October 2018 Dividend Income Update

October 2018 Dividend Income Update

Possessing a good dose of market history can do wonders for the financial mind.

Whether it was living through Black Monday of the October 1987 crash, the dot-com crash nearly 20 years ago, the financial crisis now a distant ten years ago, or the hand-wringing related to recent stock market volatility – the lesson should remain the same:  stay invested and stick with your plan.

This lesson in behavioural finance is very relevant right now because many people believe another market crash is imminent.   It might happen next week.  It could happen next month.  Or maybe that crash is coming in early 2019.  It might not even happen at all!

The reality is, even amongst all the financial experts in the world, nobody knows when any stock market calamity will strike.  And for investors like you and I who embrace that wisdom, that’s a very good thing…

Over the years of running this blog, largely a financial diary of my thoughts, perspectives, massive financial failures (but also some decent success stories), I’d like to think I’ve learned a few things when it comes to personal finances and investing.

In no particular order:

  • Be a student of market history.  Like I’ve mentioned above, try to train your investing brain. This way, you’ll learn that “this too shall pass” – you’ll stay invested in the stock market as much as possible for as long as possible.
  • Avoid trading. Investors who dodge in and out of the market often get it wrong more often than they get it right.  In holding assets (versus trading them away) you’ll save money on commission fees too – so that’s win-win.
  • On the subject of financial fees, keep your money management fees as low as possible for as long as possible. Meaning, avoid high-priced financial funds or other expensive products.  The only people that get wealthy associated with pricey products is the company that sells them.
  • Be wary of any fund, company or financial product you can’t explain to a 10-year-old. Put options might be an example.  If you buy a put option on, say, the S&P 500, you gain the right to sell the S&P 500 at a predetermined “strike price”.  This option only works for a certain period though.  If you don’t use it, the option expires worthless.  So, a “put” or put option is a stock market device which gives the owner the right, but not the obligation, to sell an asset, at a specified price, by a predetermined date to a given party.  Seems like a gamble on the negative value of the future.  Why bother with that gamble if you don’t have to?
  • Embrace diversification.  Via owning many companies, within many different sectors of the economy, from many countries around the world is generally speaking a very good thing to do. By spreading your investment risk around using a combination of stocks, cash, fixed income, real estate and potentially commodities you benefit from what goes up and you’re not hit as hard as what comes down.
  • Ultimately financial behaviour is the most important thing you and I can ever do to be successful. Your ability to save consistently, long-term with discipline; ignoring talking heads; investing in low-cost funds that hold hundreds if not thousands of stocks from around the world; sticking with a diverse basket of established companies that pay dividends – doing all this without fail for decades on end – is an excellent recipe for financial success.

This list bring me to this:   based on my lessons learned and those of others, if you’re not already an active student of stock market history – get after it.  Take those lessons and then map out a financial plan you can stick with.  In doing so, I believe you will get wealthy eventually.

Why blog?

Using this site to document what I’ve learned, we’ve created a game plan. 

Our ultimate financial goals within the next 5-10 years remain aggressive but doable: 

  1. to be debt free, and
  2. to own a $1 million investment portfolio beyond any workplace pensions or future government benefits for semi-retirement.

Slowly but surely, we’re getting closer to those two major goals – these monthly updates are a small part of journey.

In 5-10 years, as we chip away at our debt and become debt free:

  • We intend to keep at least one years’ worth of basic living expenses in cash savings. That is likely somewhere up to $50,000.  Such cash savings will be used for emergencies and/or if and when we need money and we do not wish to sell assets to get obtain this money.  It will provide liquidity .
  • After this one-year cash fund is tucked away in a high interest savings account, we will rely on the following for semi-retirement income beyond any workplace pensions:
    • Cash flow from dividend-paying stocks from Canada and the U.S. (around 40 stocks in total). We will use the dividend income generated monthly and quarterly to pay for living expenses.
    • Cash flow from a couple of low-cost ETFs. We will spend the distributions generated by those ETFs and eventually draw-down the capital.
  • After we start drawing down some our RRSP capital in our 50s and 60s, we intend to take delayed CPP and/or OAS income (actual dates TBD!) to help smooth out taxes for the years ahead.

