September 2021 Dividend Income Update
Welcome to my latest monthly dividend income update for September 2021.
I use these monthly posts to share where and how we invest to help demonstrate that realizing any financial independence dreams are possible – one month at a time.
You can read my previous monthly dividend income update here, including answers to some specific reader questions about my journey and why I enjoy owning some “TULF” stocks for growing income.
Monthly Dividend Income Update Reflections
Before we get to my September 2021 monthly dividend income update tally, you should know for some time now, over 11 years in fact, I’ve been tracking my dividend income journey associated with my taxable account and our Tax Free Savings Accounts (TFSAs). While I have no intention of changing this reporting structure on my site, I thought it would be interesting to ask some reflective questions about this particular part of my financial journey.
1. What key things do you enjoy about dividend investing? Do you think you can stick to this plan for more years over time?
I hope so!
I guess I really gravitated to dividend investing in the first place because it’s tangible money I can see and/or use as I wish. I mean, companies use dividends to pass on their profits directly to shareholders but they don’t have to. There are a few standing reasons why some companies focus on paying dividends to their shareholders and will continue to do so:
- Reason #1 – dividends are core to any company strategy. Potentially there are no current companies to acquire, maybe company debt is under control, and/or there is already a healthy stream of cash to begin funding new company products or services. Thus, as part of company strategy to reward shareholders – the board of directors feels it’s simply one of the best things to do with company profits over time.
- Reason #2 – the company is on sound financial ground. Most companies that pay a dividend, especially long-term (as in decades) have a stable business model. You really can’t fake dividend payments for very long. Companies that grow their dividend tend to have great cash flow – profits. As an investor, it’s to your advantage to own shares in a company that makes large profits, consistently, with time. A reliable dividend is essentially one very good sign of business strength. This is because unstable companies cannot divert profits directly to shareholders for very long.
- Reason #3 – the company wants to attract investors. This is akin to company strategy. Some investors are more speculative and like risks (note: this is not me). Dividend-paying companies can attract a certain type of investor; one who prefers cash in hand versus the hope of capital gains. Such investors like the idea of earning income from their investments the same way people go to work to earn an income – it’s dependable. Over time the work is performed by their portfolio. The portfolio will pay out MORE income over time if you reinvest dividends and/or you hold such dividend paying companies long enough whereby dividends are increased by the company every year or so. Companies know there are investors out there who put a bias on income generated from their portfolio over growth.
- Reason #4 – companies know investors like me like optionality. You see, in a perfect world, all businesses would allocate capital in a way to perfectly maximize the return on that capital. This would be done so reinvested money would go back into the business in way that pays off immensely for the shareholder (by increasing returns over time AND by continually reducing the company’s tax burden). But you should know by now we don’t live in a perfect world. This means shareholders have over time demanded a dividend – for the purposes of “optionality”. Shareholders like optionality – and dividends provide that optionality – to give investors the choice to increase or decrease their exposure to the business. Reinvested dividends therefore, take advantage of that optionality, to increase exposure. Dividends taken as cash, do not.
At the end of the day…I enjoy seeing dividends “flow” into my accounts without buying or selling shares. That tangible money income machine helps me stick to a plan I believe in.
2. Do you remember a time in your life where you weren’t concerned about money? What will it take for you to be less concerned about money over time?
In hindsight, I think I was legitimately concerned about my financial future around the 2008-2009 Great Financial Crisis (GFC). During the GFC, I wasn’t sure if my financial plan was robust enough. In retrospect, it wasn’t.
Given where I’ve been (and where I am now), I would say I’m MUCH more comfortable with my financial plan. I’ve made a number of adjustments over the years to:
- diversify my stock portfolio,
- diversify my holdings beyond Canadian borders, and
- increase my cash wedge / emergency fund to combat any “what ifs” in life.
You can read about some of that progress and thinking in these posts here:
My Financial Independence Plan
The Cash Wedge – a great tool to manage market volatility.
I think for me to fully let go of most money concerns or fears, I will likely need to reach my Crossover Point.
For me, once I know the income from our invested capital comes close to matching our monthly expenses, routinely, I believe we’ll have enough money to change our working habits. It is my hope those days are about 3-4 years away from now.
