November 2020 Dividend Income Update
It’s been quite the investing year.
Dividend increases, cuts, and the recent Canadian big-bank dividend freeze announcement just to name a few.
Looking bigger picture, back to March 2020, I couldn’t image this is where the stock markets would be at now:
And I think that is what is so impressive about my slight bias (I admit, and for the record, we all have biases…) to owning a basket of Canadian and U.S. dividend paying stocks, and indexing the rest.
It helps me with an investing plan I can largely stick with riding any market ups and downs, with minimal changes in direction.
Other investors have taken similar paths to financial independence by investing this way. One of them happens to be one my inspirational sites Million Dollar Journey.
Welcome to my latest monthly dividend income update.
As regular readers of this site are aware, I take a two-pronged approach to investing:
- I strive to build a passive income stream using our non-registered account and TFSAs, investing in mainly Canadian dividend paying stocks, and
- I strive to invest in U.S. stocks and low-cost ETFs inside our RRSPs, for income and growth.
These updates are and continue to be about that first bullet.
I focus on that reporting because a) I’ve always reported it that way; creature of habit I guess and b) because I will eventually draw-down the capital inside our RRSPs as part of semi-retirement in the coming decades.
The appeal of semi-retirement, work optional
While I wouldn’t necessarily link my blog directly to any FIRE (Financial Independence, Retire Early) movement, I wouldn’t hesitate one second to link it to some very important financial independence concepts.
- Live within your means.
- Pay yourself first.
- Invest regularly and stay invested.
- Try and be patient.
- Rinse and repeat #1-4 as long as possible.
You can read about my Financial Independence Plan here.
The idea of making “work optional” is very appealing to me in the coming years, and it’s becoming a reality through some long-term disciplined investing.
When we reach our personal Crossover Point, it will be interesting to see what employment decisions we do actually make. Certainly for now, I thoroughly enjoy my team, my role and my work. So does my wife and her role.
With no mortgage debt (which will be liberating unto itself in a few years), I believe the beauty of financial independence distills down to options and choices in life.
Countless readers have emailed me to highlight the joy they felt or continue to feel now that their decisions about time are not anchored by making money to pay for living expenses. Instead, they consult, they work part-time, they have turned a woodworking hobby into a small part-time job, or a host of other things…
Those examples have clearly sent strong signals to me over the years that working, for some, can be much more enjoyable when you don’t do it because you need the money.
Ultimately what financial independence delivers is choice – whatever those choices for you may be.
In an unknown future, persistence over time pays…
I really have no idea what my career might look like in another few years, although I have some vague plans on what that could mean.
For now, I will continue down my path of persistence. After all, time is required for compound growth to do its thing.
I found an interesting quote the other day on Morgan Housel’s site:
“The greatest shortcoming of the human race is our inability to understand the exponential function.” – Albert Bartlett, Physicist
So, I’ll continue to save a bit, invest money saved and enjoy the rest after that.
I will let any investments and compounding do their thing.
This means for me, I’m going to stay the course with dividend investing and indexing as my one-two investing punch.
November 2020 dividend income update
Even with a few dividend cuts in my portfolio that I’ve written about this year, our taxable and non-registered portfolio is still on pace to earn $20,800 this calendar year – with one month of compounding and time in the market to go.
That’s getting very close to what I thought our target might have been earlier this year – a target that would have been surpassed without those dividend cuts for certain.
We don’t dare touch or tap this income stream since we need it for the future semi-retirement reasons above.
To put that income into further perspective:
- If we weren’t reinvesting many dividends paid (but we are today), that income would cover our property taxes, condo fees and utility bills as key household expenses – including likely all inflationary costs for those things in the range of 2-3% per year, for life.
- $20,800 per year in dividends earned translates to earning roughly $2.37 per hour of every hour of every day ($20,800/8,760 hours (24 hours x ~365 days)) even in my sleep.
- That income earned per year could be considered earning the equivalent of exactly $10 per hour assuming I work a 40-hour work week ($20,800/2,080 hours (40 hours x 52 weeks)). Even better, some of that income is tax-free (thanks TFSA) and I won’t pay taxes on it again.
- That’s an increase of about $1,400 over this time last year based on TFSA contributions alone, during a pandemic no less. Once I factor in the latest Enbridge (ENB) dividend increase next month, for my forward dividend income, I suspect my total 2020 tally might even be higher and closer to my 2020 target.
The basic rule of compounding comes in four words: never interrupt it unnecessarily.
Thanks for reading,