Dividend income – Dec 2016 Update

I’m so stoked to write this post. Writing the last dividend update of the year is always exciting because we can finally tally how much total dividend income we received for the entire year. 2016 was a great year for us financially – we maximized both our TFSA and RRSP, maximized both kids’ RESP, added over $45,000 to our dividend portfolio, and our net worth continued to grow steadily. Best of all, we welcomed Baby T2.0 to our family. What is our December 2016 dividend income and our total dividend income for 2016? Let’s find out!

December Dividend Income

In December we received dividend income from the following companies.

Pure Industrial REIT (AAR.UN)
Brookfield Renewable (BEP.UN)
BP plc (BP)
Corus Entertainment (CJR.B)
Canadian National Railway (CNR.TO)
ConocoPhillips (COP)
Chevron (CVX)
Dream Office REIT (D.UN)
Dream Global REIT (DRG.UN)
Dream Industrial REIT (DIR.UN)
Enbridge (ENB.TO)
Evertz Technologies (ET.TO)
Fortis (FTS.TO)
H&R REIT (HR.UN)
High Liner Foods (HLF.TO)
Intact Financial (IFC.TO)
Intel (INTC)
Inter Pipeline (IPL.TO)
Johnson & Johnson (JNJ)
KEG Income Trust (KEG.UN)
Coca-Cola (KO)
McDonald’s (MCD)
Manulife Financial (MFC.TO)
Magna International (MG.TO)
Prairiesky Royalty (PSK.TO)
Qualcomm (QCOM)
Royal Dutch Shell (RDS.B)
RioCan REIT (REI.UN)
Saputo (SAP.TO)
Starbucks (SBUX)
Suncor (SU.TO)
Target (TGT)
Unilever plc (UL)
Visa (V)
Ventas (VTR)
WestJet (WJA.TO)
Waste Management (WM)

Wow what a list! In December 2016 we received dividend income from a total of 37 companies and a total of $1,185.90 in dividend income. This was much higher than expected thanks to a special dividend payout from Evertz Technologies. The special dividend was $1.10 per share plus regular dividend payout, totaling $1.28 per share. It was an unexpected boost for our December dividend income.

All these dividend payments from 37 companies meant we had a record breaking month! At $1,185.90, it was the highest monthly dividend income in 2016. Woohoo! Who wants to celebrate with me? (Hopefully with more clothes than just a bathrobe ha!)

Out of the $1,185.90 dividend income received, $401.29 was in USD and $784.61 was in CAD. Please note, we use a 1 to 1 currency rate approach. Therefore, we do not convert the dividends received in US dollar into Canadian currency. Reason for doing this is to keep the math simple and avoid fluctuations in dividend income over time due to changes in the exchange rate.

The top 5 dividend payouts were Evertz Technologies, Manulife Financial, Suncor, Coca-Cola, and Suncor. The top 5 payouts corresponds to 35.5% of our December dividend income.

Dividend Income Growth

Compared to December 2015 we saw a YOY growth of 21.79% which is absolutely fantastic! I was a little bit surprised to see an over 20% YOY growth in December given that we received over $950 in dividend income in December 2015. The special dividend from ET.TO definitely helped with this growth matrix.

When comparing our annual dividend income between 2015 and 2016, we saw a 21.73% YOY growth. Needless to say, I am very happy to see such growth.

Just for fun let’s take a closer look at our annual dividend income YOY growth since 2011.

Our annual dividend income YOY growth is slowing down. This is inevitable as I have explained many times. Why? Imagine receiving only $20 per month in dividend income, or $240 for the year. A 100% YOY increase means a future annual dividend income of $480, or $40 per month. At a 3% dividend yield, only $8,000 additional capital is needed to see 100% YOY increase.

Now imagine a monthly dividend income of $1,000, or $12,000 for the year.

A 5% YOY increase in annual dividend income means an additional $20,000 is needed at a 3% dividend yield.

A 10% YOY increase in annual dividend income means an additional $40,000 is needed at a 3% dividend yield.

A 20% YOY increase in annual dividend income means an additional $80,000 is needed at a 3% dividend yield.

Finally, a 50% YOY increase in annual dividend income means an additional $200,000 is needed at a 3% dividend yield.

This is a simplified example as we are ignoring any dividend income increases from organic dividend growth and dividend reinvestment plan (DRIP). But the message is clear, it takes a significant large sum of fresh capital to sustain a high dividend growth rate once your dividend income reaches a significant level. Unless you are making millions of dollars at your job, I believe it is extremely challenging to save and invest $200,000 each year. The more dividend income you receive, the more fresh capital is needed to grow future dividend income. Here’s another example. Imagine you are receiving $4,000 in dividend income per month, or $48,000 per year.

A 5% YOY increase means an additional $80,000 is needed at 3% dividend yield.

