It’s the beginning of the month and that means it’s my favourite time of the month – it’s time for the monthly dividend income update! For those of you who are new here, I am doing these monthly updates to keep us honest and demonstrate that it is possible to build up a sizable dividend portfolio so it generates sufficient dividend income to cover our expenses. When our dividend income and other passive income exceeds our annual expenses, we can call ourselves financially independent. Simple right?
Other than the occasional dividend stock purchases, for the most part, we don’t really keep too much attention to our portfolio value. We usually review the portfolio value every quarter when we do a net worth update. The stock market has been on an upward tick since January, so our portfolio value has grown quite a bit when we checked at beginning of April.
Thanks to a bit nicer weather, we have been busy doing yard works. Mrs. T has stated planting various vegetables in our backyard vegetable garden. We have also been sprouting new plants in our new indoor grow light garden as well. We are very much looking forward to harvesting time later in the summer. It is our goal to be more self-sustainable during the summer by eating produce from our garden.
In April, we received dividend income from the following companies:
- BCE (BCE.TO)
- Bank of Nova Scotia (BNS.TO)
- CIBC (CM.TO)
- Canadian Natural Resources (CNQ.TO)
- Dream Office REIT (D.UN)
- Dream Industrial REIT (DIR.UN)
- Dream Global (DGR.UN)
- H&R REIT (HR.UN)
- Inter Pipeline (IPL.TO)
- KEG Income Trust (KEG.UN)
- Coca-Cola (KO)
- Nurien Ltd (NTR.TO)
- Prariesky Royalty (PSK.TO)
- Rogers (RCI.B)
- RioCan REIT (REI.UN)
- SmartCenteres REIT (SRU.UN)
- Telus (T.TO)
- TD (TD.TO)
- TransCanada Corp (TRP.TO)
- Domtar Corp (UFS.TO)
- Vanguard Can All Cap ETF (VCN.TO)
- Ventas (VTR)
- Wal-Mart (WMT)
In total, we received 23 pay cheques that added up to $1,914.01. For the second month in a row, we received over $1,900 in dividend income. Nice!
Of the $1,914.01 received, $173.88 was in USD and $1740.13 was in CAD or about a 10/90 split. April was a month when we received majority of our dividend income in CAD 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 April 2019 came from Telus, TD, Bank of Nova Scotia, CIBC, and BCE (not in order). Dividend payout from these 5 companies accounted for $1,146.37 or 59.9% of our April dividend income total.
Tax efficiency is very important to us. Therefore, each year we try to max out our TFSA and RRSP contribution rooms before contributing to our taxable accounts, as I outlined in the recent dividend FAQ. Between TFSA, RRSP, and taxable accounts, we also hold different kinds of dividend stocks – we only purchase US listed dividend paying stocks in our RRSPs; REITs and income trusts in our TFSAs and RRSPs; and Canadian dividend stocks that pay eligible dividends in our taxable accounts. The plan is to pay as close to $0 in income tax when we are financially independent and living off our dividend income.
For April 2019, here’s the breakdown of the different accounts:
- TFSA: $844.13 or 44.1%
- RRSP: $515.02 or 26.9%
- Taxable: $554.86 or 29%
Effectively only 29% of our April dividend income was taxable and the amount is split between Mrs. T and I.
Compared to April 2018, we saw a YoY increase of 23.85%. While this wasn’t as good as the 38.01% that we saw in last month, it was still pretty awesome considering the growth was still above 20%. As mentioned in my previous post, we are starting to face the law of large number, so it is becoming increasingly more and more difficult to sustain a YoY growth rate of more than 15%.
The total dividend income that we received up to April 2018 was $5,679.13. After 4 months in 2019 we have collected $7,207.61. This means we have realized a 26.9% YoY so far. If we were able to keep up such growth rate up for the entire year, we would end up with over $23,500 of annual dividend. It would be nice to collect over $23,000 in dividend income, but we’ll have to wait and see whether we can sustain such a high YoY percentage for the entire year.
In April a few of the stocks that we own announced dividend increases:
- Procter & Gamble raised its quarterly dividend by 4% to $0.7459 per share.
- Johnson & Johnson raised its quarterly dividend by 5.56% to $0.95 per share.
- Apple raised its quarterly dividend by 5.5% to $0.77 per share.
- Unilever raised its quarterly dividend by 6% to €0.4104 per share.
This added $40 toward our annual dividend income. At 4% dividend yield, that meant we saved ourselves from needing to add $1,000 of fresh capital in our dividend portfolio.
Dividend Stock Transactions
In April, we were “relatively” quiet on the dividend stock transaction front compared to March. We only purchased 3 stocks.
- 157 shares of iShares all world ex Canada index ETF (XAW.TO)
- 27 shares of Bank of Nova Scotia (BNS.TO)
- 19 shares of Canadian National Railway (CNR.TO)
These transactions added approximately $220 toward our annual dividend income.
There are a few stocks that are on my radar, but we haven’t pulled the buy trigger yet. These stocks are: Bank of Montreal (BMO.TO), Fortis (FTS.TO), SmartCentres REIT (SRU.UN) and Metro (MRU.TO). I plan to continue monitor these stocks and see if there are buying opportunities.
Financial Independence Journey Progress
The $1,914.01 dividend income received in April was able to cover 28.9% of our total spending in April. The ratio was really low this month and to be honest, it was very disappointing to see such a low dividend to expenses ratio. However, our April expenses was higher than usual for a reason though – we had many planned expenses. Some of these planned expanses included: a regular maintenance for our only car, we purchased a new mattress, a kids-free stayaction, Mrs. T and I attended a weekend marriage course and stayed in Vancouver the entire weekend, we ate out a bit more than usual (visitors, staycation, the weekend course, etc), and we signed the kids up for a few summer camps.
If we look at our necessities spending, the April dividend was able to cover 57.1%. In other words, most of the extra expenses this month were non-necessities.
Given that we like credit welcome points (i.e. travel hacking), we applied new rewards credit cards ahead of time and charged these planned expenses. As a result, we will be getting the welcome bonus points soon. Applying new credit cards and getting welcome bonus points when we anticipate large expenses is exactly how we travel hacked our way to Maui last year and saved ourselves over $10,000.
After 4 months in 2019, we have received $7,207.61 in dividend income. If we use a $40 per hour rate ($83,200 annually), that would mean we have been able to save ourselves almost 180 hours worth of work or an equivalent of over 4 weeks. It’s a really nice feeling to know that our money is working hard for us, so we don’t have to.
For the month of May, we plan to continue to save money and purchase more dividend paying stocks and index ETFs. Hopefully the market will turn volatile, so we can find some buying opportunities to deploy cash on hand.
How was your April dividend income? Did the growth live up to your expectation?