September 2020 Dividend Income Update

September 2020 Dividend Income Update

Earlier this year on this blog, I wrote:

“Coming out of this crisis things will improve. They always do. They can certainly be better for you and me on an individual level too.”

I still feel that way even with so much turmoil in our world right now.

I remain optimistic. We are a resilient species. We can and will adapt. That is my hope…

Plans are good, but planning is everything

At the recent 2020 Canadian Financial Summit, I shared our personal finance plan and how we are still trying to get semi-retirement ready, and adapt, even during this pandemic.

While all plans at a point and time may be good, I continue to tout the merits of planning – the process of planning is essential for financial success let alone other things in life. As this pandemic has taught us, plans can and will be changed on you. So, it’s important to revisit any plans on a continual basis.

While there is no perfect personal finance plan to combat this pandemic (and please don’t let any advisor or other financial expert tell you otherwise, they are not perfect either), there are some good things you and I can do in our process of planning and re-planning to ensure our financial act is somewhat intact before unknown disaster strikes.

80,000 personal finance books and advice into simple bullets

I’ve read dozens of personal finance and psychology books on money over the years and I can distill those gazillion pages down into the following, simple, point-form bullets.

  • You should work hard to get out of debt and stay out of debt.
  • You should spend less than you make.
  • You should establish and maintain an emergency fund. Ideally, at least a few months’ worth in cold-hard cash.
  • You should make savings for investment purposes automatic.
  • You should invest some of your savings for long-term growth; as in equities.
  • Once invested in equities you should stay invested, without fail if you can help it.
  • Once invested, you should keep your investing fees very low.
  • You should diversify your investments across companies, countries and world economies – you should consider low-cost, diversified index funds “when in doubt” over random stock-picking.
  • You should mind your taxes.
  • You should obtain adequate life and disability insurance.
  • You should continue to educate yourself since continuous improvement will keep your mind active.
  • Money doesn’t mean much if you don’t have your health. You should do what you can to stay healthy.

Of course, these things are easier said than done. It takes time to ingrain habits.

September 2020 dividend income update

With that modest list in mind though, over time, we’ve checked off a number of these items on our list in order to focus on mortgage debt repayments (our biggest liability) and investing (our largest asset growth potential) in particular. For example:

You should establish and maintain an emergency fund. Ideally, at least a few months’ worth in cold-hard cash.

Long since done. Actually, in the coming years, we’re going to increase our cash savings as we work towards our semi-retirement cash wedge. You can read up about that below.

How much cash should you keep?

You should make savings for investment purposes automatic.

Done. We’ve been automating our savings since January (since both our Tax Free Savings Accounts (TFSAs) were maxed out in January 2020) for this year’s upcoming 2021 TFSA contribution room.

We should be “ready to go” as of January 1, 2021 for contributions.  

Once invested, you should keep your investing fees very low.

Also nailed. I only invest in low-cost funds. I own nothing higher than 20 basis points for the total expense ratio in my portfolio – that fund being Invesco QQQ ETF.

Invesco QQQ as of June 2020

Image courtesy of Invesco. 

I own this fund to hopefully gain a small tech-stock growth kicker over time without worrying about whether Apple or Amazon or Microsoft will be the world’s largest tech company. I figure this fund will continue to rocket forward with time as our global technology demands evolve.

Money doesn’t mean much if you don’t have your health. You should do what you can to stay healthy.

I go for walks or bike rides daily. My wife and I are now doing yoga once per week. I hope to start doing more home workouts as the winter weather in Ottawa closes in.

Once invested in equities you should stay invested, without fail if you can help it.

Yup, doing that too. Market highs or lows and everything in between.

While experts will claim, in theory, a corporation should only seek to distribute after-tax cash to shareholders (dividends) when it has exhausted all capital expenditures that meet its required rate of return. That doesn’t mean dividends are a bad company policy decision.

I invest in dividend paying stocks for income and growth, and I invest in some low-cost Exchange Traded Funds (ETFs) for extra diversification, for capital appreciation. 

Thanks to this approach, I can now announce we’re trending to earn $20,660 this calendar year from dividends earned inside our taxable account and TFSAs. I’m hopeful no more dividend cuts will occur this year…so this should keep that target intact. But you never know! 

To put that forward dividend income in perspective:

  • That’s like earning $2.36 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)!!

Again, will some more stocks I own cut their dividends??

Likely.

This pandemic is not going away.

While companies such as RioCan REIT (REI.UN) in particular make up just 0.6% of my total portfolio, I could see REI.UN and other REITs in general, near term, continue to get hammered by this pandemic. Long-term, some REITs should thrive again. I will continue to hold a few REITs for that sector comeback and see what happens.

Dividends matter, because they support my plan, just like capital gains matter, share buybacks matter, paying down significant amounts of debt to increase shareholder value matter, and so on.

I’ll have another update next month. Thanks for reading.

Mark

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're very close to realizing two major money goals: owning a 7-figure+ investment portfolio along with no debt to start semi-retirement with. Find out how we did it, what's next, and what you can learn from me to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

29 Responses to "September 2020 Dividend Income Update"

  1. I love that your number keeps going up month after month. Very awesome stuff Mark!

    Keeping things simple is a great idea. There’s no need to make your investments complicated.

    Reply
    1. Well, it did go down after I got hit from IPL and SU but we have since recovered thanks to dividends reinvested!

