It’s that time of the month once again where I provide a monthly dividend income update. For those readers new to this site, although technically we are financially independent, we decided to delay our FI journey. Instead of the typical 4% withdrawals from our portfolio, we are creating a passive income stream by holding top Canadian dividend stocks, US divided stocks, and international index ETF in our investment portfolio. When our passive income (i.e. dividend income) exceeds our annual expenses, we can call ourselves financially independent.
How much do we need to live off dividends? We estimate we need around $60,000 in dividend income per year. At a 4% dividend yield, that would mean we need to build a dividend portfolio worth $1.5M. Our plan is to hit this target in 2025 or earlier.
That’s our plan and we all know plan can change. But having a plan and reviewing our plan is better than no plans at all right?
Just like the past number of months, we stayed at home mostly to help prevent the spread of COVID-19. It’s hard to believe that I have been working from home for over a year already! I feel very grateful and fortunate that I can do my day-to-day job at home without heading to the office. I am eternally grateful for all the health and essential workers and their hard work throughout this global pandemic. I can’t imagine a world without them.
With sunnier weather in April, we were busy working in our backyard garden. We expanded our backyard garden this year to allow for more plants. A bigger backyard garden meant the need for more soil, so Mrs. T ordered eight yards of manure and the two of us (mostly me) were busy shoveling manure throughout the month.
Here are some pictures from the backyard garden. Based on experience from previous years, the backyard garden will be very green in the summer.
We are very excited about this year’s harvest. It would be really cool if we can live off our garden’s production for a few months.
Dividend Income – April 2021
Back to the main topic of this post – dividend income. In April 2021 we received pay cheques from the following companies:
- Algonquin Power & Utilities (AQN.TO)
- BCE Inc (BCE.TO)
- Bank of Nova Scotia (BNS.TO)
- CIBC (CM.TO)
- Canadian Natural Resources (CNQ.TO)
- Capital Power Corp (CPX.TO)
- Dream Office REIT (D.UN)
- Dream Industrial REIT (DIR.UN)
- European Residential REIT (ERE.UN)
- Granite REIT (GRT.UN)
- H&R REIT (HR.UN)
- Coca-Cola (KO)
- Rogers (RCI.B)
- RioCan REIT (REI.UN)
- SmartCentres REIT (SRU.UN)
- Telus (T.TO)
- TD (TD.TO)
- TC Energy Corp (TRP.TO)
- Wal-Mart (WMT)
In total, 19 pay cheques added up to $3,052.04. We almost beat our all-time monthly dividend income record! Hopefully in another quarter (July), we can receive over $3,100 in dividend income.
Out of the $3,052.04 received, $227.51 was in USD and $2,824.53 was in CAD. Please note, to keep things simple, we do not convert USD to CAD when reporting our monthly dividend income. I have been using this approach to avoid fluctuations in our monthly dividend income due to changes in the exchange rate.
The top five dividend payers were Algonquin Power & Utilities, TC Energy, TD, CIBC, and Bank of Nova Scotia (not in order). These top five dividend payouts accounted for $2,079.3 or 68.1% of our April dividend income.
Compare to April 2020, we saw a YoY growth of 19.84%. It’s not quite the +20% YoY growth that I’m aiming for but it’s still pretty decent.
As our dividend income gets bigger, we start running into the law of big numbers. It will require larger and larger sums of money to sustain a +20% YoY growth. For example, getting a 20% YoY growth for $100 dividend income will only require an additional $500 at a 4% dividend yield ($20 extra at 4% dividend yield). But getting a 20% YoY growth for $30,000 dividend income will require $150,000 in new capital at a 4% dividend yield.
So as your dividend income gets bigger, it gets harder and hard to sustain the large YoY growth rate.
Last month, we deployed over $20,000 to purchase dividend paying stocks and ETF. Not surprisingly, April was a much quieter month when it came to dividend transactions.
In April we purchased 51 shares of TC Energy (TRP.TO) and added $177.48 toward our forward looking dividend income.
We plan to continue to purchase more dividend paying stocks in May. With the market going higher and higher, it is getting harder to find attractive stocks to purchase. Here are some stocks we are keeping a close eye on:
- Algonquin Power & Utilities (AQN.TO)
- Telus (T.TO)
- Pepsi (PEP)
- TC Energy (TRP.TO)
- Enbridge (ENB.TO)
I am debating whether it makes sense to close out our positions in Canadian Tire and Saputo and invest the money elsewhere. I am also considering getting rid of shares of underperforming REITs like Dream Office REIT and H&R REIT, then focus on retail and apartment REITs.
I guess I will have to do some analysis and go through some quarterly reports to decide our moves.
Dividend Reinvestment Plan (DRIP)
For the most part, we try to avoid touching our divided portfolio too much. Once we purchase a stock, we try to buy more shares so we are eligible to reinvestment dividends. Once that happens, we’d enroll in DRIP and put that investment on autopilot.
DRIP allows us to add more shares and dollar cost average our cost basis. Furthermore, dripping additional shares allows us to increase our dividend income.
In April we were able to drip the following shares:
- 8 shares of AQN.TO
- 2 shares of BCE.TO
- 5 shares of BNS.TO
- 1 share of CNR.TO
- 1 share of CPX.TO
- 1 share of D.UN
- 1 share of ERE.UN
- 2 shares of HR.UN
- 1 share of KT
- 1 share of RCI.B
- 2 shares of REI.UN
- 2 shares of SRU.UN
- 5 shares of T.TO
- 5 shares of TD.TO
- 2 shares of TRP.TO
We managed to drip 39 additional shares in April and increased our annual dividend income by $76.74.
Due to the recent run up of Canadian banks, the dividends received from CIBC weren’t enough to drip any additional shares (we hold CIBC across different accounts). This is unfortunate but at the same time, this is OK. Dripping allows us to dollar cost average over time. When the stock price is low, we can drip additional share(s); when the stock price is high, we stop dripping share(s) to avoid buying shares at an inflated share price.
In April, the following companies announced dividend increases:
- Procter & Gamble (PG) increased its dividend payout by 10% to $0.8698 per share.
- Costco (COST) increased its dividend payout by 12.8% to $0.79 per share.
- Johnson & Johnson (JNJ) increased its dividend payout by 5% to $1.06 per share.
- Apple (APPL) increased its dividend payout by 7% to $0.22 per share.
These raises increased our forward dividend income by $65.27. It’s not a big amount but I will take a raise over no raise any time. At a 4% dividend yield, that’s like adding $1,631.75 new capital.
So far in 2021 we have received a total of $10,341.71 in dividend income. This means we have already exceeded our annual dividend income in 2015. It’s pretty neat to look at our dividend income progress over the years.
We certainly have come a long way since 2011! Our dividend goal for 2021 is to receive over $32,000 in dividend income. If we can do that, it’d mean in ten years our dividend income would have increased by a a whopping 4,639%!!!
To put our dividend income in perspective…
- Our dividend income produced $3.59 per hour after four months in 2021.
- Assuming I work at 40-hour work week, our dividend income would be equivalent of earning $14.36 per hour.
So what does that means? First, it means when we go to bed at night and have an eight hour sleep, our dividend income would generate $28.72 for us, enough to buy a few cups of fancy Starbucks coffee.
It also means that our dividend portfolio is generating almost enough income to match BC’s minimum wage of $15.20 per hour. But we are probably getting more money after tax overall since some of the dividend income is tax-free from TFSA and tax-deferred from RRSP.
Dear readers, how was your April dividend income?