May 2021 Dividend Income Update
Save. Invest. Wait.
Do it over and over again.
That’s the boring part.
The exciting part: money that makes money, tends to make more money if you leave it alone.
Welcome to my latest monthly dividend income update.
Regular email subscribers know I’m a hybrid investor: I own a mix of stocks for income and growth, and I own some low-cost ETFs for mostly growth purposes.
Here are more details…
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.
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.
May 2021 Update
This time last year, I wrote: “COVID-19 changed everything”.
12 months ago, I incurred a few dividend cuts and those were reported in this 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.
Then again, dividend cuts can be a trigger for any DIY stock investor to re-evaluate their portfolio. And so I did.
As a buy-and-hold investor, I tend to make very few changes but last year was a bit of an exception. I made many changes when compared to previous years. I’ve highlighted the key ones below:
- I liquidated HR.UN. I sold out of HR.UN (a couple hundred shares).
- I liquidated Inter Pipeline (IPL). It can be tough to sell a dividend paying stock you’ve held for years but that’s exactly what I did last year after IPL cut their dividend by 72%.
- We bought XAW. I’m far from a perfect investor and so I’m trying to overcome some long-standing bias to Canadian and U.S. dividend paying stocks by investing in companies and countries from around the world. I feel owning iShares XAW is a great fund to help overcome that lack of diversification so we bought a few hundred XAW units for our TFSAs earlier this year.
Quite simply, as a fund of funds, iShares XAW is a simple, low-cost way to own U.S. international, and emerging market stocks.
I’ve long since listed XAW as one of the many great funds to own on my dedicated ETFs page. So, I’m eating my own cooking!
While owning XAW has definitely reduced my forward dividend income stream potential from the TFSAs (XAW historically yields just shy of 2%), our short-term plan doesn’t have us touching any capital inside the TFSAs. So, the more growth, the better.
How close is the goal? May 2021 Dividend Income Update
While the $30,000 per year goal from our non-registered account and TFSAs seemed very daunting a decade ago, that target doesn’t seem that far away now.
Like I wrote above:
- Disciplined savings.
Do 1-2-3 again next year thanks to new TFSA and RRSP contribution room. That’s pretty much it.
With stocks and ETF units DRIPping along nicely, the money invested is growing at a good pace. The money invested in making more money over time. That means assuming no dividend cuts occur, and dividends continue to compound as they might, we have a great shot at earning $22,500 this calendar year in dividend income, from the capital invested inside our TFSAs and a non-registered account.
As of this month, our forward dividend income is at $21,803.
To put that passive income in perspective:
- That’s like earning $2.49 per hour of every hour of every day (income/8,760 hours (24 hours x ~365 days)) even in my sleep.
- Part of my portfolio is essentially it’s own job: earning $10.48 per hour (income/2,080 hours (40 hours x 52 weeks)). Then again, some of that income is 100% tax-free (thanks TFSA).
Stay tuned to my blog to find out the next set of results after June dividends are paid.
You can see some of my stock holdings here.
Thanks to some recent reader questions – Here is my approach for rebalancing my stock portfolio.
Learn why I enjoy a lazy, passive approach to investing using low-cost ETFs on this page here.
a question about XAW in the TFSA account. How much of an impact does this have on Foreign Withholding taxes with the US and International holdings? I realize tax drag is not the only consideration when it comes to tax efficiency and I like the growth potential for this ETF. What was your decision making process that came to selecting this one?
I recall we covered XAW and the FWT in this post my brother site if you will:
“The In-Canada, ex-Canada, and Bonds – Three Fund Solution:
ETF MER – TFSA MER – RRSP MER – Non-Reg
ZCN 0.06% 0.06% 0.06%
XAW 0.53% (0.22% + 0.31%*) 0.53% (0.22% + 0.31%*) 0.26% (0.22% + 0.04%*)
ZAG 0.09% 0.09% 0.09%
*Without getting into too many details, you should know that a Canadian-listed ETF that invests in U.S. stocks, or U.S. ETFs, or that invests in ETFs that hold international stocks will have some *foreign distributions withheld based on the tax treaties associated with those countries the ETF invests in.”
Yes, there are FWT but to your point, a small price to pay for international and U.S. diversification beyond my Canadian stocks.
I own about 26 CDN stocks so essentially I’ve unbundled XIU and built my own ETF 🙂
I invest in XAW to own stocks beyond Canada’s borders:
Hope that helps Sue!
It’s quite amazing when you literally get paid for doing nothing.
