Happy new year everyone! I hope everyone enjoyed their holidays and celebrated by staying at home with their household members. And I hope everyone stayed safe and healthy during the holiday season. 2020 was a year not like any other. Who knew at the beginning of 2020 that we’d be forced to stay home for an extended period due to a global pandemic? What a weird and crazy year we had, right?
Looking ahead, I am optimistic about what 2021 has to offer. While the pandemic isn’t going away anytime soon, the availability of vaccines means we are starting to see the light at the end of the tunnel. I am hopeful that things will start getting under control and this awful virus will impact fewer people. I am also hopeful that soon we will be able to hug each other, socialize inside like before, and travel internationally again.
For Christmas, Baby T1.0 got a huge Land Rover Lego set (39th biggest Lego set available) from Mrs. T, myself, and my parents. Because it’s a very complicated Lego set, Mrs. T and I supervised throughout the build to make sure Baby T1.0 installed all the pieces correctly. Baby T1.0 did very well and built the entire set by himself.
Needless to say, I was very impressed by the inner-works of the car.
In December 2020, we received dividends from the following companies:
- Brookfield Renewable (BEP.UN and BEPC)
- Brookfield Property Partners (BPY)
- Canadian National Railway (CNR.TO)
- Costco (COST)
- Canadian Tire (CTC.A)
- Canadian Utilities (CU.TO)
- Dream Office REIT (D.UN)
- Dream Industrial REIT (DIR.UN)
- Enbridge (ENB.TO)
- European Residential REIT (ERE.UN)
- Fortis (FTS.TO)
- Granite REIT (GRT.UN)
- Hydro One (H.TO)
- H&R REIT (HR.UN)
- 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)
- Metro (MRU.TO)
- Qualcomm (QCOM)
- RioCan REIT (REI.UN)
- SmartCentre REIT (SRU.UN)
- Suncor (SU.TO)
- Target (TGT)
- Visa (V)
- Waste Management (WM)
Phew what a list! In total we received 30 dividend cheques that added up to $2,769.68, which was an all-time high. What a great way to end the year.
Of the $2,769.68 dividends received, $786.38 was in USD and $1983.30 was in CAD, or about a 30-70 split. The USD dividend income was higher than usual because of the special dividends from Costco. Please note, we did not convert USD to CAD when reporting our dividend income. Instead, we used a 1 to 1 currency rate approach. Why? Because we wanted to avoid fluctuations in dividend income over time because of changes in the exchange rate.
The top five dividend payouts came from Enbridge, Brookfield Renewable, Canadian Utilities, Manulife, and Costco (not in order). These payouts accounted for $1,671.10 or 60.3% of our December dividend income.
Compared to December 2019, we saw a YoY dividend growth of 32.38%. This was the second highest YoY dividend growth for 2020. Our $115k dividend stock purchases throughout 2020 certainly have helped to boost our December dividend income.
If we compare the annual dividend income between 2020 and 2019, we saw a 17.03% YoY dividend increase. It was nice to see a number of above 15% but I was really aiming for higher than 20% YoY growth for 2020. However, considering the challenges aka all the dividend cuts and dividend suspensions, I think we did very well at an annual YoY dividend growth rate of 17.04%.
Hopefully, for 2021 we can achieve a YoY growth of above 20%.
We didn’t make any dividend stock transactions in December because we were busy saving cash for the upcoming TFSA contributions. With the new TFSA contribution room of $6,000 per person, we will have $12,000 available to purchase some Canadian dividend-paying stocks.
Some stocks we are considering are:
- Brookfield Renewable Corp
- Capital Power Corp
- Canadian National Railway
- Granite REIT
- Dream Industrial REIT
- European Residential REIT
- SmartCentres REIT
- RioCan REIT
Mrs. T and I think renewable energy is the future, so we want to continue investing in this sector. Capital Power Corp looks interesting and if we decide to purchase some shares, it would be initiating a new position for us. Both Canadian National Railway and Telus have wide moats and should continue to generate solid revenues. Although the dividend yield is low, I have come to really like the consistent dividend growth from Canadian National Railway.
Some readers might wonder why we are considering adding more REITs, considering we are still in a global pandemic. Well, I like industrial REITs because online retailers like Amazon and Wayfair will always need warehouses to store their merchandise. Other companies like automobile manufacturers, automobile part suppliers, building material suppliers, brewers, etc will also need warehouses to store their products. I like Granite and Dream Industrial because they are both geographically diversified – having properties in Canada, the US, England, Poland, the Netherlands, Germany, and other European countries.
Since people need a place to live, I like European Residential REIT for residential apartment exposure. Since we only have a small position in ERE.UN, I’d like to increase our exposure a little bit.
I am having a tough time determining whether it makes sense to add more retail REITs or not. Throughout 2020, the retail REITs have suffered significantly due to all the different lockdowns. Online shopping has become more and more of a norm. However, I think retail shopping will come back we inoculate more people. There are certain items that people prefer to see and feel before purchasing. Some people also prefer “offline” shopping so they can get the products right away rather than having to wait for a few days. One thing that people miss a lot during the COVID-19 stay-home-orders and lockdowns is social interaction. Many people get their social interactions by meeting and socializing in shopping malls. So this is another thing to keep in mind for the retail sector recovery. Having said all that, RioCan did reduce its dividend payout by 33% so there’s definitely a risk that other retail REITs like SmartCentre can follow this trend. As a long term dividend investor, I’d rather a company to reduce its dividend payouts to ensure long term company profitability and dividend sustainability than racking up debt in order to pay for dividends. However, I did not like the fact that the RioCan CEO was telling investors that they wouldn’t cut dividends for many months and ended up cutting dividends. There’s some trust issues here IMO.