As you have probably gleaned above, the equity bias in our portfolio focuses on cash flow AND some capital appreciation.  I believe this continues to be contrarian thinking since everyone these days seems obsessed with market value – what is my portfolio worth?  While that’s very important; total return that’s not what I’m focused on.  As I approach semi-retirement I focus on when and how much I will get paid from my portfolio – tangible money I can use without selling assets.  Your mileage may vary.  Furthermore, you’ll probably see I don’t mention bonds in my portfolio.  I used to hold bonds in my portfolio many years ago.  I don’t anymore.  As you age, most gurus have long written about putting most of your assets into bonds (and less stocks) as you get older.   I’m not one of those people.  I’m learning to live more and more with stocks and so should you.

My math continues to tell me we’ll need about $30,000 per year in dividend income to fund our semi-retirement dreams, excluding any RRSP assets and any income from workplace pensions.  Thanks in part to my activities with market history we’re getting closer, slowly but surely, to that goal every month.

At the time of this post, with some recent dividend increases (thanks Manulife) and with dividends continually reinvested, we’re approaching $17,000 in dividend income this calendar year excluding RRSP assets.  We don’t dare touch this money because it’s for our future. The future is shaping up…

With a couple of months to go, I suspect we might even surpass that amount this calendar year – the arrow above was our status earlier this year.  The calendar year income will rely on the companies we own continuing to pay dividends and avoiding any dividend cuts.  I can’t predict that future but I can stick with my plan. We’re inching closer to some solid pre-retirement income to rely on – a journey that hasn’t happened overnight but one that has been cultivated over many, many disciplined years.

Will we reach that amount?  Will we fall short?  You’ll have to keep reading these monthly updates to find out!

Thanks for being a fan of the site.  If you have any questions about our financial plans, portfolio and other saving and investing principles you could leverage for your own financial journey I’m happy to answer as many questions as I can.  Keep them coming folks.

34 Responses to "October 2018 Dividend Income Update"

  1. Sorry for the slow response. Originally was very long winded so here is the short version.
    Pension allows for more risk. All our RRSP money are in stocks and ETF’s that pay a distribution and we plan to start unwinding those next year, depleted by age 80 or earlier. RRSP not huge as pension reduced contribution room and wife made little income. Monthly cash flow is most important to us. GIC and Bonds tie up your money. Cash wedge is a great idea but not necessary for me. Accessible cash for emergencies etc… is what I want. If I work 5 days per month I will bring in the same take home pay as when I worked full time. This will be accomplished from having multiple income streams. Pension splitting will also play a huge part by moving us down a full tax bracket.
    RE debt: we almost had house paid for but I didn’t like the thought of having this large asset not making me money so we leverage through a small HELOC. Used it to top up RRSP, buy recreational property, cover the occasional house repair and when there was more month at end of money. This plan is not for everyone but if I can make the same money working part time as I did working full time and cover all my debt obligations, why not take that shot? Rhetorical question. You obviously have enough money to pay off your mortgage by liquidating assets so why don’t you eliminate your debt? You understand the value of having money invested over extended periods of time. That will put you ahead. I have a buddy my age who has a paid for house but no savings. He is trying to catch up now and has to work for another decade. I can’t convince him to leverage a small percentage of his house to kick start his savings. My mortgage is fixed under 3% for the next 3 years and I can buy BCE today and get 5.5%+, BNS is paying 4.75%. If I win $100 000 the last thing I would do is pay my mortgage. Even in this rising rate environment we will be fine. Might have to make some adjustments but that’s ok.
    I also have a life insurance policy that will wipe out the debt. Bottom line. None of us get of the rock alive. Don’t overextend, look for ways to create cash flow and live on. If assets minus liabilities leaves enough to cover final costs and a gift for the fraggles then I did my job.

    1. All good Gruff.

      re: pension. I feel the same. I consider it a “big bond”. I don’t own any bond ETFs accordingly.

      It will be interesting to see what products banks and others come up with re: income. “Monthly cash flow is most important to us.” – and I suspect to many soon-to-be retirees. They simple don’t know how to make this happen….