One day, that dividend income will turn into six figures per month.
When you say 6 digits per month surely you’re including the two digits after the decimal. If not, could you please share with us your strategy on how one can achieve that astronomical figure. The minimum 6 digit monthly income you alluded to would be $100,000. To achieve that income would require $30,000,000 in capital if your average portfolio dividend yield is 4%. I’m not saying that is impossible to achieve, Canada does have a few multi-millionaires. Its possible some of them may have $30M in dividend stock.
If you meant a 6 digit income of at least $1,000.00 per month you would only need a $300,000 portfolio yielding the same 4%. Those kind of minimum numbers would be more in-line with most lifetime savers.
Thanks for your dividend update. I am trying to get mine to your level.
I am using Dividend Stocks Rock to help with selection.
I own a lot of the stocks you do (Couldn’t seem to get the listings to scroll down to see them all though.)
My RRSP is all USD. I primarily own stocks but also some ETFs.
I have 2 TFSA maxed out. Plan to continue to contribute the max. All CAD stocks.
RESP – about half way there.
A non registered for which I did Smith Maneuver to fund.
Another non registered in which I have CAD VIU and USD IEMG
My current income stream will vanish in 3 years when I am 65.
I am trying to position my finances to be able to get a significant dividend income but don’t seem to be seeing numbers like you.
If I do the math based on a 4% rate of return I believe the amount you and I have invested is similar.
Perhaps I am not seeing my returns accurately due to DRIP?
Any comments/thoughts/suggestions appreciated.
Years of patience and discipline Ian. You will get there with that too!
I know Mike at DSR very well – he has a good newsletter but at the end of the day, I don’t find the CDN stocks too hard to find 🙂
“My RRSP is all USD.”
You’re ahead of me on that since I want to increase USD and international assets more with time….
Smart stuff on the TFSAs = maxed out. Well done.
I don’t focus too much on the 4% rule per se, rather, how much income my portfolio (dividends + ETF distributions) can reasonably generate. These updates are about that via our TFSAs and non-registered. I figure if I can grow those accounts such that they deliver my desired $30K per year, I figure we can semi-retire based on our income/expense needs.
Have you considering looking at your expenses to figure out your “enough number”?
I also plan to build a cash wedge in retirement too…a hedge against a few bad market years or emergent needs.
Thanks for your blogging Mark. It’s helped me better understand the issues involved as I start down the slippery slope toward retirement.
If one wanted to leap suddenly into dividend investing, do you have balllpark idea of what it would cost one to buy purchase your holdings at something close to today’s market prices? I’m wondering what sort of premium desirable dividend stocks are at currently, vs. my strategy of holding on to equities for future capital gains appreciation, and future taxation when my income is lower.
Of course it’s a hypothetical exercise. I can only imagine what trying to buy a real estate investment portfolio would cost at the moment.
Congratulations on your progress Mark ! Like you said it’s boring but boring is good sometimes or else if we wanted some excitement we should throw some money on dogecoin 🙂
speaking of AQN it’s about 7% of my overall portfolio I know you advise on keeping it within 5% so I’m not sure if I should trim it or just ignore the 2% 🙂
Ha, well, I did answer that 5% reader question/letting your winner run question here:
If TD, BLK and a few others keep going like they are…I suspect I will be and remain over 5% of each of those in my portfolio. I won’t be selling either, so I’ll need to try and rebalance by adding new money and buying something else that is lagging behind a bit.
I’m not against letting a few winners run for sure. That 5% rule is something I’ve come up with to keep me largely diversified and avoid tinkering with the portfolio too much. I hope it works for others!
It’s a general guideline some use. Depends on the person with ideas on risk, diversification, #holdings, etc
My largest single stock holding ENB is about 3.5%. My total for 5 Canadian banks is 10.3% currently. AQN is about 1.6%.
I may be more of an outlier. My largest holdings are VXUS, VTI.
Just wait until you can add on those new bank dividend raises!
Hung onto my IPL. Prefer the Pembina offer.
Ha, yes, I’m not doing anything but sticking with the Big-6 and some life cos. as well.
I probably should have hung on to IPL in hindsight but I’m not looking back. I hold a bunch of ENB and TRP and that’s good enough for pipes for me. Over time, I have enough CDN individual stocks so I’m just buying more XAW and other low-cost ETFs anyhow. TFSA (x2) and RRSP (x2) are full, so only taxable account to invest for the rest of 2021 – if I do at all.
