October 2014 Dividend Income Update

Canadians have been urged to save more for retirement.  There are some good reasons for that.  On average we’re living longer and that longevity risk has the potential to derail our financial plans.  There are also other risks that need to be controlled.  Those include:

  • Volatility – the magnitude of losses and gains over time due to market swings.
  • Financial risk – how much decline in your portfolio you can accept given the need to preserve capital.
  • Erosion of purchasing power – there are risks that investment returns will not keep pace with inflation over time.

Beyond these risks, there is also the growing indebtedness within our aging population.  While the reasons vary, more seniors are carrying debt into their retirement years.  I don’t want to be one of those statistics.  If a growing number of seniors cannot be financially secure after decades of employment over various bull markets, in addition to financial assistance from government programs such as Canada Pension Plan and Old Age Security, I think our economy is in trouble.  An aging population and demographic shifts are going to put an enormous strain on our economy.  I’ve read in a few recent articles that stated about ¼ of our population will be age 65+ in another 20 years.  That translates into more retirees and less government revenues from working-class Canadians compared to today.  Supporting retired Canadians might very well become one of the biggest burdens to our government and there’s no telling how federal financial and healthcare programs must react to address it.

With some of this doom and gloom on the horizon I’m doing what I can to take matters into my own hands.  For one thing, I’m treating debt as the nasty four-letter word it is.  I’m also investing, wisely, at least much better than before.  Long gone are the days of holding high-priced financial products like some mutual funds charge (doing that is another four-letter word).   In recent years I’ve decided to invest in low-cost indexed Exchange Traded Funds (ETFs) that provide diversification, purity, transparency and passive growth within my portfolio.  These ETFs pay quarterly distributions that I reinvest; ETFs that over time will become the “core” of my portfolio.  I’m also invested in 30+ dividend paying stocks from Canada and the U.S., companies that pay dividends every month and quarter, stocks that could be branded as the “explore” portion of my portfolio.  With this “core” and “explore” approach our goal is to earn $30,000 in tax-efficient and tax-free income per year to help support our retirement expenses, also covered by some pension income and other retirement income streams.  As of this month, we’re projected to earn $9,250 for this calendar year.  We have a very long way to go, to save, to invest and to reinvest the distributions and dividends earned to meet our objective. I remain confident this income goal is achievable and in doing so it will help protect us from many of the financial risks above.

Canadians have been urged to save more for retirement for lots of reasons.  Reinvesting distributions and dividends paid is a big part of our retirement plan and we’ll need to keep these habits up for at least 10 more years – let’s see where we get.

Oh yes, before I go, thanks to my friends at Canadian MoneySaver, I’m pleased to giveaway in support of Financial Literacy Month #FLM2014 five (5) FREE 1-year online subscriptions to Canadian MoneySaver Magazine.  Make sure you enter the giveaway below!  As always, thanks for reading.

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41 Responses to "October 2014 Dividend Income Update"

  1. i’s like to win a subscription on the moneysense magazine because i want to be financially literate. 🙂 i am just new to investing and the magazine will surely help.
    with regards to this article, would it be ok to know how long have you been building your dividend port? and how young were you when you started?
    thank you.

  2. First up. I was lucky enough to meet Mark in person a month or so ago at a local pub before a football game.
    He talks a great financial and sports game in person just as much as the blog suggests 🙂

    I am happy to add this blog to my weekly reading of financial guidance. REITs and Div Paying companies are all on my hit list.

    I like how you put a tangible number on the target. 30K! I got some work to do to get there!

    – Former house owner… Now rent and invest/save more than I ever have in 10 years. Don’t want to pay the banks anymore…want them to pay me 🙂

    1. Great to hear from you Mike!

      Yeah, a LONG ways to go for our goal but you gotta have goals in life. Big fan of REITs and dividend paying stocks. I also index invest quite a bit as well. Maybe we’ll meet up again at the Georgetown for some pre-game pints again next year?!

      1. 🙂
        Absolutely sir.. beers before a game should be a tradition as a Redblacks fan 😛 Helps smoooooth over the losses that add up.

        This is a great blog! Bookmarked with Mr.Turner and Greaterfool.ca 🙂

        Balance Portfolio and the right decisions will make “working” for a “living” pay off down the road 🙂


  3. I really would like a subscription to the Moneysaver magazine. I have read a few issues at the local library and find the content very useful, especially the question-and-answer section!

    The section on DRIPing is also excellent and congratulations to you for implementing the strategy so successfully to generate impressive dividend income.