      Multiple income streams are ideal to us. I hope to have in 5-10 years:
      -$30K dividend income from non-reg. + TFSAs
      -take out $10K or so per RRSP per year
      -blog income
      -part-time work income

      20+ years out:
      -add in workplace pension + CPPx2 + OASx2.

      Interesting approach for HELOC…I wonder if others are doing that like you given debt ratios in Canada?

      “You obviously have enough money to pay off your mortgage by liquidating assets so why don’t you eliminate your debt?” True….and I don’t because….”You understand the value of having money invested over extended periods of time. That will put you ahead.”

      You are correct 😉

      My mortgage is now 3.2% but like you, I know I can get BCE, BNS, etc. around 4-5% yield. This is why I’m focusing on maxing out my TFSA with $11K or $12K or whatever in the coming months. I know that should continue to put me ahead as you say…

      Thanks for your detailed comment.

  2. Hi Mark;
    Living the dream now myself. Just left full time work at age 56 after 28 years in teaching. Loved my work and had a fabulous time but when I did the retirement math I discovered that if I took my pension and started drawing down some of my assets and worked 1/4 of the time, I actually make the same money as working full time! I have a bit of a die broke philosophy. If we have enough to cover our final costs, leave a modest sum for the fraggles and charity we did our job. If you die and leave hundreds of thousands of dollars to your kids I think that is a mistake. If you die and leave hundreds of thousands of debt for your family to clean up with no assets to cover it that is a huge mistake. I understand it is a personal choice. Just sharing mine. Current take home without working is 50G+. Pension is our fixed income piece and everything else is self directed invested in dividend paying equities. Will never again hold bonds or GIC’s. Still have a substantial mortgage and likely always will. Consumer debt bad, asset building debt better, no debt best, difficult to obtain and not absolutely necessary for early retirement. It can be done with some planning and patience.
    Biggest challenge is moving my mind set from accumulation mode to de-accumulation mode. Keep up the great work!

    1. I like our die broke philosophy. My wife and I hope to adopt that too 🙂

      I appreciate your income details…re: “Current take home without working is 50G+.” I figure that’s about what my wife and I need, give or take. Older post but still relevant to general thoughts on this subject…

      Having a pension is a blessing but you’re worked for it and earned it. Well done. With that “rock” in place I suspect you have the luxury to invest as you have via dividend paying equities. For the last 10 years now, I’ve tried to change and model my portfolio accordingly.

      “Will never again hold bonds or GIC’s.” I see the need for a cash wedge in our semi-retirement. Thoughts?

      “Still have a substantial mortgage and likely always will.” Interesting you have a mortgage….I personally would be very uncomfortable retiring with any debt. We’ve got 6-figures in mortgage debt and we hope to have that killed off in about 5 years. At least that’s the plan… What made you decide to carry the debt and retire? Curious.

      Keep up the great work! – I will do my best and thanks for being a fan.

  3. How are taking into account ETFs that don’t pay an income?

    if you included CCP, OAS RRSPs and pensions you should be well above the 30 grand you need shouldn’t you?

    For my wife and I we settled on 3000€ per month or 36,000€ per year as our income goal. To get that number I looked
    at what we’d need as a minimum to have a comfortable but modest mortgage free lifestyle and then doubled it. While her German pension will kick in at 63 we’ve decided to delay the rest (investments other pensions) till 67 for her and 70 for me. At that point So that leaves us a 4 year gap to cover. While it will cover our needs taking a big pay cut does make me somewhat nervous!

    1. All my ETFs pay a distribution Rob. That is by design 🙂

      We are largely working right now to 1) kill debt 2) invest in our TFSAs every year, and 3) invest in my wife’s RRSP (my RRSP is largely maxed out). That’s really it. We feel the rest of the portfolio is largely on autopilot for the next 5-10 years.

      $30k from non-reg. + TFSAs by 2026 or 2027? +
      ~$20k from RRSPs by 2026 or 2027? +
      Pensions (major penalties if we take them before age 65 – that is 20 years away) +
      CPP x2 +
      OAS x2.

      The longer we work, the more CPP we will get. OAS is not a contributory plan as you know.

      The sum of that income will be “enough” for us. I am convinced.