I am convinced how we work will change permanently. I think many companies will be open to employees working remotely regularly, some employees may even work remotely permanently. This will have a long-lasting effect on the office REIT space. Since we hold two REITs in the office space sector, Dream Office and H&R, we may have to reconsider the future of these REITs.
In December, the following companies announced dividend increases:
- Enbridge (ENB.TO) increased its dividend payout by 3% to $0.834 per share.
- Waste Management (WM) increased its dividend payout by 5.5% to $0.575 per share.
These dividend increases added $124.94 toward our forward-looking dividend income.
I remain hopefully optimistic that we will see more dividend increase announcements throughout 2021.
2020 Dividend Income Review
In 2020 we received a total of $26,975.01 in dividend income. At the beginning of the year, I set out a very ambitious goal of receiving $30,000 in dividend income. We didn’t accomplish this goal, mostly because of all the dividend cuts and suspensions caused by the COVID-19 global pandemic. Since I am not a fortune teller, I was not able to predict the global pandemic and the economic impacts it would cause. If there were no pandemic, we probably could have hit the $30k goal. But it would mean dividends from some holdings were not very sustainable and were at high risk. 2020 was not like any other year. After seeing our portfolio value went down by close to $250k, several dividend reductions, and purchasing close to $115k worth of dividend paying stocks, I have learned many lessons that could help me grow as an investor.
In case you’re wondering which stocks that we purchased in 2020 are:
- 378 shares of AQN.TO
- 100 shares of BEP
- 57 shares of BMO.TO
- 102 shares of BNS.TO
- 393 shares of BPY
- 116 shares of CM.TO
- 12 shares of CNR.TO
- 43 shares of CU.TO
- 374 shares of ENB.TO
- 450 shares of ERE.UN
- 27 shares of GRT.UN
- 453 shares of IPL.TO
- 50 shares of NA.TO
- 20 shares of PEP
- 26 shares of RY.TO
- 121 shares of SRU.TO
- 118 shares pf SU.TO
- 320 shares of TD.TO
- 16 shares of VCN
- 612 shares of XAW
All these purchased added around $6,000 toward our annual dividend income.
2020 Dividend Breakdown
Every year we try to maximize our TFSA and RRSP contribution rooms. Once we maxed out TFSA and RRSP, we then contribute money to our taxable accounts. We utilize TFSA and RRSP to minimize the amount of income tax on dividends received. For taxable accounts, we only invest in stocks that distribute eligible dividends so we can get the highest amount of dividend tax credits.
In 2020 we received $26,977.23 in dividends across the different accounts per below:
- TFSA: $8,530.34 or 31.6%
- RRSP: $10,498.5 or 38.9%
- Taxable: $7,946.17 or 29.5%
By using TFSA and RRSP, only 29.5% of our 2020 dividend income is taxable. One thing to keep in mind is we invest money in both my and Mrs. T’s taxable account. So, our taxable dividend income is roughly 60-40 split between me and Mrs. T.
Ideally, our goal is to have 50-50 income split between the two of us across the three different accounts when we are financially independent and living off dividend. But this may not be possible since we are a single income family household (for now) and Mrs. T didn’t become a Canadian citizen until 2011, so she has $10,000 less in TFSA contribution room than me.
In 2020 we split our dividend income on a 63-37 basis. Meaning 63% of dividend income came from my accounts. In case you’re wondering, the breakdown is per below.
With the 50-50 income split idea in mind, one thing we started doing in the last few years is to stop contributing to my self-directed RRSP and contribute to Mrs. T’s spousal RRSP (I still contribute to my work’s RRSP since work matches part of the contribution. Can’t say no to free money). Hopefully, we’ll see a more evenly distribution of dividend income in our RRSP accounts in the future.
Financial Independence Progress
The COVID-19 pandemic forced us to stay home for most of 2020. We didn’t travel or dine out as much as previous years. We did spend more on groceries and charitable donations but overall, we spent less money in 2020.
Our annual dividend income of $26,975.01 covered 55.15% of our total 2020 expenses. Note, this does not include any business expenses since Mrs. T has her holistic doula & energy healing business and I have a few side businesses like my wedding and portrait photography business and this blog. If we look at our necessities spending only, our dividend income covered 80.49% of our necessities spending. Living off dividends one day is definitely possible. We are getting closer and closer to making this dream a reality.
Mrs. T and I are both very grateful for our dividend portfolio. Thanks to our dividend portfolio, it generates money for us passively and works hard for us so we don’t have to. To put things in perspective, $26,975.01 in dividend income meant…
- $3.07 per hour we’re earning regardless of what we are doing.
- $12.97 per hour of working wage. In comparison, BC’s minimum wage is $14.60 per hour. Since only 29.5% of our dividend income is taxed at our marginal tax rate, I am guessing we probably earn more after-tax income compared to if we were to work at a minimum wage job.
- At $40 per hour, our dividend income saved us 16.9 weeks of work. This means we didn’t have to work until April 17, 2020.
We are very fortunate that my job is secure and we are doing well financially despite what had happened in 2020. This is why we are doing whatever we can to help others in need by donating to charities. This is also why we sponsored a family for Christmas and gave more than we’d have otherwise in other years. At the same time, we are trying to support local businesses as much as possible. I hope that we will come out of the pandemic is with a better society. But I can’t do it alone. Therefore, I sincerely hope you can do the same in your community.
Here’s to a wonderful 2021!
Dear readers, how was your December dividend income?