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”.
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) and instead bought more REI.UN inside my TFSA last summer.
- 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%. IPL is long-gone from my portfolio. I took the proceeds and invested it in Algonquin Power (AQN) – one of the stocks I said I would buy more of in 2021.
Across our portfolio, we own over 1,000 shares of AQN and DRIP a few shares per quarter.
- 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.
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.