Dividend Income – Feb 2019 Update

February has been an interesting month when it comes to weather. Shortly after coming back from summer-like weather in Taiwan, Metro Vancouver got hit by a cold snap. It wasn’t as cold as the one the Mid-West and Eastern North America encountered in January, but at -10 degrees Celsius, that’s pretty cold in Metro Vancouver standards (The Winnipeggers are calling us wimps lol!). We also got good dumps of snow over multiple days. Because of the snow, schools were closed for a few days and Baby T1.0 and Baby T2.0 enjoyed sleighing down the neighbourhood hills and being pulled on the sleigh in our backyard.

It was a little bit of a shame that we got this much snow in February as some flowers were already coming out from the ground. We’ll have to wait and see what happens to these flowers after all the snow melts.

Dividend Income

In February we received pay cheques from the following companies:

• Apple (APPL)
• AbbView (ABV)
• Bank of Montreal (BMO.TO)
• Costco (COST)
• Dream Office REIT (D.UN)
• Dream Industrial REIT (DIR.UN)
• Dream Global (DRG.UN)
• Emera (EMA.TO)
• General Mills (GIS)
• H&R REIT (HR.UN)
• Inter Pipeline (IPL.TO)
• KEG Income Trust (KEG.UN)
• Laurentian Bank (LB.TO)
• National Bank (NA.TO)
• Omega Healthcare (OHI)
• Procter & Gamble (PG)
• Prairiesky Royalty (PSK.TO)
• RioCan REIT (REI.UN)
• Royal Bank (RY.TO)
• Starbucks (SBUX)
• SmartCentres REIT (SRU.UN)
• AT&T (T)
• Vodafone (VOD)
• Verizon (VZ)

In total, we received 24 pay cheques that added up to $1,695.76. That’s two straight months in 2019 that we have received over $1,600 dividend income month, woohoo!

Out of the $1,695.76 received, $397.10 was in USD and the rest, $1,298.66 was in CAD, or about a 25-75 split. February is typically one of the months that we receive more dividends in USD currency. Please note, we use a 1 to 1 currency rate approach. We do not convert dividends received in USD to CAD. We are ignoring the exchange rate to keep the math simple. This is our way to avoid fluctuations in dividend income over time due to changes in the exchange rate.

The top 5 dividend payouts in February 2019 came from Bank of Montreal, Emera, National Bank, Royal Bank, and Inter Pipeline (not in order). Dividend payout from these 5 companies accounted for $976.36 or 57.6% of our Feb dividend income total.

Dividend Breakdown

We hold our dividend portfolio across 3 different types of accounts – TFSA, RRSP, and regular. Each year, we maximize our TFSA and RRSP contribution rooms before contributing to our regular accounts. We do this to be as tax efficient as possible as we plan to rely on dividend income from our TFSAs and RRSPs to fuel most of our expenses when we are financially independent and pay almost $0 in income tax.

For Feb 2019, here’s the breakdown of the different accounts:

• TFSA: $542.08 or 32%
• RRSP: $731.41 or 43.2%
• Regular: $422.27 or 24.9%

Effectively, only 24.9% of our Feb dividend income was taxable (we are planning to make withdrawals from RRSP in 2019). All of the $422.27 received in our regular accounts are considered as eligible dividends, so we’d get favourable dividend tax credits when we file our 2019 income tax.

• The Millennial’s Ultimate TFSA Guide
• The Millennial’s Ultimate RRSP guide

Dividend Growth

Compared to Feb 2018 we saw a very impressive 25.4% YoY growth!!! I’m extremely pleased to see the month YoY growth to be above 20%. This only motivates us to continue to add fresh capital to our portfolio and continue to buy solid dividend paying stocks.