      Congrats of living from 36,000€ per year as your income goal. That’s about what – say 1.5 x 36,000€ per year = $54,000 CDN.

      That’s very much aligned to our general needs and wants.

  4. Hi Mark. Congratulations on the growth of your portfolio. I must soon convert my $ 300 000 RRSP, composed of 50 percent Canadian and 50 percent US equities, to a RRIF. I have been paying an RBC advisor fee of 1.75 percent and he proposes I convert to a Fidelity Balanced Private Pool with further fees.
    To avoid high fees, I might consider transferring the account to Direct Investing or a CIBC Investor’s Edge which would involve a DIY approach. like you I would like to maintain a 100 percent equity exposure.
    Could you recommend an ETF portfolio that would provide a 5 percent annual income? I recognize I would need to sell some of the portfolio each year to cover the required government withdrawal.
    I have a little experience as a do it yourself investor and have some exposure to ETF’s in our TFSA’s.
    I would appreciate any insight you may be able to provide.
    Thank you.
    Jim S.

    1. Hey Jim,

      Thanks for your comment. I can’t offer direct advice but I can offer a take on what I look at with investing…

      First of all, 50% CDN and 50% U.S. equities seems to be a good split, meaning, not too much home country bias. What about your fixed income portion?

      Second, I think paying any fees > 1% these days is too much given the options out there. 1.75% is spending $750 more per year without fail.

      What about the all-in-one Mawer Balanced Fund if you want to keep things simple?

      Also, have your considered a robo-advisor for you? Less fees, automatic re-balancing and guidance as well.

      Last but not least, yes, to avoid high fees, considering a discount brokerage account at Direct Investing or a CIBC Investor’s Edge or other – can be another fine choice.

      “Could you recommend an ETF portfolio that would provide a 5 percent annual income?” That might be tough but combinations of some low-cost dividend oriented ETFs and some broad market ETFs might be an idea.

      Here are some of my favourite low-cost ETFs here:

      In terms of income oriented funds:

      ZDV and XEI should provide yields of about 4% consistently as your CDN content.

      It might be tough to get U.S. content yielding 4-5% but these U.S.-listed dividend oriented ETFs could help. There is also ZDY, a Canadian ETF that holds U.S. stocks offered by BMO.

      Lots to think about I know but do take your time and consider a fee-only advisor to talk to. I might have someone you can reach out to that I do the odd case study with and I can consider your general questions re: how to generate income in retirement a post for my site in the coming weeks.

      Best wishes.

  5. Hi Mark,

    Really enjoy reading your thoughts regarding dividend income investing. I started out doing this type of investing about 1 1/2 yrs ago slowly picking up a stock here and there. My wife and I are 59 yrs. old, both retired and I have a defined pension from the city of Wpg. I to have approx. 35-40 dividend paying stocks, mostly cdn content. I’ve being doing some reading on whether it was better to begin withdrawing my rrsp now and defer the cpp/oas as you mentioned in this article. Is this a good idea? Some financial experts tell you to wait, others say start to withdraw early. Do you know roughly the amount per month/annual you would withdraw from your rrsp and what your intentions are with this money. i.e., pay bills, contribute to tsfa, throw it into your high interest bank account, etc. I ask this because at the end of the day it turns into income which will be taxed. I’m trying to figure out what I should do with this rrsp money if I start withdrawing it early. Really appreciate your input into my comments and questions Mark. Thanks again, Rob.

    1. Thanks Rob! Always nice to hear from readers…

      Congrats on retirement!

      I hope to have a (small) pension from work, and my stocks, etc. to rely on for income.

      As for the CPP and/or OAS withdrawal rate, it really “depends”. Do you need the income now? Do you want to fight longevity risk?


      Those are two articles that highlight when to consider deferring or taking your CPP (and OAS similarly) now.

      For us, our plan is this in semi-retirement:

      So with our $1 M goal (cash + 50% stocks + 50% income oriented ETFs) should yield about 4-5% or so per year every year. I figure we could withdraw $20k from our RRSPs every year, barely touch capital; withdraw $10-15k or so in non-reg. dividends as well without touching the capital at all, and then we’ll have $10k-$15k in our TFSAs to withdraw as well and keep capital intact. Our goal for $30k per year income comes from just our non-reg. and TFSAs.