3. Do you think you’ll actually ever want to retire in the traditional sense?
My plan has always been to work on my own terms. Although I consider myself as part of the FIRE (Financial Independence, Retire Early) movement, I really don’t believe in the “Retire Early” part. I’m too young to simply retire and do nothing. Besides, most people in their 40s or 50s that do “retire early” tend to work anyhow – so don’t believe anything you read on the internet!
4. What progress do you hope to make in the coming years – using this blog?
More introspection – trying to better understand my relationship with money as I progress towards a new phase of my life and career. Over time, I’m getting a better handle on my biases but I still have some blind spots. I look forward to overcoming those and I’ll try and chronicle them on my site over time.
September 2021 Dividend Income Update tally
As I referenced above, one of the biggest benefits I feel I gain from dividend investing is seeing our money at work every month. Because we focus on the income stream we need (rather than what the market does or does not do in any given day or week or month), we have confidence in our financial plan.
With stocks and ETF units DRIPping along nicely, our income stream grows with time.
With thanks to recent dividend income raises from Fortis and Emera in particular, we should surpass our target of earning over $22,500 at the end of this calendar year in dividend income, from the capital invested inside our TFSAs and a non-registered account alone.
As of this month, accounting for those new dividend increases to take effect in the coming months, I’ve pegged our forward dividend income at $22,598.
To put this income stream into perspective:
- We earn $2.58 per hour of every hour of every day (income/8,760 hours (24 hours x ~365 days)) even in our sleep. Our hourly rate is growing at about $0.02 per month based on compounding alone.
- Part of the portfolio is essentially a job: earning $10.86 per hour assuming I work 40 hours per week. For folks keeping track over just last month, those two dividend raises I mentioned were like a $0.10 per hour wage hike.
For well over a decade now, dividend investing remains at the core of my investment plan. I must say, I enjoy getting paid to be an investor.
I welcome your comments on my investing approach, anytime. Thanks for reading.
More FREE My Own Advisor content:
How I invest in dividend paying stocks is always found here.
Why I invest in low-cost ETFs – along with dozens of articles about ETFs can be found here.
Looking for free calculators, tools, or even my support? Check out my Helpful Sites page here.
Thanks Mark. I guess I did all that work without realizing you had already come up with similar numbers.
All good David – it shows how much of a savvy investor you are. Well done. Hard to go wrong with XIU for those that don’t buy any individual stocks in Canada. Amazing, simple, effective fund IMO.
All the best,
Hi Mark. I am aware that dividend income, in lower taxable income cases, is more tax efficient than capital gain income.
However if one compares Total Return, it seems XIU has a better return that most (all?) dividend ETFs. Using Morningstar, today, October 16 2021, I looked at the 5 year “Trailing Returns” for XIU and compared that to XDV, XEI, PDC, ZDV, VDY and CDZ. I chose these as they were the ones followed on https://dividendearner.com/ (XDIV has no 5 year record).
XIU’s return came out on top, at 11.34%. The closest dividend ETF return from my list above was VDY at 10.99%, which is .35% less. The worst performer was ZDV at 8.87%.
That XIU’s total return beats all (most?) dividend ETF’s sort of challenges my thought that companies with substantial dividends do better than those without.
And not just large Cap companies. XIC (10.78%) was beat out by only one of the dividend ETFs, VDY 10.99%, and by only .21%
Am I misrepresenting the numbers?
Thanks for reading David. You’re not missing a thing. I like dividend ETFs for the all-in-one basket of dividend paying stocks approach but that said = total return matters. I said as much when I highlighted some of my favourite ETFs here:
If I had to pick a great income-oriented fund and growth ETF in Canada, I would likely go with XIU. Hands down. In fact, I used to own it myself before I built my own dividend portfolio.
Thanks for your readership 🙂
Very nice Mark…..I’m just a tad ahead of you…@ $3.39247/hr of every single day of the year! I’m on disability income and no longer contributing to my portfolio [sad, because I love dividend income and the numerous opportunities out there] but very happy with my 63 stock portfolio [19 of which are U.S. $’s]. Soon though, it will be time to dip into what I’ve built….to provide income in my retirement years. Unfortunate for me [diability] or I would have kept going for a few more years. I’m certain I could have reached $3.50/hr……
All the Best to you and your readers!
