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:
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.
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