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)
Dream Office REIT (D.UN)
Dream Global REIT (DRG.UN)
Dream Industrial REIT (DIR.UN)
Evertz Technologies (ET.TO)
H&R REIT (HR.UN)
High Liner Foods (HLF.TO)
Intact Financial (IFC.TO)
Inter Pipeline (IPL.TO)
Johnson & Johnson (JNJ)
KEG Income Trust (KEG.UN)
Manulife Financial (MFC.TO)
Magna International (MG.TO)
Prairiesky Royalty (PSK.TO)
Royal Dutch Shell (RDS.B)
RioCan REIT (REI.UN)
Unilever plc (UL)
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?