Dividend Income – Jan 2018 Update

Wow, January flew by! I can’t believe it’s already February. Here in Vancouver, January was an exceptional wet month. We had 249.4 millimetres (9.82 inches) of rain, making it the fifth wettest January on record. The previous record was set in January 2006 when 283.6 millimetres (11.2 inches) of rain fell on Vancouver. In case you are wondering, the normal amount for the month of January is 168.4 millimetres (6.63 inches). To put this into perspective, the annual rainfall for Phoenix is 204.22 millimetres (8.04 inches). No wonder there are so many Canadian snowbirds heading down to Phoenix in the winter.

Speaking of rain…here’s a Vancouver joke for you!

Vancouver doesn’t rain a lot…just twice a week. Once for 4 days, another for 3 days

This joke has some truth to it!!!

Fortunately, this kind of record rainfall in the city meant a crazy amount of snow up in the mountains, and I managed to head out to enjoy a fine day of kids-free-skiing.

View this post on Instagram

A post shared by Bob Lai (@tawcan)

Some of my outdoor friends have been enjoying wicked powder in the backcountry.

Looking good!!!

In January and the recent February days, there have been a lot of volatility in the stock market. Many people seem to be freaking out over the record stock market drops. If you are freaking out, please take a deep breath and read this article a couple of times. Once you have done that, you might understand why I tweeted out this on Feb 5th.

https://twitter.com/Tawcan/status/960624540861657088

Moving along…

January Dividend Income

In January 2018 we received dividend income from the following companies:

• Pure Industrial REIT (AAR.UN)
• BCE Inc (BCE.TO)
• Bank of Nova Scotia (BNS.TO)
• Corus Entertainment (CJR.B)
• CIBC (CM.TO)
• Canadian Natural Resources (CNQ.TO)
• Dream Office REIT (D.UN)
• Dream Global REIT (DRG.UN)
• Dream Industrial REIT (DIR.UN)
• Enbridge Income Trust (ENF.TO)
• H&R REIT (HR.UN)
• Inter Pipeline (IPL.TO)
• KEG Income Trust (KEG.UN)
• MCAN Mortgage Corp (MKP.TO)
• Nutrien Ltd (NTR.TO) – from Agrium shares
• Prairiesky Royalty (PSK.TO)
• Rogers (RCI.B)
• RioCan (REI.UN)
• SmartCentres REIT (SRU.UN)
• Telus (T.TO)
• TD (TD.TO)
• TransCanada Corp (TRP.TO)
• Domtar Corp (UFS.TO)
• Vanguard Cana All Cap (VCN)
• Ventas (VTR)
• Vanguard All-World Ex Canada (VXC)
• Wal-Mart (WMT)

We received a total of 27 paycheques in January 2018 that added up to $1,340.83. Talk about having a great start to the year! The highest monthly dividend income so far! Woohoo!

Out of the $1,340.83 received, $84.32 was in USD and $1,256.51 was in CAD. So January was a CAD heavy month when it comes to dividend income.

Please note, we use a 1 to 1 currency rate approach. Therefore, we do not convert dividends received in USD to CAD. We are ignoring 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 January 2018 were Bank of Nova Scotia, CIBC, TD, Telus, and BCE. Dividend payouts from these 5 companies accounted for 54.54% or $731.31 of our January dividend income.

Dividend Income Breakdown

We hold our dividend stocks in taxable accounts, RRSPs, and TFSAs. Every year, we maximize tax-advantaged accounts first before investing in taxable accounts.

We do this so we can be as tax efficient as possible. Why pay extra taxes when we can avoid them by utilizing these tax-advantaged accounts? It seems like a no brainer to me. This is why I am always shocked to hear people who are investing using taxable accounts when they have tons of RRSP and/or TFSA contribution rooms left.

For January 2018 dividend income, here’s the breakdown of the different accounts:

• Taxable: $306.21or 22.84%
• RRSPs: $317.87 or 23.71%
• TFSAs: $716.75 or 53.46%

Effectively, only 22.84% of our January dividend income was taxable. We constructed our taxable accounts so we only receive from stocks that pay out eligible dividend income.

Dividend Growth

Compared to January 2017, we saw a very respectable YOY growth of 17.04%. I am very happy to see the YOY growth to be above 15%.

It will be interesting to see what the rest of the year holds.

