It’s time for one of my favourite topics to write – monthly dividend income update!
For those of you that are new, we became very focused on dividend growth investing strategy in 2011 after reading The Lazy Investor by Derek Forester and The Single Best Investment: Creating Wealth with Dividend Growth by Lowell Miller. Inspired by these two books, we started moving our money from GICs and mutual funds into dividend paying stocks and eventually index ETFs. Since then, we have built up a 7 figure dividend portfolio, producing an average of $4,000 in dividend income each month.
I enjoy writing and posting these monthly updates because it allows me to demonstrate that it is possible to build up a sizable dividend portfolio and eventually live off dividends.
It’s time for Plutus Awards Nomination again. Last year this blog won Best Canadian Personal Finance Content. For this year, I’d really appreciate it if you can nominate this blog for the following categories:
- Best Financial Independence or Retire Early Content
- Best Investing Content
- Content Creator of the Year- Written
You can nominate this blog here.
As usual, before getting into our April 2023 dividend income update, a quick life update.
April was a strange month weather wise. It was really wet and cold for most of the month in the Lower Mainland then the weather quickly warmed up and we had a fabulous last week of April with temperatures in the high teens or above 20 degrees Celsius.
In early April we had a tea party birthday celebration for Kid 2.0. Mrs. T made a bunch really nice treats. While the kids enjoyed the treats, I think the adults, myself included, enjoyed the treats more than the kids.
I attempted in making my very first birthday cake, a Swedish Black Forest Cake, by following a recipe book from Ikea. I had to get Mrs. T to help me with tempering the chocolate since that was her field of expertise. Overall the cake was a success and everyone raved about it, despite how sticky it was to cut the cake.
For Easter, Mrs. T made some delicious and nicely decorated Easter eggs.
We kept both kids engaged in the Easter egg making process by having them paint their own eggs.
When the weather was better, we spent a lot of time in our garden, weeding, planting, and getting it in tip-top shape.
Last year we moved the rhubarb plants and they have been growing extremely well.
In fact, the rhubarb plants are growing so well that we had a few harvests already.
We took out a lot of dirt from the greenhouse and shovelled about 7 or 8 wheelbarrows of manure last month. Mrs. T will be planting some tomato, cucumber, pepper and basil plants in the greenhouse in late May.
We are all very excited that the weather is finally warmer so we can spend more time in our backyard and enjoy the sun. Mrs. T and I are excited to sit in the garden and have our daily afternoon coffee hygge.
Dividend Income – April 2023
Back to dividend income.
In April 2023 we received dividends from the following companies:
- Algonquin Power & Utilities (AQN.TO)
- BCE Inc (BEC.TO)
- Bank of Nova Scotia (BNS.TO)
- CIBC (CM.TO)
- Canadian Natural Resources (CNQ.TO)
- Capital Power Corp (CPX.TO)
- Dream Industrial REIT (DIR.UN)
- Granite REIT (GRT.UN)
- Coca-Cola (KO)
- RioCan REIT (REI.UN)
- SmartCentres REIT (SRU.UN)
- Telus (T.TO)
- TD (TD.TO)
- TC Energy Corp (TRP.TO)
- VICI Properties (VICI)
- Wal-Mart (WMT)
These 16 dividend paycheques added to $5,343.33. This is a new monthly dividend income record! It’s pretty amazing to break the $5,200 dividend income records considering we were so close back in January ($5,193.45). Furthermore, it’s pretty cool to know that we also broke the $5,300 monthly dividend income as well.
Compare to April 2022, we saw a YoY increase of 24.74%. After last month’s low YoY growth of 10.69%, it was nice to get back to above a 20% growth rate. After four months, we have averaged a YoY growth rate of 19.5%. Considering our goal of $49,000 in dividends for 2023, this means we need to have over 15.8% YoY growth rate to achieve this goal. We will continue to add more shares throughout the year to sustain a YoY growth above 15.8%.
Out of the $5,343.33 received, $299.61 was in USD and $5,043.72 was in CAD. Please note, we do not convert USD to CAD when reporting our dividend income. This is our attempt to keep the math easy and avoid fluctuations in our monthly dividend income due to the constantly changing exchange rate.
However, I am beginning to wonder if it makes sense to convert USD to CAD to provide a more accurate dividend income. Let me know what you think.
The top five dividend payers in April were BCE, Bank of Nova Scotia, CIBC, TD, and TC Energy Corp (not in order). The total from these five payers was $3,717.36 or 69.6% of our April dividend income.
In April a few companies that we hold in our dividend portfolio raised dividend payout.
- Procter & Gamble (PG) increased its dividend payout by 3% to $0.9407 per share.
- Johnson & Johnson (JNJ) increased its dividend payout by 5.3% to $1.19 per share.
- Costco (COST) increased its dividend payout by 13.3% to $1.02 per share.
These three dividend hikes increased our forward annual dividend income by $55.18. It’s not a lot of money but a raise is better than no raise at all.
Dividend Reinvest Plan (DRIP)
Whenever we invest in a company, the goal is to one day accumulate enough shares to enroll in DRIP. Once enrolled in DRIP, we slowly accumulate additional shares over time and dollar cost average. Dripping allows us to put some of our holdings on auto-pilot.
