Weekend Reading – More Dividends August 2024 Edition
Hey Everyone!
Welcome to a new Weekend Reading – sharing the more dividends August 2024 edition.
First up, a few recent posts:
I shared how you can rebalance your portfolio, if that’s important to you, in this post below. In that article I shared I don’t really follow any traditional rebalancing work in my portfolio at all. Read on for details. Time will tell if that works out for me!
I updated this post about my Top Canadian Dividend ETFs. I also shared in that post my favourite Canadian ETF if I had to pick just one from the list and highlighted how I’ve actually used that ETF to build my own portfolio.
Weekend Reading – More Dividends August 2024 Edition
Dividends are irrelevant to some, they don’t matter to others; some financial advisors like chirping DIY investors it’s not “free money” on social media and so on. I no longer engage on that. Count me out with the unsolicited advice.
I’ll stick to my plan and whatever your plan is, I hope you do the same:
Source: Behavior Gap.
I’ve tailored our plan based on what I believe will work for us long-term. I’ve learned and tried to apply some best practices shared from the 100s of DIY investors have engaged with me over the years; their own approaches related to this sketch above long before this sketch was even popularized…
Along with meaningful growth in 2024 to date, we also received another dividend increase (from Capital Power (CPX) this week and Tourmaline Oil (TOU, Canada’s largest natural gas producer) on top of many other stocks that have already increased their payouts to us as shareholders this year. As we move forward in this latter half of 2024 and into early 2025, there are many other companies we own that should increase their dividends as well. And again, we hope for some growth too!
I’ve mentioned for the better part of 15 years on this site, while the rise of indexed funds are great for growth (I own a few), getting paid to be a shareholder without actively selling anything thereby creating my own income stream – feels very good too. I look forward to sharing a new monthly dividend income update soon.
This was our income update for June 2024 and even though only one small purchase was made in recent weeks, the income should move even higher…
From some of my fellow DIY investors and readers for your investing inspiration:
“Despite having 40% FI in portfolio and holding mostly Canadian dividend payers for 20 years, our overall portfolio has more than doubled with growth exceeding the inflation rate. Being debt free and somewhat frugal helped. When possible, looking to only buy fixed income with greater real yield than the inflation rate also helped (Preferreds sometimes were substituted for Bonds/GICs and of course, those too are dividend payers).”
and…
“Hi Mark: Yes you can still live off dividends as I have for the last 32 years.”
Amazing.
Weekend Reading – beyond more dividends August 2024 edition
With thanks and reference to Scott Barlow from The Globe and Mail (subscription), U.S. stocks might not deliver (as much) in the coming years.
“Since 1936, 5% or greater declines in the S&P 500 index have occurred three times per year on average, 10%+ corrections have occurred once per year on average. We are thus overdue for a pullback. We also find ourselves heading into August and September, a period accompanied by seasonally weak S&P 500 returns. With the US election in November, we note that prior presidential election years have seen the VIX increase by about 25% from July to November … Easy index gains may be in. From a thematic perspective, AI capex takers of 2023 are now capex spenders, and the monetization of AI may take longer than anticipated- earnings reactions over the last few weeks underscore this shift … Dividends contributed ~40% to S&P 500 total returns from 1936 to 2010, but since 2010 have contributed just 15%. After lagging EPS growth for the last decade, dividend growth is catching up, bolstered by two banner mega cap growth stocks initiating dividends recently. In the early 2010s, depressed valuations indicated double-digit price returns for the next decade. Today a higher multiple points to low single-digit price returns through 2034. Dividends are slated to make up a larger proportion of returns”
That could very well be true. I have no idea. I really don’t. 🙂
When I read this, while interesting, I’m reminded of the following a few months ago from @gurgavin:
The financial experts are terrible at financial predictions. https://t.co/ljWC7jmPPd
— Mark Seed (@myownadvisor) February 23, 2024
Source: X.
The most successful DIY investors I know and have learned from:
- readily admit they don’t know what they don’t know;
- they invest in a collection of stocks or low-cost ETFs in a manner that meets their investing objectives;
- they manage debt well or stay out of debt; and,
- they keep a healthy balance cash or cash equivalent assets when things don’t work out – since they know things won’t work out from time to time…
Congrats to my friend and fellow blogger Bob Lai who shared 10 lessons from 10 years of blogging. I found this very important from his list since it matches my labour of love that is My Own Advisor for the last 15 years. From Bob:
“This is the most important lesson I have learned from 10 years of blogging. I have learned that I need to have fun from blogging. If I’m not having fun, I wouldn’t still be blogging.”
I liked the punchline from Jon Chevreau in this pair of MoneySense book reviews:
“…If you’re approaching milestones like 70, you could do worse than read and absorb both these books. It all depends on whether you are already familiar with the first book in this genre, Die Broke. If you haven’t read it, then definitely read Die with Zero. If you already know the concepts underlying Die Broke, then Four Thousand Weeks offers a fresh perspective on this topic.”
Why these authors want you to spend your money and die with $0 saved
From one of my favourite sites/podcasts/knowledge areas:
“Consistent progress compounds.” – Farnam Street. @farnamstreet
I’ll be back next week with a new dividend income update.
Have a great weekend!
Mark
Whilst I comprehend the fundamentals to “Die Broke” and other similar concepts, I just never really cared about it. Sure I’ve joked about bouncing the cheque to the undertaker like thousands of others, but it’s just not something I had or wanted as a goal in life. I’m more into the camp of spending as much (or as little) as I want whenever I might want to (or not want to). If that means residuals at the end (no matter how large), so be it. I’ve seen the sometimes intense discussions about a VPW on another forum but to be honest I’ve never followed it much. Probably another classic case of to each their own methinks.