Dividend Increases

February was a fabulous month when it comes to dividend increases as the following stocks in our dividend portfolio announced dividend payout increase:

• Suncor raised its dividend by 17% to $0.42 per share.
• Intact Financial raised its dividend by 9% to $0.76 per share.
• BCE raised its dividend by 5% to 0.7925 per share.
• TransCanada Corp raised its dividend by 8.7% to $0.75 per share.
• Royal Bank raised its dividend by 4% to $1.02 per share.
• Magna International raised its dividend by 11% to $0.365 per share.
• Bank of Nova Scotia raised its dividend by 2.4% to $0.87 per share.
• Waste Management raised its dividend by 10.22% to $0.5125 per share.
• Coca Cola raised its dividend by 2.56% to $0.40 per share.
• Walmart raised its dividend by 1.92% to $0.53 per share.
• TD raised its dividend by 10.4% to $0.74 per share.
• CIBC raised its dividend by 2.94% to $1.40 per share.

All these raises increased our forward annual dividend income by $363.04. Think this is a small number? Think again. At 4% yield, if we were to generate the same amount of dividends, we would need to invest $9,076 of fresh capital. Instead, we are getting a free raise without doing anything. It also means when we do invest $9,076 worth of fresh capital, we’d be generating an additional $363.04. If you do not realize how powerful organic dividend growth is, I’d recommend re-reading this paragraph again and let it sink in.

Dividend Stock Transactions

In February we kept busy by adding more shares to our existing positions. We added the following stocks:

• 150 shares of Inter Pipeline (IPL.TO)
• 24 shares of Canadian Tire (CTC.A)

According to IPL’s Q4 results, the balance sheet remains decent, EBITA is stable/increasing, and the cash flows are stable. I plan to continue buying IPL if the price remains at below $21 on the following rationales:

1. The crude throughput volume should increase next year when IPL’s capacity increase.
2. IPL’s petrochemical project will grow its revenues

The near 8% dividend yield is pretty enticing as well, and I believe IPL’s dividends are safe despite the payout ratio being over 100%.

As you may recall, we purchased many Enbridge shares last year when the price was in the low $40 range. Since then, Enbridge share price has recovered. I am hoping that IPL share price will do the same.

For Canadian Tire, I saw a good buying opportunity when the stock price dropped after their Q4 results announcement. Although Canadian Tire had a solid quarter, investors were disappointed by the poor same-store sale performance. If I look at beyond the Q4 results, I beliew solid growth will continue from Canadian Tire as the company’s EPS has grown by 13.8% CAGR in the last 3 years. Not to mention that Canadian Tire’s latest dividend increase was more than 15% and it has increased its dividend for eight straight years.

In recent years, Canadian Tire has faced fierce competition from the likes of Walmart and Costco and online stores like Amazon. The competition will continue. To levitate the competition pressures, Canadian Tire has been branching out their retail businesses and growing their financial services and REIT businesses. These include the likes of PartSource, Petroleum, SportChek, Mark’s Helly Hansen, CT REIT, and financial services. I’m counting on Canadian Tire’s presence in the retail, finance, and real estate businesses to help continue to grow the company’s revenues and its dividends.

Our position in Canadian Tire remain to be a small fraction of our overall portfolio. The purchase was not only taking advantage of the solid buying opportunity, but to diversify a little bit in the consumer discretionary sector.

These two purchases of Inter Pipeline and Canadian Tire added $185.10 toward our annual dividend income.

Summary

Two months into 2019, we have received $3,305.17 in dividend income. It’s a bit crazy to consider that we have already exceeded the total dividend that we received for the entire year of 2012 ($2,483.37) and over half of the annual dividend amount of 2013 ($5,456.20). Our hard work of saving money and investing money each month is paying off and our efforts are starting to compound itself.

At $40 per hour or $83,200 annually, that means we have already saved ourselves 82.6 hours of work. This is equivalent of 2 weeks worth of work. Pretty awesome if you ask me!

We also added $548.14 toward our annual dividend income from both organic dividend growth and purchases of additional dividend-paying stocks. All in all, February 2019 was an excellent month for us.

Dear readers, how was your February dividend income?