      To be honest, not fully sure of our draw down plans – still in savings mode including for 2019 TFSA room! I need at least $11k for that soon!

      Really though, I know some early retirees are focused on drawing down their RRSP slowly and with any money they don’t need inside their RRSP they are moving all the proceeds to their TFSAs. Then they live off their pension AND if they can, defer any government benefits to maximize needs in old age PLUS they’ll have the TFSA that is not income-tested/not taxed.

      I know there are other active retirees that are fans of this site and I suspect they’ll chime in 🙂

      All the best,

      1. Mark, good plan. I’m betting you’ll (we’ll) need 12K for TFSA in 2019!

        As an active retiree I’ll chime in below later concerning Rob’s question.

        BTW, those links above brought back some interesting exchanges; in particular the second link. A lot of ground was covered – even potential tax fraud!

          1. You, NO WAY. Apologies if I in any way implied that.

            I was referring to another posters methods of generating income from corp structure, and GIS posted on the second link.

            I’m pretty sure it wouldn’t work anyhow, and may pass it by an aquaintance whom we traveled with earlier this year, a former senior corporate tax auditor with CRA in Ontario.

            Good job on the savings. We’ll be topping up too. Trying to decide now on what to do on more RRSP withdrawals. Don’t need but likely will keep on the same path for tax smoothing.

          2. Bull: Being pretty sure – is not good enough! AND… stating “even potential tax fraud” makes you look even more LOST – on this subject. Reading https://www.myownadvisor.ca/when-to-take-your-canada-pension-plan-benefit/ brought back how much time I spent making “real life” comments – that you did not like or could not understand!. Click the above link and take some time to read and you will see that AGAIN – you and your side kick lacked credibility. (watch the video – posted by side kick – should be proof enough). But Hey – I have to respect others and watch my manners!

    2. Good morning Rob. I’m about the same age and currently retired with a moderate sized DB pension as well (wife is similar). I’ve been withdrawing from my RRSPs for the past three years to bring our taxable incomes up to around the $45K tax bracket. Don’t need the money but if I can get it out at the 15% federal rate I do it. I always keep in mind that if I were to die, the survivor portion of my pension would be 50% and expenses for the wife would markedly increase. I fund the TFSAs from elsewhere but if a person needed money for the TFSA then the RRSP is a logical choice (especially if it can be accessed at a lower tax rate than what it went in at). I’m not sure what I am going to do with CPP and OAS yet. I’m going to request some estimates from CPP next year and make my decision on that then. OAS decision can wait and I like to have options.

      Having said all that, this is not an easy topic to come up with hard and fast rules. There are so many personal situations that come into play. What may be important to some might not be to others. For example, I don’t get bent out of shape worrying about leaving a large pot of money upon our ultimate demise, charities will be beneficiaries.

    3. Hi Rob,

      It sounds like you have a good situation to deal with – enough & choices. Well done. Here’s our path so far FWIW.

      I am the same age as you, retired 4.5 years ago (no DB pension) and my wife retired 6.5 years ago (moderate DB pension). I am a former Winnipeger leaving on the East Coast for decades now.

      Our retirement income comes from 3 sources: 1 work pension, unregistered dividends, RRSP & min. LIF withdrawals (mine so far) and taxable income has averaged a bit over the 15% fed bracket #, and from this we also contribute maximum to TFSAs. This keeps taxes reasonable, meets our current lifestyle goals without tapping capital. Although we soon intend to in order to meet the last 2 points on our objectives below and in our gogo years. We expect to defer CPP to at least 65 and possibly to age 70 at least for one of us/maybe both. This should allow us more time to: draw down registered accts, smooth taxes, grow virtually risk free indexed income and shifts longevity risk to the govt. OAS at 65 is likely which would give us a moderate bump after pension bridge is gone. “If” we are doing very well asset wise at that time delaying OAS could be a consideration.

      With “reasonable” growth projections 4% and inflation indexing 2% our RRSP assets would take us past age 90 starting/maintaining our recent 3 yr avg withdrawal levels). Unregistered acct and growing TFSAs will also be considerations.
      Our objective is to stay reasonably “safe” on our income generated overall from multiple streams while living a good lifestyle, and smooth taxes along the entire journey without leaving a big pile at the end. We’ve had experience with big income swings while working without issue so hopefully this flexibility could help if things go really bad.