I hear ya, Lloyd. We are very unlikely to die broke but without any kids, we do anticipate trying to get close. It will help out our executor. 🙂
All my best and thanks for your comment,
Mark
Hi Mark,
Enjoy the 6% dividend increase in CPX while you can get it. Perhaps the same for 2025, but beyond that Capital Power is already saying they plan to slow dividend increases to 2 to 4% dividend growth. Found on page 19 of their 2024 May investor presentation.
Definite slow down in dividend increases from a number of Canadian companies since Canadian Utilities started paying 1% dividend increases a few years back.
Since 2020 I’ve been resorting more and more to contrarian investing when I can’t get the dividend growth I’m seeking.
Mark I’d like to go a bit off topic with my question. I’m preparing for my retirement at 65 and was wondering if you or any readers see any downside in turning my RRSP and my wife’s spousal RRSP into a RRIF when we retire? From what I have researched there is a CRA tax credit of $2000 on certain qualified income for retirees and the RRIF meets the criteria. We can also income split with it. I also believe while there are minimum withdrawals required there are no maximums. If income is more than needed we can always put into TFSA or unregistered account. I also don’t think there are any fees charged on our RRIF withdrawals but there would be on any RRSP withdrawals. I cannot find any upside to delaying the RRIF conversion for us till 70 or 71 as required by regulations. Am I missing anything? I know a lot of people seem to wait for the conversion until they turn 71 but for my wife and I it seems to make more sense to do it at 65. Thoughts?
Not off topic for this site, at all, Don!
I personally see very little downside, related to turning enough RRSP assets to RRIF income to qualify for pension income credits, etc. at age 65.
https://invested.mdm.ca/the-pension-income-tax-credit-one-benefit-of-opening-a-rrif-early/
Beyond the credit, all RRIF income can be split too, so there are advantages of certainly “RRIFing” some or all of your RRIF income at age 65.
Correct, as far as I know = no withholding taxes on RRIF mins.
Based on the work we do at Cashflows & Portfolios for clients, we often see folks with healthy RRSP/RRIF balances start taking the money out to “smooth out taxation” while meeting their desired income spending and use any $$ they don’t really need for spending to max out their TFSA contributions every year.
The key reasons why some folks delay RRSP>RRIF conversion until age 71:
1. They don’t need the money, they have plenty of other income sources (e.g., corporations, taxable income to drawdown) and/or
2. Their RRSP balance is small, they need the RRSP assets to compound away as long as possible to meet any retirement income planning needs.
The most efficent way we’ve seen RRSPs/RRIFs being drawdown / fully exhausted are to start RRSP/RRIF early in order to defer both CPP and OAS benefits such that all RRSP/RRIF assets are usually gone / transferred out around time of longevity / death (age 90, 95, etc.) to avoid estate taxation.
https://www.myownadvisor.ca/watch-out-for-rrsp-and-rrif-taxation/
I hope that helps share what I’ve observed and learned, although personal finance is very much personal.
Mark
Thanks Mark. The last part that I will have to consider is taxes. We will need to have enough taxes withheld from RRIFs to avoid penalties or having to pay instalments. I believe we can set up RRIF withdrawals of 10% as a minimum or 15% to avoid any issues with CRA. The math should not be hard and can be done on a spreadsheet. I am planning on delaying my CPP and OAS till 70. My wife will take both at 66. Her CPP is not much as she was a stay at home mom. We did apply for her to have her CPP adjusted for her years of zero income when she was home and had no income. It took 10 years of zero income off her calculations and did raise her CPP up a bit. It all helps.
Well, it might be worth using some free calculators like some on this page, including Taxtips.ca to figure out how fast your RRSP/RRIF could last.
https://www.myownadvisor.ca/helpful-sites/
If you can delay CPP and OAS to age 65+ then the math should be fairly easy…
Keep me posted on what you decide!
Mark
Thanks for the link Mark. A lot of interesting stuff there. Cheers.
You bet!
Just a tip, until you turn 71, you can have both a RRSP and a RRIF so you can decide each fall how much you want in your RRIF for the Jan 1 age-based calculation and transfer from your RRSP to RRIF (should not have a fee for this and either direction is allowed); this way you can control what the min withdrawal is if your RRSP is large.
Thank you Zack. We only plan on moving some not all of our RRSP’s into RRIF’s. That way we have more options and we all love to keep our options open. This will add another tab to the spreadsheet. I do appreciate all of the advice that has come from others that have done this already. Thank you everyone 🙂
Great stuff Don, you have some choices – that is excellent. 🙂
Mark
100%.
I know a few folks that have opened a RRIF, fund it with a bit of money, say $50k or so and then do the RRIF min. withdrawal including pension income credit while keeping the rest of the RRSP intact in their 60s. Pros and cons!
You’re not missing anything Don. Those are the reasons I’ve converted part of my RRSP into a RRIF at age 65. Pro tip: if you are married use the age of the younger of you when setting up the RRIF.
Thank you Paul. My wife is only about 9 months younger but I like your tip and will be doing it. Cheers.
I missed the CPX increase, thanks for pointing it out- divvie increase season is the best time of the year!!
I loved the CPX increase…more to come hopefully!
Have a great weekend Geoff,
Mark