May 2023 Dividend Income Update
Welcome to a new monthly dividend income update…
New readers to this site will learn more about my hybrid approach to investing through these updates.
Long-standing subscribers will also learn about some recent portfolio additions too!
For everyone involved, I will also share a few answers to some recent reader questions.
How much is enough?
Mark, I read your last dividend income update with great interest. Link here. In that post, you highlighted that a crossover point is ideal – to realize true financial independence. You’re not planning for that. Aren’t you worried with prolonged higher inflation and so many future unknowns you might outlive your money (if you don’t have your portfolio earning more than your expenses)? Thoughts? Am I the one being too conservative? I would like your reply. Thank you.
Reference: the financial independence, retire early (FIRE) crossover point. Your mileage may vary.
Thanks for your question!
You know, maybe there is a risk. Well, there is absolutely a risk!
But I feel there is a bigger, lifestyle risk, by not seeking out work on our own terms and trying to live our balanced lifestyle – something we’ve been working towards for almost 20 years now.
The entire #FIWOOT journey has always made sense to us. Your mileage could vary.
Like I mentioned last month, I figure once your portfolio delivers most of your retirement income needs (excluding our future CPP and OAS benefits), then it’s OK to take a small leap of faith – not work full-time too much longer unless that is your plan.
On the subject of higher inflation, I have written about my approach numerous times on that.
In fact, you can retire even during periods of higher inflation using this approach (with ample retirement savings of course) as a guide:
When it comes to being conservative, with money, I could likely improve. 🙂
I mean, part of the reason why I gravitate to dividend paying stocks in Canada is because I like seeing the income flow-in from the stocks we hold in our portfolio, without doing anything. Besides, there are likely only 30-40 stocks to consider owning in Canada for dividend income. Otherwise, index invest.
My DIY investing approach is actually very passive.
The process is: I own stocks, I get paid for owning these stocks, I can redeploy or reinvest the money as I please. Also via this process, in the not too distant future, I can spend money as I please without selling stock shares or ETF units. This appeals to me for now.
But over the years this slight bias to dividend investing and investing conservatism in general has also had a performance downside – lack of risk taking. For example, I don’t own many tech stocks in our portfolio. The U.S. market is full of them. As such, over the last 10 years or so, I have missed out on some HUGE gains with the likes of Amazon, Apple, Microsoft, and other tech companies rising high in price. Sure, I own a small amount of low-cost ETF QQQ as a tech stock proxy but sometimes there is actual FOMO (Fear Of Missing Out) in playing the woulda, coulda, shoulda with some stocks or assets.
QQQ has done rather well in recent years and I will continue to own it. (More on that below.)
My basket of Canadian DIY stocks continues to Beat the TSX (BTSX) over time because I happen to own many BTSX stocks every year when making more/new portfolio purchases.
But I do confess I have missed out on some major U.S. tech gains with my approach due to a lack of risk taking on my part. So, while staying boring works well with investing I would be foolish not to acknowledge some opportunity costs.
Mark, for years, I’ve followed your site and because of that, I dumped my financial advisor. I’m happy I did and I’ve never looked back. I’m more conserative than you so I took your considerations to heart and bought low-cost ETF XIU instead of building my own stock portfolio. I’m very happy with the results. I get income and growth from XIU, just as you said I would.
I also own a bit of your low-cost XAW as well, for ex-Canada investing. I also keep some cash as dry-powder! I am considering owning QQQ since you’ve mentioned you own that.
My question is: can you share some of the U.S. stocks that you own? You don’t really mention much on your Dividends page beyond a couple of U.S. stocks and it would be nice to know what you own and why. Thanks for considering this since I know you’re a bit private with your investing decisions and don’t share everything publicly for privacy reasons. Thank you.
Thanks for your question, and correct!
I don’t disclose everything, all the time, in one place on my site for a few reasons but I do try and share what I am comfortable with to help others of course or allow others to learn from my DIY investing mistakes! 🙂
I fully appreciate the desire to avoid any individual stock selection. With an indexed fund you own all the stocks: the good, some bad or indifferent.
You are correct in that I don’t disclose all U.S. stocks in my portfolio but I will share some stocks inside my RRSP on this occasion.
Here are the stocks in my own RRSP (not my wife’s) as per current state relative to portfolio weights I’ve maintained for a few years now:
- a mix of BLK, BEP/BEPC and BIP/BECP along with JNJ, PG and NEE.
I’ve compared my returns for the last 8-years or so with largely a buy-and-hold approach against XIU (Canada) and QQQ (U.S. tech) for quick fun:
Source: Portfolio Visualizer
(Notes: Blue Portfolio 1 – XIU; Orange Portfolio 2 – my portfolio; Red Portfolio 3 – QQQ. You can see if I went all-in with QQQ (orange) I would have done much better!?)
Ah, the future…
Again, none of these stocks or ETFs are recommendations for purchase.
Rather, I buy and hold some individual stocks from the U.S., mostly defensive plays, along with low-cost ETFs since I feel I get the best of both worlds: income today, growing income tomorrow to deploy as I please and broad-market ETFs that deliver higher equity returns to help us meet our investing objectives.
Beyond these stocks or QQQ inside my RRSP, another reminder I’ve also gravitated to owning more indexed ETFs like XAW inside my TFSA over time: to capture lazy growth inside that account. At the time of this update, XAW is up 8%+ for the year. Pretty good for staying boring. Things can always change…
May 2023 Dividend Income Update
Well, time for the Projected Annual Dividend Income (PADI) update:
Keen readers will notice a massive $600+ jump in just one month from April 2023.
We haven’t done much but that also won’t happen every month!
I bought a bit of TD Bank recently but otherwise the dividend income is higher thanks to some key dividend raises in May:
- Telus (T)
- Pembina Pipeline (PPL)
- Bank of Montreal (BMO)
- Bank of Nova Scotia (BNS)
- CIBC (CM)
- Royal Bank (RY).
To put this new monthy update into perspective:
- That’s averaging $3,476 per month – getting closer to covering most basic expenses every month such as paying for food, shelter and transportation.
- A reminder we don’t intend to invest any money inside our taxable accounts at all, this year. We simply don’t have enough to go around… Our plan is to save for 2024 TFSA contributions starting this summer and hopefully be ready to roll when new TFSA contribution room opens us as of January 2024. This saving work remains directly aligned to our 2023 financial goals.
I look forward to sharing more updates next month.
With diligent, multi-decade savings for retirement, I believe many Canadians can build a decent retirement nest egg using low-cost ETFs. I was only happy to share my thoughts as part of the Best ETFs for 2023 with my peers and colleagues at MoneySense here.
How much do you need if you want to spend more in retirement: what does it take to retire on $6,000 per month?