October 2020 Dividend Income Update
Welcome to my latest dividend income update.
For those of you new to these posts on my site, for a few years now, every month I discuss our approach to investing using Canadian dividend paying stocks and how that approach is helping us realize financial independence.
My approach
To recap our investing journey in the nutshell, we take a hybrid-approach to investing.
- Approach #1 – we own a number of Canadian dividend paying stocks for income and growth. These monthly updates specifically focus on that progress and the performance of our TFSAs and non-registered accounts to support any semi-retirement dreams.
- Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. I believe owning more U.S. ETF units (over time) is a great complement to our Canadian dividend income machine, beyond the handful of U.S. stocks we own as well.
For any future reference you can see some of my current holdings on this Dividends page here.
Financial Independence (FI) is getting closer…
Dedicated readers will continue to read on this site I’m not a huge fan of the Retire Early (RE) part of the #FIRE movement but I am a huge advocate of (and diligent investor striving towards) FI.
I said as much in this post here:
I’m passionate about FI because I feel this mindset and approach to investing will give us the freedom to continue working at jobs we enjoy today – even if we don’t need that money for retirement purposes.
I fully believe even in semi-retirement, you need to have purpose. It will keep your body and mind engaged and active.
It is my intention to work full-time in the coming years and transition to part-time work in hopefully another 4-5 years should my employer continue to have me!
FI income goals
Based on the math I continue to do every year, including in this very first edition of my Financial Independence Plan, I continue to believe earning ~$30,000 per year from our Canadian dividend paying stocks should cover most of our basic expenses, for life.
Ottawa, Canada is an expensive city to live in (compared to other parts of the country (Toronto $$$ and Vancouver $$$$$ excluded)), so based on this choice so we’ll need a decent retirement portfolio to cover the following in current dollars:
- food/groceries, basic household supplies = $8,000 per year or $667/mo.
- condo utilities (heat, hydro, water, internet, cell phone bills) = upwards of $6,000 per year or $500/mo.
- condo property taxes in Ottawa = $6,000 per year or $500/mo.
- condo fees = $6,000 per year or $500/mo.
That’s $26,000 per year without any auto expenses or healthcare expenses.
Throw in some car expenses from time to time (our car is paid off) and then a healthcare plan when our workplace benefits end and it doesn’t take much to need $30,000 per year after-tax to live where we do.
(Here is what to consider when your workplace benefits are disappearing.)
Get your tax-free money!
Thankfully, to help us with our semi-retirement dreams my wife and I have long understood the powerful merits behind our Tax Free Savings Accounts. So should you!
These are incredible things you can do with your TFSA!!
We’ve essentially considered our TFSAs as another retirement account from Day 1 – and because we have – we’re getting much closer to realizing some of our semi-retirement dreams since a good portion of our income will be tax-free – to spend as we please or it can continue to compound away as we work part-time.
This time last year, our taxable and non-registered portfolio was churning out about $19,300 per calendar year. We actually ended 2019 earning $19,558.
With just another two months left to report on this year, we’re now estimating we’ll earn $20,790 in income.
In fact, we might reach our target of $21,000 should a dividend raise occur between now and New Year’s Eve and/or thanks to dividends compounding away without any effort via dividend reinvestment plans.
To put that passive income in perspective:
- That’s like earning $2.37 per hour of every hour of every day (even in my sleep).
- In terms of an hourly wage, that’s like earning almost 10 bucks per hour assuming I work a 40-hour work week. Then again, some of that income is 100% tax-free (thanks TFSA)!!
Even without any new money added in 2020 since our TFSAs were maxed out in January, and after surviving a few dividend cuts this year, we’re still doing rather well.
My take home message is, whether it’s stocks or ETFs for a hybrid of the two I hope you can see the power that staying investing and reinvesting your dividends or distributions can deliver year-over-year.
I look forward to sharing another update soon. Thanks for reading and sharing.
Mark
Previous update:
Rebounding in September after some dividend cuts – this is my September 2020 Dividend Income Update including what 80,000 personal finance books say.
Got a comment about our investing approach? Got a question for me? Fire away. Happy to answer and provide any insights I can to help you tailor your own path.
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and now investing beyond the 7-figure portfolio to start semi-retirement with. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
Hey Don G
Good to hear from you too.