If you aim for a 10% YOY increase that means an additional $160,000 is needed at a 3% dividend yield.

Conclusion? High YOY growth in dividend income is extremely hard to sustain. You are faced with a steeper and steeper mountain to climb.

Dividend Increases & DRIP

In December a number of companies that we own in our dividend portfolio announced dividend increases:

  • Canadian Imperial Bank of Canada (CM.TO) raised its dividend by 2.45% to $1.24 per share.
  • National Bank (NA.TO) raised its dividend by 1.82% to $0.56 per share.
  • Bank of Montreal (BMO.TO) raised its dividend by 2.33% to $0.88 per share.
  • Ventas (VTR) raised its dividend by 6.16% to $0.775 per share.
  • Waste Management (WM) raised its dividend by 3.66% to $0.425 per share.

These dividend increases mean that our annual dividend income will increase by $37.14 moving forward.

To take advantage the power of compound interest, we are enrolled in DRIP for many of our holdings. In December we managed to DRIP additional 13 shares of various dividend paying stocks. This resulted in an increase of $14.80 in our annual dividend income moving forward.

By utilizing organic dividend growth and DRIP, we have managed to gain a total of $51.94 in our forward annual dividend income. To get the same dividend increase, at a 3% dividend yield, we would have to invest $1,731 of new capital. Essentially we got a pay raise for doing absolutely nothing at all. This is the power of organic dividend growth and DRIP. This is like getting a raise without even having to go through any performance review.

Conclusion and Moving Forward

In 2016 we received a total of $12,559.74 in dividend income. This is a large sum of money for doing absolutely nothing. To put this to a quantitative perspective, at a $40 per hour wage ($83,200 annual salary), we have save ourselves a total of  314 hours of work. This is an equivalent of little over 39 days worth of work, or a little shy of 8 weeks. Needless to say, our dividend portfolio certainly has been working hard for us so we don’t have to. 🙂

Based on our financial independence assumptions, the passive income we need to be financially independence is $38,640 per year. W are almost 1/3 of the way to this target number.

Our dividend goal for 2016 was $13,000. Unfortunately that means we didn’t meet our dividend income goal. We were only short by $440.26 or 3.39%. Receiving $13,000 in dividend meant a YOY growth of almost 26%. I knew it was a very challenging goal to begin with, but I like to shoot for the moon when setting up goals. While we contributed over $45k into our dividend portfolio in 2016, it clearly wasn’t enough. Having said that, the dividend cuts from the likes of Kinder Morgan, Potash, Dream Office, ConocoPhillips, and Husky Energy definitely made it more challenging to meet the $13,000 annual dividend goal. If these companies didn’t cut their dividend payout, I strongly believe we would have accomplished this annual dividend goal.

So where do we go from here?

A 2017 dividend goal of $15,000 perhaps? This means a YOY growth of 19.4% or an increase of $2,436.76 in dividend income. At a conservative 3% dividend yield that would require an additional of  $81,255. Boy that’s a lot of money! However, it shouldn’t take that much capital to meet this $15,000 annual dividend goal if we are able to harvest the power of organic dividend growth and dividend investment plan (DRIP). Is it a challenging goal? Absolutely! But I would rather shoot the moon than setting a not-so-challenge goal that we can easily meet and then having to update our goal half way through the year.

Dear readers, how was your December dividend income? How much total dividend did you receive in 2016?

 

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24 Comments

  • Reply
    mrtako2015
    January 9, 2017 at 10:40 am

    Dividend income was pretty good for us in 2016 too! I managed $47,428 in dividend income. Our best year yet!

    In 2017, I think I’m going to set a goal to grow our dividends by 10%. That’s $160,000 in additional capital (at 3%). That’s challenging, but possible.

    • Reply
      Tawcan
      January 10, 2017 at 12:20 am

      It’s amazing that you received over $47k. With that money we’d be able to call ourselves financially independent. 10% growth would be pretty awesome for next year, especially given $160k needed.

  • Reply
    Austin Wagner
    January 9, 2017 at 10:48 am

    Hey Tawcan,

    Thanks for sharing – a very impressive year to say the least! Congrats on baby #2! I noticed that your dividend income is fairly steady month to month…did you do this intentionally? A lot of portfolios (including mine) pay heavy in March, June, September, December. Just curious about your strategy. Good luck in 2017!

    • Reply
      Tawcan
      January 10, 2017 at 12:21 am

      Hi Austin,

      The steady month to month dividend income wasn’t done intentionally. We have a mix of monthly dividend and quarterly dividend payers. For some reason the quarterly payers just happen to spread out pretty evenly throughout the year.

  • Reply
    DivHut
    January 9, 2017 at 11:02 am

    Awesome. Just awesome results. Your portfolio is firing on all cylinders with impressive year over year growth for many years counting. You have achieved my next long term goal for my own portfolio which is to average $1k a month. Nice long list of companies paying you too. Keep that diversified income flowing. Look forward to following your journey in ’17!