  4. Just wondering why you picked 30 000? Why not just keep investing and see where you end up, or do you think 30 plus other income from gov’t or pensions will be enough? Thanks

    1. I figure this is the number that will cover most basic living expenses, such as heat, hydro, food and some small entertainment. $30k+ will be needed for travel and more entertainment. Hopefully other income streams will cover that.

  5. Just keep doing what you are doing… It’s all about learning good habits early and then letting time work in your favour. The $9k is in distributions and dividends, or just dividends? Just curious. A lot of our current growth in retirement money comes from capital gains, but maybe one day many of my capital gain companies will grow into dividend payers… Either way, like I said, you’ve got the good habits, so all you need is time. – Cheers.

    1. That’s from ETFs and dividend stocks, more dividends than distributions though although I will be indexing more in 2015+. Yes, time for the investments to incubate. Thanks for the comment Phil.

  6. Congratulations on topping $9,000 for the calendar year. That’s a significant amount if you think about the fact that it is perpetual income, i.e. $9,000+ every year in perpetuity. Keep up the good work!

  7. I join my congrats, great revenues!
    And good post. Sadly too much people wait only for the govt and their corporate pension plan, if they have any. Saving and investing is always a good practice, even in this consumerism world.
    Keep up the good way, cheers!

    1. Thanks farcodev. I don’t want to rely on the government CPP and OAS programs, but certainly because I’ve contributed I will take the income. I simply don’t want to make any bets about the future of these programs. I figure I need to look after my wife and I, that’s priority #1.

      1. Mark,
        a small note about CPP vs. OAS – one only contributes to CPP unless you consider paying taxes as “contributing”

        – OAS is NOT really a pension more of a reward by our govt. for being able to fog a mirror @ 65 – it is not funded but is paid from general revenues – CPP on the other hand is funded (your contributions) and managed (not badly btw) by the CPPIB – al its funds are segregated from govt. funds and in theory not available for the govt. of the day to fritter away

        – OAS is seen as an entitlement by many and woe to any govt. that messes with it (see the Mulroney Conservatives)

        personally I’ve reached the point where CPP is available but I consider it beer money – personal resources cover my lifestyle; as to OAS it will probably all be clawed back in my case

        1. Thanks for the comment, did I write OAS was a pension? I certainly didn’t mean that if I did. Well, we are “contributing” to both programs, CPP and OAS, via general taxation for the latter 🙂

          It would be great to use both CPP and OAS as “beer money” as you put it, or scotch. The goal is not to rely on the government for program payments. If we get some, it’s gravy. That’s the plan, we’ll see, we have long ways to go.

  8. I just started on the path of dividend investing this year. While my earnings are small (less than $1K), I’m expecting to hit higher in 2015.

    I agree that your home should be a small part of your retirement nest egg. Putting all your eggs in one basket is very risky! 🙂

    Keep up the good work with your dividend income.

  9. Mark, congrats on the $9k div income. Great progress so far. I have a ways to go with mine. Ive been slowly building up my RRSP while also making small contributions in my TFSA. My goal for the next couple months is to have both RRSPs maxed, then use the tax refund to put towards the TFSAs. I’m hoping they raise the annual TFSA limit but I’m starting to wonder since they haven’t mentioned it recently and I would have expected an announcement by now if it was to take effect for Jan 1/15

    1. That would be very impressive if you could max out both accounts Dan. I’m not quite there yet with the RRSP but trying… I think the TFSA contribution limit will stay the same. I suspect it will be in the 2015 budget.

  10. The trend I am seeing is that Canadian cannot afford their own retirement in Canada and some instead of struggling here are moving out of country so their dollar goes farther. Too many Canadians are house rich but not enough tucked away so they are forced to downsize. Will be interesting to see how the aging population affects the already strained healthcare in Canada in the future.

    I entered the giveaway. I read moneysaver as every few months I will take them out at my library. Not a lot of fancy pics in there and no advertisement but its a solid read for Canadian stock and etf buyers. Before I made my big Reit play I read a few of their articles which helped guide me.

    1. Your comment about house-rich made me smile. This is exactly what I’m trying to avoid on our financial freedom journey. I hope that our home is not where are the majority of our equity is. I hope to make our home a small portion of our assets at some point, through diligent saving and investing. Thanks for your comment AG and glad you entered the giveaway.

  11. I realize that you have roughly $20K more to go but congrats on earning $9,250 this year! You are practically a 1/3 of the way there. 🙂 And through the power of compounding, your growth will continue at a much faster rate as you get closer and closer to your goal of $30K.

    Wishing you nothing but continued success! AFFJ


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