      I appreciate everyone will have very different objectives and methods for themselves.

      Here is a good source for easily doing your own CPP calculations:

      Here is a good site for easily calculating scenarios for RRSP/RRIF withdrawals

  6. Every time Mark posts one of these updates I am continually impressed with what he and his wife have accomplished. I have to keep reminding myself that these income updates are exclusive of their RRSP holdings. The curious side of me would love to see a *total* portfolio report. I suspect I’ll be gobsmacked.

    Great summary of lessons as well. If this is all a person knew they’d be in great shape. Of course you just lost any reason to write a 300 page book on the subject, it all fit on one page on the computer. 😉

      1. Well, it’s not huge, I have a mortgage to pay down so I’m certainly not in a position to retire until all debt is gone. However, we’re doing “OK” with our saving and investing and beyond the $17k I just wrote about in this post – hopefully going to be that by end of 2018 – an amount I hope to hit with our non-reg. and TFSA dividend income this year, we have another $17k that both our RRSPs generate each year. I don’t include that in these posts because that is capital I eventually have to draw down to live from in our 50s and 60s.

        So, I figure we need $30k income in our key accounts (non-reg. and TFSAs) to provide the following lifestyle:

        “food, groceries, basic household supplies ($8,000 per year or $667 per month or ~ $150 per week)
        home/condo utilities (heat, hydro, water, internet, cell phone bills) (up to $6,000 per year or $500 per month)
        home/condo property taxes ($6,000 per year or $500 per month)
        home maintenance/condo fees (around $6,000 per year, again, another $500 per month)
        auto costs for 1 car (insurance ($50-100), gas ($50-100), maintenance ($50-100)); (around $3,000 per year or about $250 per month)
        healthcare costs (various).

        $30,000 per year and more every year without touching the capital.”

        RRSPs will be used for other expenses and that money will be spent before any workplace pensions kick-in at age 65 to avoid penalties for early withdrawals.

        I hope that makes some sense? Maybe or maybe not!

    1. Ha, well, that’s the thing I think Lloyd – many personal finance books say the same thing in hundreds of pages that I can usually fit into 1200 words, or less. Will I write a book someday? Maybe, I’ve thought about it. But the blog is more free and real-time so I’ll stick with that.

      Anyhow, yes, we’re focused on the savings and investing because I realize I value time FARRRR more than I ever used to – that is becoming a very big driving force for me in my 40s now.

      Yes, these updates are exclusive of RRSP assets that are lower yields, more focused on U.S. ETFs like VYM every year. I had a HUGE Canadian bias years ago in my portfolio and I’m really trying to buy more U.S. assets over time and get to my goal: $1 M portfolio with 50% stocks and 50% low-cost ETFs, most of the ETFs via U.S. assets only.

      1. ” I value time FARRRR more than I ever used to”

        I read about a person who did something I’ve always wanted to do (procrastinated again). He placed marbles into a jar representing life expectancy. So 75 marbles for 75 years type of thing. The jar should be of the size that it is completely filled with these marbles. Look at it for a few days then take out the number of marbles equal to one’s current age. The jar will now represent an approximate time remaining in a visual context. On every birthday, take out another marble. If that does not entice one to ponder the value of time then I’m not sure what will.

  7. From a discussion here a while back…holding your mortgage inside a RRSP….how can that be worse than holding equity?
    After the week that was.
    Yes div paying stocks tend not to tank as quickly as growth stocks..but tank they can. Just look at the pain of owning AltaGas as they morph into a utility co …yes the 13% div looks juicy…but for how much longer? Mngmnt must love the shorters who give crappy mngmnt a reason to cut the div…div % is way too high…so we have to cut the div instead of…we have done a crappy job of running the Co into the ground and will fall on our swords

    1. Slowly getting there Gary. I just have to stick with my plan of owning these stocks for income and owning more U.S. listed ETFs for income and growth. Rinse and repeat for the next 5-10 years and we should be good – we should hit our goals.


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