    • Reply
      Tawcan
      January 10, 2017 at 12:23 am

      Hi DivHut,

      Thanks. An impressive year for sure. Very much looking forward to what 2017 will hold for us.

  • Reply
    Divnomics
    January 9, 2017 at 12:12 pm

    Congrats on the good results! This is the proof that by continuous dividend growth and adding fresh capital every month really does it’s compounding magic.

    We’ve managed to achieve around €850 on dividend income. For our second year, I’m very very pleased with what we achieved so far 🙂

    • Reply
      Tawcan
      January 10, 2017 at 12:24 am

      Thanks Divinomics. €850 in dividend income for your second year is pretty impressive. Just keep taking advantage of the continuous dividend growth and adding fresh capital every month.

  • Reply
    PassiveIncomeDude
    January 9, 2017 at 1:39 pm

    Tawcan AWESOME job! It’s inspiring to see your progress and know you are 1/3 of the way there. I wish you the best of luck in 2017!

    • Reply
      Tawcan
      January 10, 2017 at 12:25 am

      Thanks PassiveIncomeDude.

  • Reply
    freedom40guy
    January 9, 2017 at 9:27 pm

    Strong year! Great to see things slowly but steadily heading higher and higher!

    • Reply
      Tawcan
      January 10, 2017 at 12:25 am

      It’s a good feeling to see the numbers going higher and higher. 🙂

  • Reply
    Dividends Down Under
    January 10, 2017 at 2:44 pm

    Nice job Tawcan! Congrats on a great 2016, it’s amazing that you averaged of $1,000 a month and now you should get over $1,000 every single month forever! 🙂

    We had a pretty good 2016, we are going to total our dividends up soon.

    Tristan

    • Reply
      Tawcan
      January 14, 2017 at 10:53 pm

      Thanks Tristan. It takes a while to get a good amount of consistent dividend income. Don’t get discouraged, keep it up the work.

  • Reply
    Heather
    January 10, 2017 at 7:56 pm

    Thanks for sharing your progress. This is really inspiring!

    • Reply
      Tawcan
      January 14, 2017 at 10:53 pm

      Thanks Heather.

  • Reply
    Joe
    January 11, 2017 at 8:47 am

    Great job in 2016! We didn’t do very well with our dividend last year because I didn’t reinvest and I moved things around a bit. I’m hopeful for 2017, though.
    Good luck this year. $15,000 will be an awesome milestone .

    • Reply
      Tawcan
      January 14, 2017 at 10:54 pm

      You will have a great 2017, I’m sure about it. You guys are already doing pretty well and dividend income is one of your passive income streams. 🙂

      $15k will be an awesome milestone indeed.

  • Reply
    Dividend Diplomats
    January 15, 2017 at 2:06 pm

    What more can I say, other that THAT’S WHAT I’M FREAKING TALKING ABOUT TAWCAN! Amazing stuff here and it has been a blast waching your income grow over the year. Keep up the amazing work and lets keep the good times rolling in 2017!

    Bert

    • Reply
      Tawcan
      January 16, 2017 at 12:12 pm

      Thanks Bert. Looking forward to 2017.

  • Reply
    Dividend Money
    January 17, 2017 at 11:29 am

    Tawcan, Do you have a particular strategy for trimming/eliminating those positions that cut dividends from the portfolio?
    I completely agree with your dividend growth philosophy, but I’m curious about how you decide to eliminate or cut a position that ‘isn’t doing it’s job’? (ie. providing you income from your investment)

    • Reply
      Tawcan
      January 17, 2017 at 2:08 pm

      Hi Dividend Money,

      Good question, I’m in the camp that tend not to trim/eliminate positions that cut dividends or freeze dividend. That’s why we still have KMI, POT, and HSE. If the dividend payout is not sustainable, it is better for the company to cut or freeze it rather than taking on debt to keep some investors happy. Once the company gets over the hump, they might decide to increase the dividend payout again. Another key is diversification so these “riskier, cyclical” companies don’t contribute high percentage of your dividend income. Hope this helps!

  • Reply
    Dividend Money
    January 17, 2017 at 2:24 pm

    Thanks for the reply. Would it be prudent to avoid cyclicals altogether when building a long-term dividend growth portfolio? My personal experience has led me to avoid investing in ‘extraction’ companies altogether for sustainable dividend growth at least. The integrated operations like HSE are historically better in this regard, but I’m still contemplating if the ‘Squeeze is worth the juice’ on these companies when we’re talking about a long term dividend growth portfolio.
    All the best in 2017!

    • Reply
      Tawcan
      January 17, 2017 at 6:56 pm

      I think you have to make the call yourself. If you avoid cyclical completely you might miss a lot of good opportunities.

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