Weekend Reading – New dividend milestone and retirement bucket approaches
Welcome to my latest Weekend Reading edition where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
This past week, I set out to define some new financial goals as we march towards a $1 M portfolio, stock market willing.
Before we get to my Weekend Reads, awesome to see two raises already so far in our portfolio this year, adding a couple of hundred bucks to the dividend war chest:
Canadian Utilities (CU) increased their dividend by 3%.
Brookfield Renewable Partners (BEP.UN) increased their dividend by 5%.
Even without those raises, I have a new dividend income milestone to report soon and I can’t wait to share it. In the meantime, check out where we finished recently here in a few key accounts – our plan is coming together!
Very interesting article here on the concept of generating retirement income through a “bucket” strategy.
Image from post – Retirement Manifesto.
A few things I would disagree with though with the savvy Retirement Manifesto on this one, at least for my portfolio. Your mileage may vary.
- I wouldn’t put anything in the “income bucket” related to bonds. Anything greater than >5 years is in equities for me, dividend paying stocks or low-cost ETFs.
- There is no way with >10 years investment horizon I would hold junk bonds or commodities in my portfolio. Again, I would own income and growth oriented stocks and low-cost growth-oriented ETFs.
So, my bucket approach is going to be different than the above.
After tucking away a modest cash wedge (about 1-year in cash for an emergency fund (Bucket 1), sitting in an interest-generating savings account) I intend to “live off dividends” and distributions with the rest in the early years of any retirement.
Here is a bit more about my bucket approach to earning retirement income.
Anything I should revisit on this bucket strategy for a future blogpost??? Happy to hear it.
More Weekend Reading…
Great work by Jon Chevreau here citing reasons why DSC (deferred sales charge) funds need to go away, everywhere, for good. Very kind of him to include my thoughts in his MoneySense article as well. Thanks Jon – keep up the great work in helping Canadians build wealth.
Congrats to Tawcan on his new dividend income milestone!
Dividend Earner highlighted the best Canadian bank stocks to own. Crazy that all big-6 banks are now yielding at or over 4%!
I must say, I really enjoyed the update and returns shared by Rob Carrick on the 2MP. What the heck is a 2MP?
Essentially the 2-Minute Portfolio (MP) was first introduced some 20-years ago in the Globe & Mail as a means to investigate the idea of simplifying the portfolio-building process by focusing on the largest stocks in the Canadian stock market. The strategy was later refined to include the largest two dividend-paying stocks in each of the 11 subgroups of the S&P/TSX Composite as measured by market capitalization.
Based on Rob’s article (for subscribers only):
“Data for the 2MP is managed by Morningstar CPMS, which has done back-testing that sets Dec. 31, 1985, as the start date. In the 34 years of the 2MP, the past 10 might be the best stretch ever. The total return for the portfolio from 2010 through 2019 was an average annual 10.4 per cent, compared with 6.9 per cent for the index.”
Impressive stuff. Here are some of the stocks as part of the 2MP (image from article in Globe & Mail):
Money in Your Tea kicked around the question about whether it was smart to invest money as a lump sum or limp in (via dollar cost averaging). My answer: invest when you have the money. #justinvest.
Why do that?
Dollar cost averaging is essentially striving to time the market, strategically.
Need help with your TFSA?
By now you know you can contribute another $6,000 to your financial future self via the Tax Free Savings Account (TFSA). To get help, as always check out my Deals page for current partnerships and offers.
Also make sure you check out these posts:
A reminder if you normally spend your RRSP refund, the TFSA makes WAY more sense to invest in.
How can you diversify your portfolio and TFSA using low-cost ETFs? This post has the goods.
Are there some easy, simple, all-in-one funds for your TFSA? You bet – right here!
Reader question of the week (adapted for site):
Love reading your various posts, it’s inspiring and educational! Very well done for a 40-something!!
OK, we are retired and withdrawing from our RRSPs at the moment. Our withdrawals happening 2 or 3 times per year. Since we’re withdrawing money actively, I really don’t have the dividends reinvested via DRIPs like you do. (Mark – here is why I’m a BIG fan of DRIPs here.)
Without DRIPs, I feel that I’m leaving money not invested…it could bite me if the market drops. Is it worth the risk given the time span? Your thoughts?
Great questions! You’ve done some thinking on this subject!
I think if you need the money, you should turn off the DRIPs. Just let the cash accumulate for your withdrawals x2 or x3 per year. Then take out the money. Let stock market growth do the work for you.
If you don’t need the cash or even all of the cash, for sure, DRIP away since I believe that is one of the big benefits of DRIPping – it helps you avoid any bad behaviours and any market timing. DRIPping allows money to compound for you, FREE of charge I might add, and take advantage of buying more stock shares when the market dips.
All the best to you and thanks for being a fan of the site – tell others about it in 2020 and stay tuned for more posts! 🙂
Other readers, I have your questions in my inbox and I will be answering them soon!
ATCO, the holding company of CU, has a 7.5% raise. Last year, both had raise about 7.6%. There might be some policy change happened there.
Wow, big raise. I actually don’t own ATCO at all but have considered it. I do own CU and have done so for about 7-8 years.
I have both, along with other utilities. Maybe should just stick with winners. Both CU and ATCO are not popular choices I feel. And it’s for a reason. My biggest position in utility is FTS.
