May 2019 Dividend Income Update

May 2019 Dividend Income Update

Welcome to my latest dividend income update for 2019 folks – happy to have you as a reader of my site.

For those of you new to my site or new to these posts, for the last few years, every month I discuss our approach to investing using Canadian dividend paying stocks in some key accounts.

To recap, we take a hybrid-approach to investing.

• Approach #1 – we own a number of Canadian dividend paying stocks for income and growth. We hold these stocks inside our non-registered account and within our Tax Free Savings Accounts (TFSAs).  You can read about what I own and our journey to date using dividend paying stocks here.
• Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. We do so to diversify our assets beyond Canada’s borders for portfolio diversification (I didn’t anyways believe in that, but I do now.)

These monthly income updates focus on our Canadian stock portfolio – investments owned inside our taxable account and TFSAs only – and my big hairy audacious goal to earn about $30,000 per year from the income delivered from our holdings.

We figure reaching this income goal should be “enough” to begin semi-retirement and part-time work when this income is combined with other investment assets (e.g., RRSP).

More eyeballs, more questions!

As this site grows in popularity and interest across Canada, I’ve definitely noticed a spike in reader questions and emails to me.

You know what?  Keep them coming.

I’m happy to offer a perspective even though I can’t offer direct advice for many reasons.

As part of this month’s update, before I get to my latest dividend income tally, let’s answer another reader question.  (Reader emails are adapted for further clarity.)

Hi Mark,

I hope your weekend is off to a great start.

I’m a late starter when it comes to investing (in my late-30s) but I guess it’s better late than never?!  I’ve been reading your site a lot; researching how to invest and I think investing in blue chip dividend stocks is a great strategy.  I’ve really enjoyed reading the information on your site and I thank you so much for sharing.  

My first trade was for ENB (Enbridge) which I purchased over a month ago.  I paid $49.95 per share.  This past week I put in a bid for SU (Suncor) and, to my dismay, they issued a medium term note offering on Thursday which sent the stock down premarket.  Unfortunately I didn’t see this in time, so I didn’t get to cancel my order.  So, I ended up paying $42 per share. 

This experience was frustrating but I guess that’s the stock market for you, eh? 

Have you had any experiences like this?  I think my strategy for buying will have to change…maybe checking first thing in the morning before placing an order?  And be more aggressive when it comes to bidding? 

I also didn’t know which stocks to purchase first.  There was a lot of news about ENB and SU as being “good buys” at the moment, so that’s why I started there. 

Anyways, thanks so much once again for your website.  I really appreciate it!

Thanks for your email and questions.  I’m very happy you enjoy the site.  I enjoy running it.

Now, to your questions, approach and more…

Interestingly enough, ENB (Enbridge) was my very first dividend paying stock purchase as I gravitated out of big bank mutual funds some 10 years ago now.

In hindsight, after many years of investing, while the decision to own ENB has turned out very well for me I would be naïve to think this outcome was a given.  What I mean is, the future is always very unpredictable and uncertain.  What seems like a “good buy” today from some analyst could be a dog in the future.

That said, I’ve gravitated to owing a basket of many Canadian dividend paying stocks since I believe the collection of companies I own, that have paid dividends for decades or generations, are likely to keep paying them – even with an unknown future.

Here are the friendly dividend histories of many Canadian stocks.

“I also do not believe in buying companies that do not pay attractive dividends.  Nobody can forecast the future.   But it’s obvious that companies that have a strong uninterrupted record are more interesting than those that have not.” – Stephen Jarislowsky, The Investment Zoo.

Prices go up, go down, go up and go sideways – who knows?!

Have a look at these charts (images courtesy of Globe and Mail):

Did you panic and sell here recently when the U.S. stock market tanked by >1000 points?

Or, did you realize this is just another small blip in your long-term investing timeline?  I mean, weren’t people saying the market was going to go nowhere just a few years ago?  (Image from MarketWatch)

My perspective is:  don’t listen to people when it comes to market predictions.

Even smart people don’t know what they don’t know.

Instead, develop a financial plan (before picking stocks or ETFs at random) and then see how that plan needs to be fulfilled.  Your financial plan might include dividend paying stocks, or ETFs, or GICs, or a bunch of cash savings, or low-cost mutual funds, or annuities, or any combination of these.  There is no one right or wrong answer here. The only answer that matters is the one for you.

If you choose to buy and hold dividend paying stocks or low-cost ETFs like I do, then I would suggest you try and train your investing brain to celebrate market declines.  The lower the market falls, the better.

Get started with understanding ETFs and better still, investing with low-cost ETFs here.

Think of it this way:  when do you like going grocery shopping the most?  When you see deals or when you see prices just increased because of a Florida frost?

I know my answer.

The challenge is, we are very much hard-wired to avoid “loss” in life.  It’s emotional.  The same applies to money.

So, whether you buy when prices are low, sideways, or even inching higher – the key is the stick to the buying process long-term, as part of a long-term plan over many decades.  The results will show.  That applies to ENB stock, or SU, or anything really.

Our portfolio is very simple – I’ve largely unbundled the top-20 holdings of this big ETF for income.

Will I change my approach over time?  Will I own more indexed or low-cost ETFs as I get older?  Possibly.  But for now, my plan is what it is until I change it!

May dividend income update

Thanks to dividends paid and mostly reinvested every month and quarter, our dividend income is growing.  At the end of this month, we’re on pace to earn $18,800 this calendar year in dividend income in key accounts.

For diligent readers following along, that’s over $2,400 more than this time last year.

I predict if we keep up our boring ways in another 5-10 years, we’ll realize our HUGE goal of earning $30,000 per year from our non-registered investments and investments inside our tax-free accounts.

That will be extremely good since if we’re debt-fee by then we’ll surpass our crossover point based on other assets we currently own.  Income derived from our investment assets will be > our expenses.

We’ll be able to work on our own terms.  Wouldn’t that be wonderful??

Dividends are never guaranteed.  There are risks with my approach.  This approach is not for everyone.  However through owning a basket of Canadian dividend paying stocks I’m quite optimistic we’ll see another, higher, dividend income milestone next month.

Stay tuned to find out and thanks for reading.

Check out my previous April 2019 dividend income update where I answered other reader questions here.