$3.39 per hour is excellent to say the least – well done done Don! Yes, I will be dipping into mine in another 3-4 years. Might as well start enjoying what I’ve been building and I hope the same for you 🙂
Have a great weekend and thanks for your comment. Stay well!
Congratulations Mark for achieving another milestone with your dividend income exceeding your target!!!! Well done, you should be proud of yourself. I have no doubt that when it comes time to retire you will have more than enough income to spend as you like. You have planned it very well since many years ago and your well-thought plan will bear fruits for you to enjoy.
Wish you all the best and you will be richer than you think
Thanks very much Ken! 3-4 years to semi-retirement me thinks! I look forward to those days and I appreciate the very kind words about my plan. Seems to be coming together.
All the best back,
Hi Mark. Long time listener, first time caller… but thank-you for putting out your blog. It’s been really helpful as I move closer to ‘retiring’ (now 51) and have been taking a much deeper interest in investment/retirement planning. To date, all handled for me by an investment management firm. An area I’d be really interested in getting your perspective and ideas about is the whole (or partial) process of moving away from a third-party firm to self-managing things. I’m in good shape overall and generally the annual returns have been good (not necessarily great), but there’s some comfort in knowing someone else is on it while I do my day job. I’m a bit fearful of taking on the responsibility of managing my portfolio myself, BUT I do suspect that better returns are possible and I like the idea of taking on more of this IF I can manage the downside risk.
Great stuff Jeff and kind words.
I can appreciate the fact that if you’re very busy with the “day job”, with family, other, it’s hard to find the time to dedicate to investing.
A quick perspective is, and I’m biased, investing could never be easier. With all-in-one funds and such, you can literally replace your third-party firm with one fund if you wanted.
I wrote this a while back – remains relevant today. This was targeted to big banks vs. investment firms per se.
The challenge is training your investing brain to manage the downside. You eluded to this. It’s easy to invest when everything is going up. It’s quite another to invest, stay invested, if anything invest MORE when the markets remain sideways or decline.
Any specific I should write about given your situation?
Also, have you considered a Robo-Advisor as a transition from the investment firm to eventual DIY?
Great job on your progress Mark! Slow and steady wins the race when it comes to dividends.
Very nice to hear from you! How are things? Drop me an email if you wish via Contact page.
Thanks – just trying to stay out of my own way when it comes to dividend income! 🙂
Nice summary Mark, and good work. Realizing your investment income will not be seriously affect by the market is the real eye opener, at least it was for me. From that point on, I stopped worrying about having enough income, and didn’t care about the value of my investments.
Thanks cannew. You’ve done so well with your income journey – I hope to realize some of my long-awaiting income dreams like you in the coming years.
I figure once my crossover point is realized – i.e. my income from my portfolio > expenses, I figure I will stop worrying about a lot of money things 🙂
By the way, still own FTS and EMA? They raised their juicy dividends recently!
Still own the same holdings. Having fun with my Play Wealthsimple account.
LOL. Good on you. Must be nice to play with all that money!!
Take good care!
Congrats on exceeding your annual goal so early.
I never worried that we don’t have money for now, but I actually worried about whether or not I could have enough money for retirement before I really took a look at our financial situation. I didn’t know how much we have, how much we need etc. Once I began to first figure out where we were, where we want to be, and made a plan to go there, I was not worried any more.
Thanks very much. It was a nice surprise since I didn’t expect those raises to come so early in 2021 but I won’t say “no” to them 🙂
I suspect you are not worried about money at this point given you have a sound plan in place now. Kudos.
As soon as I have a plan, I am already much less worried. A couple of years into the plan, then I know the plan will work, it’s just a matter of time, I am not worried anymore.
The precondition, of course, is that I am pretty sure it should not be difficult for both of us to keep a decent job until we achieve our goal for retirement. Actually, our family income from working has increased quite a bit since then and it definitely helps to speed up the retirement portfolio. So I think ultimately, the most important thing is still investing in yourself, get the skills the job market desires.