I want to have 2022 TFSA contribution room ready for Jan. 1 so we’ll probably start saving for that very soon.
Anything on your buy list?
‘I probably should’ve hung on to IPL’….I think this is a little sellers remorse but the answer in this case would be unfortunately yes, Selling IPL on Mar 30 in the $8 range and buying AQN in the $18 range looks to be empirically the wrong decision w IPL now above $20 and AQN at near $19. I think the deal w PPL is the right one and you get back to a 6% yield with increases with PPL next year too. Maybe that could be on your buy list (PPL)? I own IPL as Gruff has mentioned and think the PPL offer is the right one.
Mark, I have gone through a slightly more painful process when NFLX announced their first price increase and I thought everyone would cancel their subscription. I underestimated management quality. Sold NLFX at $111 and now on a pre split basis it’s at $3,500/shr…..ouch. But we learn and move on.
Mark, as part of your dividend selection process, do you have a process to evaluate the quality of management? Wish you all the best. Jim
Well, thank goodness I didn’t sell IPL at $8 🙂
No, no real remorse but hard to predict the future, hence the challenge with buying individual stocks. I’m not against buying some PPL, just don’t own it yet but might!!
To answer your question, no real quality of management selection filter. I would need to meet them of course.
All the best to you too! Keep you posted on the next income update!
I wonder if the management evaluation screen might have some merit. I’ve held IPL for many many years. The Heartland complex is a transformative project and so not surprised re div cut as they needed capital to finish that project (scheduled for next year I believe).
I think actually meeting management is not needed re management evaluation. Do you listen to the quarterly conf calls of co’s that you hold? I wished I had the discipline of doing that prior to when NFLX announced their first price increase. If I had listened to the calls I would’ve been comfortable w Reed Hastings management skills and would not have thought they were finished b/c everyone would cancel their subscription. I wonder if there is merit to somehow include a quality of management screen when picking dividend paying co? Wish you all the best Jim
Interestingly, I’ve called in to some management meeting calls – very interesting stuff. I think there is value in doing that, as part of screen, the challenge is finding the time!
Nice tracking again Mark.
It’s good to see income growing and knowing your assets that drive this are also increasing, so you can utilize whatever combo of income and capital you choose to generate cash flow in retirement. A1
Thanks very much Deane. Yes, a mix of income and growth (including inside other accounts) with some part-time work should serve us well I hope?!
Ha, that’s a typical understatement from you. You’re certainly set to be well served, especially with some additional PT income, for a number of years.
It’s great to see it coming together for you.
Thanks very much. As you know, a lot of hard work has been put into my plan – far less time than the blog takes!! – but it’s nice to see things trending. <4 years now.
My employer asked me about long-term plans…it was an interesting discussion, but I did mention it is my hope I can consult or work part-time in about 3-4 years, should that be an option. We'll see.
I can certainly see that.
It’s a good idea to have that dialogue now. Hopefully it will work out the way you want.
We’ll see. I’ll keep you posted 🙂
We closed out IPL position as well but have held onto HR.UN so far. Might decided to close HR.UN later.
Over 1000 shares of XAW is awesome, great diversification.
Well, the 1,000 shares relates to AQN but we’ll get there eventually with XAW. Thanks for the visit and comment!
Mark: Your Income chart is the reverse of what most other investors, Retirement withdrawal chart will look like.In fact, by the time you retire, your retirement Income should keep you from depleting your retirement investments. I just posted about this on my blog.
Is that a good thing? re: reverse of what other investors have? 🙂
I checked out your post, good stuff.
If Mark’s retirement investments are for the most part within an RRSP (probably like the majority of readers here) nothing will stop him from depleting his retirment investments. I have tried to talk the CRA in to letting me withdraw only 4% from my registered plans but they keep on saying NO.
If you start early enough your TFSA can fund a good portion of your retirment needs above any company pensions, CPP/RRQ and OAS. Then you can invest any surplus funds in to non-registered portfolios and watch your income increase as you age. If I wanted to I could supplement my income by approx. $900 per mth if I were to utilize my TFSA dividends and non-registered dividends. Presently just keep re-investing and I am looking forward to increasing my non-registered portfolio next year when I am OBLIGED to withdraw 5.28% (not 4%). Extra monies will be placed in the non-registered portfo;io and invested there.
With the stock market increases this year I may be looking at an OAS clawback next year. A good position to be in but no one likes to give money nack to the government.