So excellent to hear about the no regrets on phasing down, no regrets and being one of the best things ever done. Ditto. Yes.
Very impressive Don. All the best.
Hey RBull
Thanks and nice to see you back posting lately.
We both had a very similar path to retirement with you just being a few years ahead on your age timing. I cut back to 4 days @ 7 hrs per day in 2011 & 2012 and then left the company I’d been with for 22 years and went out on my own for a year working minimal hours before fully pulling the pin in June 2013 at age 60. The nice transition into retirement allowed me to realize that I was totally ready and have never looked back, not even for a second.
I totally agree with you as being one of the best things that I’ve ever done. It gave me so much more time to spend with the grandkids and allowed my wife & I to get out there camping and hiking way more and for longer periods (more 3 week type trips).
Take care
Don
Hey Mark
Good work. Increasing dividend income is a very good thing especially for a retiree or someone close to it.
2020 was a really unusual year for us in terms of quite a bit of portfolio maintenance. Usually we are pretty steady as she goes but this year we had a bunch of dough to re-invest from the Northview REIT takeover. We also decided to sell the rest of our Parkland Fuel as it don’t fit our limited sector approach. We also did 2 very rare trims, trimming 80% of our BEP.UN and 25% of our NPI (the yield had gotten under 3% so saw better opportunities). We also generated more dividend income than we needed to live off. Lastly, we had 2 dividend cuts on our 27 holdings but had 16 dividend increases so far (I actually think ENB is going to increase by 5% so it might be 17).
Anyway, the net result is that are dividend income is currently $11,343 more than at the start of the year. Very nice!!
Ciao
Don
Wow, amazing. You are really doing super well with your portfolio.
Thanks May. The general buy & hold of good dividend growth/income companies has worked out really well for us. It took a bit of effort back in 2012-2013 to develop our strategy but for the most part, it’s been on auto-pilot since. The biggest disruptors have been take-overs and deploying the extra dividend income.
As an aside, our strategy would have been way easier to develop if I had heard about Henry/Cannew back then as our strategy is incredibly similar to his.
I’ve always been really impressed by your level of planning and have really enjoyed reading all your posts. It really sounds like you have a terrific and solid plan and I like it that you have built in some wiggle room to boot.
All the best
Don
Thanks Don!
I’ve kept our portfolio intact albeit with very minor changes the entire year during COVID-19. I simply let reinvested dividends do their thing as you know.
BEPC and BIPC have been flying for me. As has BLK. Very happy with that but I’ve done nothing really except stay boring!
Earning $11k+ more than the start of the year with money you don’t need to live from for basic expenses means you are doing very, very well.
Kudos. I love reading such updates from folks like you. Huge inspiration for me!
Thanks back at you.
BIP & BEP definitely have been on a tear especially BEPC. I figured there’d be a premium on BEPC vs BEP.UN but thought it would be around $5. Totally shocked at the current $21 difference. Also hard to believe the BEPC yield is now down to 2.17%. When we first bought BEP.UN in Mar/2014, the yield was around 5.3%. That along with it now seeming over-priced was the reason we trimmed so much recently.
Take her easy
Don
Awesome! Nice to get to the next round number (jumping from $19000 to $20000). Thanks for sharing your bare bones basic expenses. You are probably already at $30,000 annually if you include your RRSP!
Do you have a target number (or I guess what they call Fat Fire) to include International travel once that returns?
Thanks GYM. I see you’re really saving yourself…geez! Great work.
I figure once we get to $30k per year inside TFSA and non-reg, we will consider part-time work. RRSP assets are very likely to be drawn down in our 50s and 60s and yes, I don’t include in these updates but it does add quite a bit more to the income stream. Gotta keep some things private right?
Earning the $30k per year with TFSAs and non-reg. has always been a goal because even without RRSP withdrawals, or my pension, or my wife’s pension, I know that income will cover basic expenses such as condo, property tax, groceries, etc. via tax-free and tax-efficient income for life.
Part-time work will cover international travel and we’re hoping to spend $15k-$20k per year on that. Back to Belize in another year (we hope??) for a few weeks!
Once I get more points saved up, we hope to go to Maldives for a week in a couple of years. Wouldn’t that be nice? 🙂
All the best to you, chat soon,
Mark
Well done! Hoping to hit $9000 by year end myself 🙂
Excellent work!