On the other hand, it makes “just one more year” more attractive. Pretty hard to quit the job.
Yes, you’re not the only one that has any “one more year” thoughts. We’ve talked to many aspiring retirees at Cashflows & Portfolios when running some retirement projections for them and it’s really amazing how much more money they think they need – when they really don’t.
Many are guilty of “do I have enough” syndrome. I might be one of them as well 🙂
I know I have enough for retirement already. But it’s still hard to quit as it’s pretty easy to find ways to spend that extra cash, especially with two kids.
According to my original plan, we should retire in one year. Now we plan to retire in three years.
That’s a “two more years syndrome” 🙂
Ah, I am so much looking forward to see the crossover-point. There are a couple of years and a lot of hard work left, but it’s important to keep motivated. Thanks for your inspiring posts, Mark, and all the best!
Thanks very much SavyFox and I hope to keep you updated! 🙂
All the best back.
Excellent progress, keep up the good work. I’ve followed you for years and appreciate the help your musings have given me over that time. I have achieved FIWOOT and am now hoping to help my kids down the road as the housing market is nearly untouchable unless they have 2 incomes. Outside of dividend income, what are your 2 key ETFs in your opinion for capitol growth and preservation. I don’t like all my eggs in Canada, but the majority are, so I’m looking to get more global exposure. with the markets the way they are, I plan on buying once a larger pullback occurs. Keep on dripping
Lou, very kind words and thanks!
Congrats on your own FIWOOT – love it. I hope to follow your lead in the coming years! 3-4 maybe?
I’m pretty much all CDN stocks inside my taxable account. Inside the TFSAs, rightly or wrongly, I felt I needed a bit more exposure beyond Canadian borders so I own XAW there now. I own XAW for growth since I won’t be touching my TFSAs for income or capital for likely 20-30 years.
I own VTI and QQQ inside my RRSP for the U.S. diversification and tech growth. I will eventually spend the dividends from the RRSPs and slowly draw down the capital over a period of 10-20 years before x2 CPP and x2 OAS kick in.
For wealth preservation, I’m slowly going to increase my cash wedge in the coming years to 1-years’ worth of expenses so I don’t have to tap anything in a market correction but essentially will remain in >90% stocks as I start part-time work in 3-4 years. That’s the plan!
I hope to live off dividends from taxable in early semi-retirement years (that should pay for all condo fees, and condo property taxes for life); RRSP withdrawals should cover other bills ~ $20K per year (I need to eat :), and part-time work should cover “extras” in life like golf, dinners out, travel, etc.
Essentially, in the later years of my life (ages 70+) we should have healthy x2 TFSAs, x2 CPP, x2 OAS and some taxable dividend income to live from so I figure that’s pretty good.
I also don’t like all my eggs in Canada hence XAW, VTI and QQQ.
All the best Lou!!
Excellent reasons for liking dividend investing. You’re doing an amazing job with these updates, Mark. You’re close to $2K/month now.
One of my favourite things about eligible dividends is how tax efficient they are. A retired person can potentially earn income from dividends in a non-registered account, while withdrawing money from a TFSA, and not worry about OAS clawbacks.🤗
Yes, very tax efficient as you know. It’s not overly tax efficient while working full-time but alas, it’s always been a bit of a goal of mine to replace some employment income with dividend income over time. So…getting there!!
It’s been a lot of updates over time and I’ll say basically what I always do:
Very nicely done to date Mark. Congratulations on the excellent progress and continued best wishes.
Good list of rationale for dividend payers. A valuable consideration for some investors.
Thanks very much. The portfolio is doing most of the heavy work now 🙂
Appreciated – onwards and upwards to semi-retirement I hope!
Anytime. Much deserved.
Yes, kind of a critical mass thing. From experience I can say it works heavily “in reverse” at correction times. That’s when the rubber hits the road and a dividend strategy can help.
I always look at the expected dividends income in corrections to comfort myself. 🙂 Basically, that’s what lets me sleep tight on the nights when the market is down.
Well done. Sleeping tight is a good thing.
Same. There is a major psychological factor about getting paid. Beating the TSX over the last 10-years with my CDN basket of stocks feels pretty good too! Ha.