awesome. I hope you will get your $30 000 target in less than 4 years, with combination of new capital, dividend reinvestment and dividend increases.

    My dividend income would be around $9200 for this year. It is growing faster than I anticipated. My goal is to generate $25000 per year from dividend portfolio.

    Cheers,

    Reply
    1. Coming along FJ. I was on your site recently and you’re doing very well yourself. I hope we get there in about 5-10 years ($30k per year). I’m not sure 4 years is realistic but we’ll see. There are never any guarantees in investing.

      Reply
  6. Lloyd (58, retired (but farm a bit), married, rural MB) · Edit

    The compounding effects of DRIPs combined with increasing dividends, what’s not to like? 🙂

    Reply
  7. Have fun at the US Open Golf!! What a fun trip.

    $16,400 dividend income- that’s super amazing! I am barely half that amount. Keep up the great work, you will reach $30K plus in no time.

    Do you have a defined benefit pension?

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    1. It was great! Yes, I have a small DB pension as well GYM but I can’t touch it without penalties until 20+ years from now (age 65). So, I/we save and invest on our own. We’ll also have some RRSPs to draw down but as you know the RRSP value isn’t all our money!

      Reply
  8. Question about allocation. You own around 27 individual stocks in your TFSA. When next year comes and your contribution room is 5500, how do you decide what stocks to put that money into.
    I’m looking into getting started in this with my TFSA, will have around 60,000 to allocate. I will probably only select 10-15 stocks. Would you purchase say 6000 worth of stock for 10 stocks?

    Reply

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