I would not be concerned (personally) but CU or ATCO long-term. They will figure out a way to be profitable I believe. I could be wrong but that is what I think!
I am not concerned. But I am thinking maybe I am too diversified and it’s not necessary. With utilities, I have CU, ACO.X, AQN, BEP, FTS, EMA. Do I really need so many of them? Maybe concentrate a little bit and fewer stocks to watch. But if I want to trim, which one I should sell? CU and ACO.X didn’t perform as the other ones. But in the other hand, all the other four was performing very well and might be considered a little bit expensive.
Also I have all six big banks. Again, do I really need to have all of them? Maybe Just two or three would be enough.
I know myself. I will just wonder a while, probably will not do anything.
I’m the same. All big banks. Many big utilities. Many (3) pipelines. I figure “that’s enough” and slowing increasing my U.S. equities over time. Would love to have 50% of my equity portfolio on USD from U.S. stocks and ETFs over time. Working on it 🙂
May, that’s a very good question.
I used to have 22 stocks. For some time, I wanted to hit 30 stocks to diversify but could never find that many Canadian stocks. These days I have cut down. My final portfolio will only be 15 stocks across 5 sectors that have a good earning and dividend growth track record. I think when we sometimes diversify, we end up buying a number of mediocre stocks just for diversification sake.
I rather have good stocks even if there are only 15 on my list.
That’s the thing eh….there might be only ~30-50 CDN stocks to ever own for income approach. Everything else is a gamble for capital gains so you (and I) might as well index invest.
I think my final portfolio will probably end up being about 20-30 CDN stocks, then a few U.S. assets (stocks, ETFs) for international diversification. That’s it. And some cash of course.
What CDN stocks do you own? The usual suspects?
Mark, yes i own the usual dividend growth stocks. My banks are mainly td and ry. I would like to own more national bank but it’s overpriced. 3 utilities – ema, fts, cu. 2 telecoms. Pipeline – trp and energy- su. Others include cnr and MRU.
Selling enbridge as negative cashflow and dividend payout ratio is over 100%.
Ya, the usual suspects! Have you considered owning any BAM.A or the children of BAM.A = BEP, BIP, BPY?
I was expecting CU dividend raise to be more. Was surprised that it’s only 3% this year. But again dps is only 48%. So perhaps the company is on the prudent side. That is a good thing.
So was I Rn, thinking it was going to be in the 5-7% range but alas, I will take it. I don’t mind payout rations being in the 40s and 50s at all.
I own this too.
Well their 10 yr div growth rate avg is over 9%, so this isn’t great news. Although imho smaller div. raises for many companies will become the norm.
CU revenues are down and earnings are down, a fair bit. They are reinventing themselves selling last of fossil fuel electricity generation plants. I also read their large Mexico project has run into a lot of snafus.
Hopefully they can get the ship righted and back to more earnings and bigger dividend increases. It has a long track record of a well run operation.
Thanks for the mention Mark. It’s crazy to think that we received over $23k last year! And yea it’s crazy that the banks are yielding over 4%!
Very well done Bob. Keep up the great savings and investing work!
This year I learned my lessons. I don’t wait and just bought stocks I feel not so expensive using the new money in our registered accounts. I am very happy to just watch my portfolio up almost every day after that.
Very smart. Invest when you have money and don’t look back. 3 years, 5 years, 10 years out you should be very well rewarded.
RE DRIPS, Mark: I use dividends to accumulate selected ETFs. Every time I have more than $100 accumulated I buy my broker’s fee-free ETF. I am with TD, so I usually buy the S&P 500 TDB 902, sometimes TDB 3055. It is amazing how dividends grow a second time this way, and accumulate into something worthwhile.
Looking to max out my TFSA for the year right after RRSP contribution deadline for 2019.
Good day to spend catching up on reading material due to the snow today
I hear ya. We just got a blast here in Ottawa.
I was recently on your site. Do you just invest in ETFs? I noticed you replied with XAW and VXC. Great funds as you know. Do you hold those and if so where in your portfolio?
All the best.
Yes my entire portfolio in made up of only ETFs. I’ve broken the components of VXV into the underlying ETFs and hold those instead. VUN / VEE / VIU / VCN / VRE.
I also own ETFs from BMO that has tilted towards dividends.
I’ve come up with an automated approach to investing and I take a look at my model to see which funds are underweight based on current market rates and rebalance the funds to bring them back to my desired asset allocation. Essentially building my own Robo Advisor model.
These funds are split between my TFSA / RRSP / LIRA.
I’m hoping to do a post on my blog down the road to further explain my portfolio and my own robo advisor model.
I think you should do that post! Do share with me so I can put into any Weekend Reading bucket to help others learn about as well DGX.
No U.S. listed ETFs yet? e.g., VTI, IVV, other for total return?
That would be great, thanks Mark!
For me to keep things simple as posted while also getting exposure to almost the entire university of global equities, I’ve only used Canadian domiciled ETFs.
VUN gives me exposure to the entire US market, VIU for developed markets and VEE for emerging markets.
I first learned about ETFs when I was at the national accounting firm and its stuck with me since then.
Smart stuff DougP since I believe you can buy TDB funds commission free? No trading costs correct? Here is the fund profile of TDB902 just for kicks.