There is no doubt if millennials just younger than me, focus exclusively on their TFSA(s) over the coming decades, they could have $500K or more saved for their retirement just from that account. So, to your point, the TFSA can fund a very sizeable portion of any retirement along with CPP/QPP and OAS.
It would be nice to make the abolishment of RRIF and LIF mandatory withdrawals, max and mins., etc. an election issue – meaning, get rid of the bureaucracy associated with that.
You’re in a great financial position Ricardo!
Perhaps focus there first for many people but TFSA alone may not be enough to fund retirement.
Yes, further changes with withdrawals on RRSPs RRIF are needed, as well as income factors for TFSAs re govt programs. Makes no sense, is unfair and wasteful. Govt specialties.
Oh, quite true. When was the RRIF account structure introduced…like 1978?? A few adjustments since then but really, 45 years and no major changes? Another government example of simply falling asleep at the wheel. Sigh.
With the market so good I assume lots of retirees with RRIF will pay more tax next year.
I am pretty surprised this year and feeling need to be prepared for a market downturn in near future.
I paid more tax this year May as it was the first year for a withdrawal from my RIF. Both governments (Can & QC) pigged out much more than I thought (or wished) – 33% overall. I had asked for 25% overall to both govs. My Lif is in to a second year so I can control taxation a bit more.. Might be something for Mark to investigate – first year taxation. As long as I don’t get in to a situation where I am making quarterly payments I will be content. Another thing for Mark might be taxation rates to pay.
I think I can likely do a case study on that Ricardo, smoothing out taxes, say, at age 60 starting to make it simple for CPP to begin, OAS at 65, and see how how I can get the tax rate with a modest RRSP/RRIF LIF, etc.
I noticed your email so I will reply and see what figures I should use. Might to be interesting to see how low tax rates can start if you are strategic about withdrawals from certain accounts, and how much, when.
Been a wild/great year of returns already even if there was zero growth for the rest of 2021. Another example, nobody could have predicted this accurately!
Yeah, last year is quite disappointing for me and this year it already caught up for last year and then achieved this year ‘s target for me. You are absolutely right, nobody can predict the market so better just stay in.
Well, the market can always go down too. Let’s tight our belts and see what’s happening.
That and with some seniors handouts from the govt re Covid.
Trying to take more charge of our registered accts earlier on to minimize the forced RRIF withdrawals and tax implications later on.
“forced RRIF withdrawals”
Almost wish that the prices would just stop going up (not really) as all they’re doing is increasing the required withdrawal. So far the dividends will cover withdrawals in the RRIF to age 67 (at current worth) and to age 63 in the LIF. Theoretically though the banks should boost yield a bit to extend those dates. Being the procrastinator that I am, will see what the withdrawal is in Jan 2022 and try to figure out something then (not likely though).
I’m also considering taking some of the GIC RRSPs into income this fall to just pay the taxes now. The question then becomes what to do with it.
You have some good problems to have financially Lloyd.
I just noticed Lloyd is still pretty young. Always feel you have already been retired for ages. LOL.
Too much money in RRSP is always a nice problem to have. Ever considered to withdraw more before 71 so that you will have less headache with forced withdrawal? I want to clean out our RRSP/RRIF during 80s.
I’m actually fine with the required withdrawals from the RRIF & LIF. In my delusional mind I do like to see the withdrawals more than covered by the dividends for as long as possible. Of course with the escalating percentage each year, it is obviously not going to go on forever. I’ve looked at pulling more out of my remaining RRSP but only up to the ceiling of the 20.5% tax bracket. We’re building charitable endowment funds now so we have decent tax credits to cover the income tax.
The wife’s RRSP will continue DRIPping until she is 65 due to her income level at this time.
I don’t intend to deplete the RRIF/LIF/RRSPs/TFSAs as we like the concept of having a larger asset base in case anything happens to moi (wife is disabled and would require more support). In a way, it’s almost like life insurance. Paying taxes on the residual once we’re gone is not a big concern.
You are right, you don’t need to. This simplifies things a lot for you.
“Too much money in RRSP is always a nice problem to have.” You bet.
Many readers of this site seem to be in that boat – my goodness people – congrats!!
I will definitely withdraw actively once retired. I am actually hesitating if we want to continue to max out RRSPs but decide not to let the tax tail wag the investment dog. So the longer we work, the more we need to withdraw from RRSP once we retire. I figure the forced withdraw plus investment income from non-registered account alone could be more than enough of our needs. Well, a good problem to have I guess.
So the question raised again, should I retire right now at this minute? LOL.