Dividend Increases

In January, a number of stocks that we own in our portfolio announced dividend increase:

• Omega Healthcare Inc raised its dividend by 1.54% to $0.66 per share.
• Canadian National Railway raised its dividend by 10.30% to $0.455 per share.
• Metro raised its dividend by 10.77% to $0.18 per share.
• Chevron raised its dividend by 3.70% to $1.12 per share.
• Visa raised its dividend by 7.69% to $0.21 per share.
• Enbridge Income Fund raised its dividend by 7.13% to $0.1883 per share.

These announcements have increased our annual dividend income by $48.68.

At 3% dividend yield, that’s equivalent to adding $1,622.67 of fresh capital into our dividend portfolio.

Dividend Stock Transaction

As I hinted in our 2017 Year End Dividend Income Update, January was going to be a huge buying month for us. This is mostly because the additional $5,500 per person in TFSA contribution room. Once we maximized our TFSAs and making sure that our RRSPs are maxed out as well, we started making purchases in our taxable accounts.

Since the beginning of 2018, we have made the following transactions:

• Closed out our Corus Entertainment position (115 shares in total)
• Purchased 44 shares of Bank of Nova Scotia (BNS.TO)
• Purchased 36 shares of Enbridge (ENB.TO)
• Purchased 36 shares of National Bank (NA.TO)
• Purchased 100 shares of Canadian Utilities (CU.TO)
• Purchased 122 shares of Smart REIT (SRU.UN)
• Purchased 22 shares of Laurentian Bank of Canada (LA.TO)
• Purchased 50 shares of Emera (EMA.TO)
• Purchased 50 shares of BCE (BCE.TO)
• Purchased 100 shares of Magellan Aerospace (MAL.TO)
• Purchased 29 shares of Vanguard All-World Ex Canada

Roughly $24.5k worth of transactions.

Or roughly $927.71 increase in our annual dividend income.

Phew!

Some thoughts…

Corus Entertainment Inc (CJR.B)

After the latest disappointing quarterly results, I began questioning Corus Entertainment’s ability to generate profits. This was the third quarterly disappointment in a row. The consolidated revenues decreased 2% for the quarter, and the consolidated segment profit decreased 7% for the quarter. At over 100% payout ratio, this was simply unsustainable. While the dividend yield is extremely high, the payout ratio indicates CJR.B is extremely risky to hold.

Since our purchase in July 2014, the share price has tumbled. Given that more and more people are cutting cable and moving to Netflix, I was not convinced that Corus Entertainment can recover to its glory days.

So I decided to bite the bullet and liquidated all of our CJR.B shares.

Bank of Nova Scotia, Enbridge, National Bank, Smart REIT, Emra, & BCE

I made these purchases to simply add more shares to our existing positions. All of these stocks are considered long-term holdings for us. With the share prices taking a hit due to the recent market volatility, I figured I might as well take advantage of the opportunity.

You can take a look at some of my reasoning behind considering these stocks here.

Laurentian Bank of Canada & Magellan Aerospace

I purchased a few shares of Laurentian Bank of Canada for the sole purpose to diversify within the Canadian banking space. LA is not as big as TD, RY, BMO, BNS, CIBC, or NA, but it does have a pretty decent dividend record. It also happens to be the cheapest Canadian bank from a PE analysis point of view. The share price has taken a hit due to concerns of high exposure to residential mortgages. As a long-term investor, however, I believe this is a good opportunity to initiate a small position of the company.

Magellan Aerospace Corp popped up when I was reviewing the Canadian Dividend All-Star list. I decided to purchase a full lot of MAL because I liked its dividend track record and that it’s in a very specialized sector. When a company is in a specialized sector, typically it is harder for a competitor to enter the sector. The MAL purchase was about $2,000 in, a small fraction of our dividend portfolio, but it provides us with some sector diversification. We will have to see how Magellan Aerospace Corp does in the next few years.

Conclusion

We started off the new year with a bang, receiving a total of $1,340.83 in dividend income. This is a fantastic result, considering in 2011 we only received about half of this amount for the entire year, and in 2014 we didn’t cross the $1,300 mark until the middle of March. In addition, we started the year with a major shopping spree and plan to continue adding new capital to our dividend portfolio. With 11 more months to go, 2018 is looking very bright.

Dear readers, how was your January dividend income?