In April we dripped the following shares:
- 31 shares of Algonquin Power & Utilities (AQN.TO)
- 1 share of Brookfield Asset Management (BAM.TO)
- 10 shares of BCE (BCE.TO)
- 10 shares of Bank of Nova Scotia (BNS.TO)
- 12 shares of CIBC (CM.TO)
- 1 share of Canadian Natural Resources (CNQ.TO)
- 2 shares of Capital Power Corp (CPX.TO)
- 1 share of Coca-Cola (KO)
- 2 shares of RioCan REIT (REI.UN)
- 5 shares of SmartCentres REIT (SRU.UN)
- 13 shares of Telus (T.TO)
- 11 shares of TC Energy Corp (TRP.TO)
- 2 shares of VICI Properties (VICI)
In total, $4,525.79 was reinvested right away and we added 111 more shares toward our dividend portfolio thanks to DRIP.
To be honest, I was pretty shocked to see that we dripped 111 shares! I did not expect to drip this many shares. Dripping as many shares when the market is volatile is a great way to take advantage of dollar cost averaging.
These 111 shares added $257.62 toward our annual dividend income.
Continuing with the usual heavy purchase during the first half of the year theme, we added 70 more shares of BCE.TO. Given how addicted Canadians are to data and media content, we believe BCE will continue to do well in the foreseeable future. Let’s not forget BCE, along with Rogers and Telus basically have a monopoly on telecommunication (and internet provider space to some extent) here in Canada. I don’t see that changing anytime soon.
Adding 70 shares of BCE.TO increased our forward annual dividend income by $326.08.
Stock Considerations & Future Outlook
For months, I have considered closing out both Omega Healthcare and Verizon positions. Considering the high yield and the limited stock price growth, both can be considered value traps.
The +7% dividend yield for both companies appears to be safe and sustainable. However, since we care about both dividend income and capital appreciation (i.e. total return), it makes sense to close out these two positions and reinvest the money in other companies that can provide a higher total return.
Just a side note, we purchased Omega Healthcare and Verizon many years ago, definitely before I was a more seasoned dividend investor and became more focused on total return rather than just looking at dividend yields. Focus on total return is an important lesson I’ve learned as a DIY investor.
One of the stocks I am considering adding is Microsoft. Like Apple, Microsoft is a giant in the tech industry with a wide moat. A lot of Microsoft’s revenues came from re-occurring revenues – Azure and Microsoft 365 are two key sources with extremely high operating margins.
As you can see from the income statement above, Azure alone made $22.1B for Microsoft in the latest quarterly report with a 43% operating margin. Any investors should be salivating over this kind of profit margin.
The one downside of owning Microsoft is that it is trading at a very PE ratio (over 30) but the stock has returned over 200% in the last five years. Some investors may overlook Microsoft due to the <1% low yield. However Microsoft has increased its dividend payout for 21 years and has a 10 year dividend growth rate of 11.70%, so it is definitely a stock that rewards long term investors.
A couple of other stocks to consider investing in, if we do close out Omega Healthcare and Verizon, are Apple and Costco.
I wrote about some of the reasons I liked Apple in the recent top 5 long term holdings post. Since that post, Apple started offering a new high-yield savings account in the US which I believe is another game changer for Apple.
In the last few years, Apple is slowly turning itself into a FinTech company, offering financial services like Apple Pay, Apple Pay Later, Apple Wallet, Apple Card, and now Apple Savings. All of these services are wrapped around Apple Wallet with the long term goal to replace your physical wallet one day.
Why do I think Apple Savings is a game changer? Because once users are relying on Apple Wallet and these financial services, it becomes increasingly difficult for them to switch to something else.
Essentially, the Apple ecosystem becomes so essential to your day-to-day life, you can’t go anywhere without Apple. So you have to stick with Apple products, continue getting upgrades, and help Apple make more revenues.
According to a couple of sources, Apple’s new savings account drew nearly $400 million in deposits on the first day of launch then as much as $990 million in deposits over the first four days! That is Apple’s brand power at work! Imagine how much money Apple can generate if they can enable this new savings account globally.
The Apple wide moat keeps getting wider and wider as the Apple ecosystem becomes more entrenched in people’s daily routines. As a shareholder, I love this! Let’s not forget how much money Apple continues to earn each quarter…
Another stock I’m considering adding more is Costco. It’s a well-known fact that Costo makes most of its profits from membership fees. Unlike typical retailers like Walmart, Target, and Loblaws, Costco makes low margins from its merchandise. Per the latest quarterly report, in 12 weeks that ended Feb 12, 2023, Costco generated $1.027 billion worth of revenues from membership fees. That was an increase of $60 million or 6.2% compared to the same period in 2022.
According to Costco’s 2022 annual report, the membership renewal rate was 93% in the US and Canada and 90% worldwide at the end of 2022.
Talk about amazing re-occurring revenue!
We already have a sizable Costco holding but we sure wouldn’t mind adding more Costco shares.
Dividend Score Card – April 2023
I started doing a dividend scorecard last month because it’s a great way to summarize the monthly dividend income and dividends added from the various sources in one table.
Here’s our dividend scorecard from April 2023.
If I have to give ourselves a scorecard, I’d definitely give us an A+ for having a record dividend income month.
Dividend Income – April 2023 Summary
After four months of the year, we have received a total of $17,265.15. We have not only exceeded the total dividend income for 2017 but are on the verge of exceeding the 2018 total as well. We are extremely thankful and grateful that our dividend portfolio is working hard for us and generating money every day so we don’t have to.
To put things in perspective, our dividend income is equivalent of:
- $143.88 per day or $5.99 per hour which our dividend portfolio is generating for us.
- After 17 working weeks, our dividend portfolio is generating $25.39 per hour
Our dividend portfolio is generating enough money each month to be considered as a serious side income. Best of all, we don’t have to do much work with this side income. Gotta love that.
Our April dividend income was excellent… how was your April dividend income?