Great job this month, Mark. You’re killing it with consistent dividend income growth! The really crazy thing is that the $10 per hour you’re earning is more like $13 – $15 per hour pre-tax. No matter what your savings goals are, I always tell people maxing out their TFSA (and keeping it maxed) is sooo worth it. Your progress with the account is a great example why: the power of compounding combined with the power of tax-free investing is the best way to reach your retirement goals.
That is correct, re: pre-tax but you have to think some of that is also, already, tax-free income (=TFSA) 🙂
Yes, you cannot disregard the benefits of the TFSA. It is an outstanding account for retirement purposes and I’ve used it that way since 2009. As you know!
Thanks for stopping by and I hope to visit your site soon! Need a coffee for my morning reading.
Mark
Well done Mark.
Like May I’m slightly dividend negative, had 2 cuts and some halts like the banks and also no expected raises coming up for remainder of 2020. Will be ready with our 2021 TFSA contributions and moving a bit into unregistered too so will help the road back to rising dividend income, along with drips in TFSA.
Yes May it sounds like a great lesson now. Good luck with the revisions. And another yes on ENB balance sheet. That was a big increase too. Its my largest stock holding.
D
Which raises are you expecting before Christmas – do tell?
AQN is going to raise their dividend again in early 2021. That should be a given and I own a few hundred shares of that.
TRP should do the same by March 2021.
All big-6 bank dividend increases are likely frozen for the next year or so. Which is fine and smart.
I could see a BIPC and BEPC increase by spring 2021.
My wife and I are ready for our 2021 TFSAs as well. Just finished saving up for those and will be highlighting that in our goals post/update soon.
No doubt RBull knowing your portfolio a bit from this site you’re more than fine 🙂
Mark
LOL, you’re hoping to see some raises! I wrote I expect “no expected raises for remainder of 2020”, so the answer is none!
Agree, there will likely be some raises in 2021.
Yes, more than fine is probably right. I’m sure like a lot retirees on this site we’ve set up both our lifestyle and investments to withstand a fair bit of bad news whenever it happens.
It seems that way. Most readers that are semi-retired, retired or aspiring to retire soon that comment on this site seem to have rather bulletproof plans. Impressive to say the least.
Its refreshing and encouraging to see, but I don’t think its so typical for the general population.
Oh I would agree. Bulletproof to Lloyd’s point is a bit over-doing it. Then again, the recipe although not easy is simple: save, keep fees low, focus on equities. Rinse and repeat for 20 years. Wake up wealthy.
“seem to have rather bulletproof plans.”
Bulletproof might be a bit overstated. Perhaps ‘bullet resistant’ would be a more accurate descriptor.
Fair point!
Yep. I like that one.
I assume it would be always a difficult decision to leave a well-paying job for retirement. For the past three years since I began my retirement planning, my salary has increased by 20%, and now is the time I am having the highest income in my life. Maybe this experience will make it even more difficult. When I play with the projection, one more year staying at work actually makes a big difference. Hopefully, I will not always be like “just one more year” for every year until 65.
Ha. I think if you love your job and feel passionate about it May – then at least you’ll have some options as to whether to stay or not. Life is great/better when you have options to do things you enjoy.
Mark
I get that. When I pulled the plug on my 55th birthday I had been working PT for 2.5 yrs in a phase down job. In that last year I was earning 50% more than I was working FT 4 yrs earlier, but my passion for it was waning. I decided to retire and now 6.5 years later don’t regret that. Working longer could have made a big difference to our assets and retirement income but doing what I did was the right choice considering all factors. Being free at a younger age was more important for me than more money, if you have enough for a decent lifestyle and reasonable enough safety net. Depends a lot on how much you enjoy work you’re doing and what things you plan for in retirement. YMMV
55 is the age I planned to retire. I really admire your courage to walk away from 50% more earnings without looking back.
One thing different for us is that we won’t be free yet with our kids still being home. But we will be freer with my kids going to high school. If any one of us still works during that time, then the travelling budget could be pretty high and which is pretty attempting. It would be nice that we can travel at the convenient times when the kids are free at high season.
