May 2020 Dividend Income Update
Save. Invest. Wait.
Do it again.
I know you want investing to be exciting but that’s not my get wealthy eventually plan.
I don’t think any trading should be in your plan either.
Regular readers of this site will know we continue to take a two-pronged (hybrid) approach to investing:
Approach #1 – we own a number of Canadian dividend paying stocks for income and growth.
We own these stocks inside our non-registered account and within our Tax Free Savings Accounts (TFSAs). These income updates focus on that.
Approach #2 – we own a number of U.S. dividend paying stocks for income and growth AND we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time.
One of my favourite U.S. ETFs is VYM. We’ve owned that fund for almost 10-years now and have no intention of selling it – in fact – we reinvest the ETF distributions every quarter to buy four more ETF units commission-free.
We own U.S. assets because we believe investing in companies beyond Canada’s borders will provide us with some much needed U.S. and multinational diversification.
Back to VYM, we’re likely to start spending VYM distributions in about five years as part of our semi-retirement plan.
May 2020 Update
In recent months since COVID-19 changed everything, I’ve incurred a few dividend cuts and those were reported in this previous income update here.
While dividend cuts are not fun to endure as a dividend investor, they can be sign of responsible management action to support long-term shareholders. After all, total returns matter.
While I’m down from where I really want to be at this point in the calendar year, you’ll see I’ve actually returned to where I started. Without any new money added since January we’ve returned to those levels thanks to reinvested dividends and a few dividend increases from:
- Algonquin Power (AQN).
- CIBC (CM).
- Great-West Life (GWO).
- Manulife (MFC).
- Royal Bank (RY).
- TC Energy (TRP).
- TD Bank (TD).
- Bell Canada (BCE).
To put that passive income in perspective:
- That’s like earning $2.32 per hour of every hour of every day ($20,300/8,760 hours (24 hours x ~365 days)) even in my sleep.
- In terms of an hourly wage:
- It’s the equivalent of earning $9.76 per hour assuming I work a 40-hour work week ($20,300/2,080 hours (40 hours x 52 weeks)). Then again, some of that income is 100% tax-free (thanks TFSA).
Will more stocks cut their dividend?
I’m banking on it.
But given I firmly believe in the companies I invest in, long-term, it won’t stop me from running dozens of my dividend reinvestment plans (DRIPs) that deliver more stock shares, commission-free, every month and quarter. At last count, across the entire portfolio, we’re earning over 600+ shares per year thanks to DRIPs!!
(For the record, I continue to own both IPL and SU in my portfolio. I’m also DRIPping at least one share of each every quarter.)
Stay tuned to my blog to find out the next set of results after June dividends are paid.