September 2015 Dividend Income Update

September 2015 Dividend Income Update

Welcome to my latest dividend income update.  For those of you new to these posts on my site, every month I discuss my approach to investing focusing on dividend paying stocks and how reinvesting the dividends paid from the Canadian companies we own are helping us reach financial freedom.

For this month’s update, I thought I would do something a bit different.  I’m going to outline what I’d do if I was just starting out…on my dividend investing journey.

Like I mentioned in previous dividend income updates, although I’m a fan of low-cost Exchange Traded Funds (ETFs) to diversify my portfolio more going forward, I continue to hold and reinvest dividends paid from dozens of blue-chip Canadian companies in our non-registered accounts and Tax Free Savings Accounts (TFSAs).  I do this because I’m after this passive income stream for retirement (and my RRSP is maxed out for 2015).

Just starting out…

If I had a few thousand dollars to start my dividend investing journey today, I’d probably buy what I did 5+ years ago:  a company like Enbridge.  Maybe this is hindsight bias…it probably is.  This is a dividend king that has paid dividends for a couple of generations now and has worked out for me very well to date.

There are other dividend studs in Canada and my goal is to own all of them. 

Beyond Enbridge, I’d probably advise a younger self to give consideration to owning a dividend ETF such as VDY, ZDV or XDV, first.

This way, again just starting out, I could reap the diversification benefits these ETFs without the risk of going “all in” with one stock. I need to remind you at this point….only you can determine what your tolerance for investing risk is.  This is something I’ve figured out for myself over the years, which leads me to my next point.

What to be mindful of…

Just because a company pays a steady or growing dividend, doesn’t mean it’s always going to be that way. 

It’s absolutely impossible to predict the financial future but needless to say, some companies simply aren’t worth the higher-yield risk. 

I would advise my younger self, when it comes to dividend stocks, focus on dividend growth over dividend yield.  I’m glad I made this financial mistake.  Better to make a few small investing mistakes than make big ones later in life.  We don’t learn in life unless we fall down every now and then.

Getting diversified…

Yes, Fortis, Telus, BCE and many Canadian bank stocks are darlings to dividend investors.  That’s not very much diversification though.  If I had a few thousand dollars to start my dividend investing journey today I’d give some consideration to owing more U.S. stocks, sooner.  The Canadian market does not have many multinational consumer companies – so I’d be inclined to start investing in U.S. dividend aristocrats like Johnson & Johnson or Procter & Gamble to name a few.

If in doubt about U.S. stocks to select I would advise my younger self to invest in a low-cost ETF like Vanguard’s VTI and never stop doing so. 

Our ultimate goal is to create a mini-Canadian index:  use the sector breakdown of the TSX Composite Index and own roughly 35% financials, 20% energy 12% materials and some industrials and telecommunications companies in the Canadian portfolio. This portfolio is almost fully constructed.

As of this month, we’re projected to earn almost $11,400 this calendar year from Canadian stocks that reward shareholders every month and quarter.  I’m optimistic we can hit our long-term goal in another 10-12 years.  This will occur if we can continue to max out our TFSAs every year, invest in our non-registered accounts after the mortgage is done and simply let the stocks do their work.  This makes time in the market our friend.  Let’s see where we end up.

Thanks for reading and supporting my journey.

What have you learned about investing in dividend paying stocks for passive income?

19 Responses to "September 2015 Dividend Income Update"

  1. Hi Mark,

    Your dividend income is impressive. I hope to follow your lead. I am just starting out and have a small portfolio of eight equities, 5 CDN/3 US. See it here:

    How many different equities do you suggest an investor owns before their portfolio starts looking like an ETF?

    Also, what criteria do you use when you are looking to buy? I would appreciate any insight.



  2. I’m conflicted about American stocks due to currency conversion and taxes. I have maxed out my RRSP with US$ stock and don’t have any more contribution room due to my pension. US stock is only about 10% of my overall portfolio. I want to increase this % eventually. When I do have extra cash to invest I end up buying CDN stock that is historically cheap or stock that has international exposure to put in taxable account in order to get dividend tax credit. I can’t justify buying american stock with the current exchange rate and dividend witholding taxes in my taxable account.

    Is this logic flawed?

    1. I hear you Max….as there is no easy recipe nor one that is ideal for all investors.

      As you know, U.S. stocks or U.S. listed ETFs have no withholding taxes associated with them inside your RRSP. This is not the case with the TFSA or a non-registered account.

      I can only tell you what I do…I try to max out my RRSP with U.S. listed assets or Canadian assets that invest worldwide and pay dividends in US $$.

      If you want to increase your U.S. exposure you do have a few key options:

      1) Put US stocks inside your USD $$ TFSA, but you’ll have withholding taxes there.
      2) By a Canadian-listed ETF that holds US stocks and put that inside your TFSA.
      3) Buy U.S. assets non-registered.

      Check out this page for some pros and cons. Let me know what you think about asset location.

  3. Great job at reaching $11,400 in dividend income. Definitely not a bad amount to be pulling in passively throughout the year. Love the advice if you would go back you would go with the steady generational paying dividend companies and ignore the higher yield higher risk ones.

  4. I had to makes some amendments to my spreadsheet to calculate the numbers. We don’t DRIP everything and we have interest income on a bunch of debentures but the difference between including what would be the total income if there were no DRIPs v. DRIPping what we DRIP is just over 9K. That’s just within the RRSPs. I don’t have a spreadsheet running for the TFSAs. I’m not sure why I don’t, just one of those things I probably intended to do but never got around to it.

    1. I know for us I could turn off the DRIPs we run and still get that amount per year, just that, it likely wouldn’t grow as much per month in these reports given money that makes money, wouldn’t be making as much money (compounding effect). Thanks for your comments Lloyd.

  5. Is that 11.4K over and above your DRIPs or inclusive of them Mark? I only ask because when I speak of cash generated by my accounts I do not include the DRIPs in the total.

    1. Hey Lloyd, that’s the cash flow earned from the capital in a calendar year. The income is inclusive of dividends being reinvested although I suspect the income would rise even if I wasn’t reinvesting dividends thanks to periodic dividend increases.

  6. Wow $11,400 is awesome! Congrats Mark.

    Agree on buying US stocks. The Canadian dividend stocks are often in the energy or financial sectors. There are not so many consumer staples here in Canada.


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