The major concern for us has been mainly how stressful the work will be and how well or bad is our health. The stress level actually has been reduced a lot since I have a solid plan for retirement and know where we are and where we are aiming at. Before that, When my DH was laid off and my kids asking “why is daddy not going to work”, the thought was “half of the income gone, we have to be careful with our expenses”. If that happened again, now we would be very calm knowing this will not impact our life in a mateiral way, and the kids will be told “Daddy is retired now so he will have more time to play with you and help you with your homework”.
Two years will be flying away very fast. Who knows, maybe I will retire even before that. I will definitely report here once anyone of me or my DH retired.
You’ve thought it out well May and seem to have a ton of flexibility with what to do, no matter what a few years bring. Excellent.
Yes, it will go by pretty quickly. The closer you get to your date and financial goals the easier your life will get. Hopefully travel will normalize and all of us will be comfortable doing it again. It was a big part of our life for 5.5 years in retirement.
Thank you. I’m always a person to look forward positively and not back. What is happening today and what I can make happen in the future is my focus. My wife retired at 53 and that’s when I went PT.
You definitely have a lot of positivity – both of you. Kudos and a nice way to live your lives 🙂
I’m hopeful travel to “normalize” again in late-2021 and by 2022 for sure. I can’t wait to see the rest of the world!
Mark
Thank you.
Your blog exudes your positivity.
It will return to normal sometime and I think with some longer term positive changes too. There sure is a lot of world out there to explore.
Congrats. Nice to see pandemic didn’t prevent you to achieve the goal.
I noticed you changed the way you report this again. Where is that monthly chart?
Also hope to get more dividend increases. This year so far I am negative with dividend cuts/cancels and dividend increases added together. While I have only a few stocks cutting/canceling dividend, and a bunch still raise dividend, but the cut normally is big. But stocks in my portfolio used to have dividend increase before the year end are only banks and ENB. I don’t see banks increase dividend this year. For ENB, I’d rather they improve their balance sheet instead of raising dividends.
It was a very valuable lesson for me with this year’s volatile ride. I am glad this happened before I retire. I think I will add more buffer to my budget for retirement, and also choose to invest in stocks with safer dividends.
I just showed the annual chart to change it up a bit. I still have the monthly chart on file – don’t worry!
I don’t see ENB hiking their dividend but who knows – that increase streak is important but as a shareholder I would prefer they freeze and manage debt with it. They can always go back to increasing in 2021 or definitely by 2022.
I figure when it comes to semi-retirement this is where my cash wedge is important. I can cut back spending (travel) but I can also dip into some money if and when needed via cash reserves for about a year and not draw-down any capital at all.
https://www.myownadvisor.ca/how-much-cash-should-you-keep/
Thoughts on your buffer?
I used to use 6% return and 2% inflation rate for all my calculations. Now I think maybe 5% return and 3% inflation will be safer.
Also, the retirement plan should have lots of discretionary expenses included, which can be easily adjusted. E.g. buying a new car every ten years can be easily changed to buying a used car.
Anyway, our original plan is to be ready for retirement two years from now. Even with this adjustment, we are right on track to achieve that on time.
Ya. I use between 2-3% for inflation FWIW.
Our FI plan includes buying a newer (not really brand new) every 10 years. It includes some international travel.
Being ready in two years is outstanding for you.
I still figure we’re a good 4 years from part-time work.
Must max out TFSAs and RRSPs to “get there” and kill debt. Those three things should make us almost ready along with a few other things.
An excellent month you had Mark! It’s always nice to see an update from a fellow Canadian dividend investor. 🙂
I think we are going to finally over take you in 2020 but we are including dividend income from RRSP too.
LOL. Yes, you’ve been doing VERY well with your saving Bob. Incredible work.
Yes, I don’t include RRSP income here. I will eventually draw that down in my 50s and 60s and besides, I don’t want to deal with USD $$ conversion for any dividend income updates on the site. That said, the income generated from the portfolio is more. Compounding away!
You are well on your way Mark! I’m looking to see if I can hit the 6k mark (see what I did there?) for 2020, it’s all going come down to December’s distribution.
Cheers!
Thanks Danish. $6k would be a nice milestone for sure!
Always enjoy seeing the Income Growth chart. Good work Mark
Thanks! Updated chart coming in 5 weeks 🙂