I’m sure you’ve done the tax calculations for retirement, and its probably very beneficial to keep contributing too RRSP. We have found them to be significant, although there will likely be tax hikes due to all this debt, and our income is projected to rise a fair bit.
I think as long as we don’t wait until RRIF forced withdrawal kicks in, maxing out RRSP should be beneficial tax-wise. Of course, unless market always as good as this year. It’s very unlikely though if not impossible. And if it is, I don’t lose anything anyway as I still end up with more money.
Good plan May and I think we’re safe that markets won’t always be this good. haha
In a typical year I need the money from LIF & RRSP in addition to unregistered dividends to live on, so have to make withdrawals that I started (RRSP) in 1st full calendar year of retirement, LIF 2nd full year. I also top up TFSAs & cash bucket from these withdrawals.
I want to get the registered accts down so when CPP/OAS starts RRIF withdrawals are less $$ so our taxes are smoothed and can very likely avoid clawback with income splitting. (paying a little more tax now than we could, to avoid more later and make the average lower -at least that’s the plan. LOL)
Same here, we have to withdraw from RRSP once we retire as we don’t have any pension and unregistered dividends won’t be enough to live on. We will withdraw more than needed to smooth out the tax curve. I figure we might not touch unregistered for quite a while unless there are unexpected large expenses.
If your plan does not work, then it’s because the market is too good. I assume you use a higher growth number for your RRSP meltdown? I feel the growth numbers you used for VPW will not work with RRSP withdrawal as they are too low.
Pretty similar plan to here other than my wife has a moderate DB pension, and we’re further along in our lives being retired now.
Ha, I’ll take the market being too good and my plan not working if so!
I don’t get fussed out on projections of growth. One for all accts. VPW uses actual market results updated annually for projections anyhow, whether using default assumptions or my slightly reduced ones. I don’t see it really matters unless we’re running close to withdrawal suggestions, which we aren’t – YET.
The rubber hits the road on any plan when we have a real correction/sustained bad period.
RBull, what does your VPW have you pulling out this year?
Just curious, as you’re into your 60s now and VPW is essentially a ‘die-broke’ plan to age 100 (excluding house assets per se) – VPW focuses on drawing down invested assets over time; not focused on a set % as you well know.
Do you think the gov’t will ever change the RRIF rules?? I hope so, simplification would be great.
It’s a rather detailed answer. There is the original VPW version. There is also a newer version which incorporates other future income sources like OAS/CPP, so the suggested withdrawals are even more aggressive and are expressed as actual dollars for one year, not percentages. (Spend more of your own assets now because you have offsetting future income streams) It seems this attempts to even out your retirement lifetime income. Each year you update it by entering your 1st of year asset balance.
For us the original VPW suggests 5.0% this year age 61 and also for 2022. Over 7 years we’ve averaged asset withdrawals just over 2.7%. Last year it was .92%. I would estimate this year will be ~3% but could be 5% or more if I go ahead with a few things I’ve been thinking about.
The suggested VPW range started at 4.7% age 54; 5.6% age 70; 7.1% age 80; 11.9% age 90 etc
The newer version suggests a larger $XXX withdrawal which works out to 6.4%, utilizing both CPP & OAS @ 70 for us. Playing around with it I can see it reduces the withdrawal suggestions after CPP/OAS start.
Hard to say on RRIFs. People continue to live longer but governments want & need their tax revenues. However they also don’t want people to outlive their savings, which ultimately burdens taxpayers.
Thanks. You never know. Maybe we’ll look you up for some more perspective.
Yes, these answers are not trivial 🙂
I see that, based on the table ~ 5% now with any 70/30 stock/bond split:
“Over 7 years we’ve averaged asset withdrawals just over 2.7%. Last year it was .92%.”
Ha. That is wild. Just means you can spend much more $$ in your 70s. I see a new sportscar in your future 🙂
Yes, will try and email you this weekend on that perspective.
Ya, not trivial!
I tend to consider the newer version as the more sensible choice to work towards, and increasing spending while we’re younger and can possibly enjoy it more. Otherwise we will have a crazy jump in potential income & taxes later on unless markets are really uncooperative. And because I expect to continue the trajectory of a rising equity path.
Ha, the lady in red works beautifully and is truly in near new condition. No need for something newer. I see they’re selling for what I paid back 11+ years ago.
Great look forward to it!
Ha, lady in red. Good one!
If either of you want to hire us, we can run some numbers for you 🙂 No obligation of course, I know you are both very savvy!!!