      Thanks for the kind words my friend.
      Mark

      Reply
  2. Like your summary:

    You should work hard to get out of debt and stay out of debt.
    You should spend less than you make.
    You should establish and maintain an emergency fund. Ideally, at least a few months’ worth in cold-hard cash.
    You should make savings for investment purposes automatic.
    You should invest some of your savings for long-term growth; as in equities.
    Once invested in equities you should stay invested, without fail if you can help it.
    Once invested, you should keep your investing fees very low.
    You should diversify your investments across companies, countries and world economies – you should consider low-cost, diversified index funds “when in doubt” over random stock-picking.
    You should mind your taxes.
    You should obtain adequate life and disability insurance.
    You should continue to educate yourself since continuous improvement will keep your mind active.
    Money doesn’t mean much if you don’t have your health. You should do what you can to stay healthy.

    BUT, I’d probably just ignore one of the items.

    Reply
    1. This is great. Thanks for sharing!

      One question though. Is that $20k earning is for entire calendar year or just one month? The article suggested calendar year but the chart is displayed monthly.

      Reply
  3. Hi Mark

    I will be turning 70 in December and I was wondering if it’s worth it for me to start Dripping. I wish I had started investing earlier but that’s the way life is.

    Reply
    1. @Terry: If you do not need to draw down all of your investment income, than I’d drip what you can. I’m turning 79 and still drip all our holdings. That way we don’t need to just rely on dividend increases to grow our income.

      Reply
    2. I think there is no bad time to DRIP really. If you need the cash, want the dividends, don’t DRIP. If you are striving for a total return approach for that stock, DRIP away and compound the money!

      I hope all is well Terry!
      Mark

      Reply
  4. Congrats on another up month.

    I managed to have more expected dividends too by both investing new money and dripping. The market is down right now and I am ready to invest more money gradually. This year we saved more due to the pandemic.

    Reply
    1. Yes, we are saving a bit (slightly?) more this year but we’re also dining out lots too! Smart work, market down; buy more. I can’t wait for 2021 TFSA room!

      What’s your timeline for the part-time work May? A few years?
      Mark

      Reply
      1. No plan for part time job at this moment. My timeline for retirement is full retirement two years from now. So far looks like I am on track. This year we are kind of spending only the bare minimum and I feel like we can retire right now with this level of expense. But of course, life will be back to normal so we better save a bit more before retirement. But this experience increased my confidence in being flexible with our expense in retirement. We should be able to cut the expense easily if necessary.

        Reply
  5. Congratulations Mark on the continued progress. I’m exactly even on income from 12 mths ago on our TFSA/unregistered accts after drips in TFSAs and a few little raises to offset a couple of big cuts.

    Like May I’m investing a little more gradually into equities, using maturing FI.

    Reply
    1. Seems very smart to me RBull. Are you still planning to use an equity glide path per se in the coming years?

      Ya, for now, just reinvesting juicy dividends…and saving for 2021 TFSA room!

      Stay well!
      Mark

      Reply
      1. Yes.

        As we prepare for more FI with CPP, OAS coming in 3-4 years, and with interest rates where they currently are it seems the best option for us.

        Reply
          1. Thanks.

            Will be ready for TFSA top ups here too.

            OAS almost certainly at 65 here for both. CPP at 65 very likely for her, when pension bridge is lost. Not sure when for me. Maybe delay to 70 or somewhere in between.

            Reply
            1. Ya, our plan is the earliest at 65 for CPP. Run a few numbers and more to share on the site soon. There is also a real possibility to delay OAS and CPP to age 70 but I don’t think I’ll do that but you never know. Assuming we work until age 50-51, should be close to $49,000 for both of us combined should we delay both (CPP and OAS) to age 70. Very interesting!

              Reply
              1. Will be an interesting post. Lots of strong opinions from people on this subject.

                I hear ya on the delay to 70, and the never know. We’re a lot closer but still haven’t decided. LOL
                PT work for you guys might give you some additional CPP credit too.

                Will be 56K for us by delaying all to 70, 37K if all at 65 (~185K of potential payments to make up, if delaying).

                And yes 100% on health as the ultimate form of wealth!

                Reply
                  1. Retiring early cost us a lot on CPP, and you’ll likely have the same issue. But overall things are good regardless and we muddle along.

                    The biggest issue for me with delaying CPP/OAS benefits and utilizing personal assets in the meantime is the potential loss of income- essentially no survivor benefits for OAS and tiny ones for CPP. Otherwise ok generally with break even point age 79 or so.

                    Reply
                    1. Yes, that’s an issue, re: OAS. Unless the income is of course less than $25,000 and the survivor I recall is between ages 60 to 64, which seems odd but it is what it is.

                      I should write an entire post about survivorship benefits of our government plans.

                      At this point, very likely to take OAS at 65 and CPP at 65 as well but I’ve been toying with the idea taking both at 70. I will know more in a few years once the debt is gone and I can do better projections with estimated pension income. That’s my bond and that needs to be secure.

    1. Great stuff Gean. I should have you on the site 🙂 Yes, health is the ultimate form of wealth!

      Thanks for the Twitter follow and interactions.
      Cheers,
      Mark

      Reply
  6. Thanks Mark…..Chris from NZ…Have all of the Big 5 Canadian Banks in my humble international stock portfolio.They are for sure ‘rock solid’ holdings in these uncertain times. Cheers.

    Reply

Post Comment