Long time reader will know that I have been doing regular monthly dividend income updates since this blog was born six years ago. I do these monthly dividend income updates to keep myself accountable and also to demonstrate that it is possible to build a sizeable dividend portfolio with some of the best US and Canadian dividend stocks. While some dividend investors only focus on dividend income, I believe that a safe and growing dividend income that can keep up with inflation and the total return of our dividend portfolio are both very important. As some of you may know, it is our goal to one day becoming financially independent by living off dividends.
In July, we went for a road trip to Banff and Jasper and spent 12 days in this fabulous part of the country. I have been to Banff and Jasper numerous times but not Mrs. T and the kids. Given that we are still in the midst of a global pandemic, we opted to camp for most of the trip, packed most of our food prior to the trip, and stayed as isolated and socially distanced from other people as much as possible.
During our trip, we felt that we may have benefited from the COVID-19 pandemic. There weren’t nearly as many people in the national park attractions. This meant we were able to see beautiful lakes like Moraine Lake, Lake Louise, and Emerald Lake in one day and had no problem with parking. There were also a lot fewer people walking around in Banff.
We were also fortunate to be able to camp next to Two Jack Lake (we booked the campsite when the reservation back in January). The lake was very pretty and on a calm day, it was amazing to look at the mirror-like lake. I was happy that I made the effort to wake up at 4:45 AM one morning to take pictures of the lake.
One of the highlights of the trip was visiting Drumheller and checking out the Royal Tyrell Museum. Being big dinosaur fans, the museum was a big hit for both kids. Mrs. T and I really enjoyed walking around in Drumheller Badlands and seeing the desert-like landscapes.
The other highlights of the trip were the close encounters we had with the different wildlife. One morning in our Jasper campsite, we discovered a young black bear climbing a tree, less than 150 metres from our campsite! Another night when Mrs. T and I were sitting by the campfire, a fox ran in front of us and disappeared into the bushes. Fortunately, no humans or wildlife were harmed during these encounters.
Needless to say, this was a very memorable family trip. We hope to go back to Banff and Jasper one day and do some backcountry camping.
Dividend Income
This is a dividend income report and not a trip report, right? Let’s get back to the main topic! In July 2020 we received dividend income from the following companies:
- Algonquin Power & Utilities (AQN.TO)
- BCE Inc (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)
- European Residential REIT (ERE.UN)
- Granite REIT (GRT.UN)
- H&R REIT (HR.UN)
- Inter Pipeline (IPL.TO)
- KEG Income Trust (KEG.UN)
- Nutrien (NTR.TO)
- Rogers (RCI.B)
- RioCan REIT (REI.UN)
- Saputo (SAP)
- SmartCentres REIT (SRU.UN)
- Telus (T.TO)
- TD (TD.TO)
- TC Energy Corp (TRP.TO)
These 20 paycheques added to $2,382.57. It was nice to see another month of over $2,300 in dividend income!
Interestingly, the entire dividend income amount was in CAD. In other words, we didn’t receive anything in USD. A quick reminder to new readers is that we do not convert the USD to CAD when reporting our dividend income. Instead, we use a 1 to 1 currency rate approach. Why do we do that? Because we want to avoid fluctuations in dividend income over time due to changes in the exchange rate.
The top five dividend payouts for July came from TD, Telus, CIBC, Bank of Nova Scotia, and BCE (not in order). The top five dividend payouts accounted for $1,721.57 or 72.3% of our July dividend income.
Dividend Growth
Compared to July 2019, we saw a YoY growth of 17.36%. After a few months of below 15% YoY growth, it sure was nice to see a number that was greater than 15%. We need to continue to work on staying above the 15% mark for the rest of the year.
If we were able to end up the year with a 15% YoY growth, we’d end up with over $26,500 in dividend income for the year. That would be a fantastic number to hit, despite not achieving our goal of $30,000 in dividends for 2020.
Dividend Income – Account Breakdown
For tax efficiency, we hold Canadian dividend paying stocks in RRSPs, TFSAs and regular accounts. All REITs and income trusts are held in TFSAs for tax efficiency purposes. All US dividend paying stocks and ADRs are held in RRSPs to take advantage of the tax treaty between Canada and the USA.
To summarize:
- TFSA: Good for Canadian dividend paying stocks, REITs, and income trusts.
- RRSP: Good for US dividend paying stocks, REITs, and income trusts.
- Taxable: Good for Canadian dividend paying stocks that pay eligible dividends.
We don’t hold US dividend-paying stocks to avoid paying the 15% withholding tax. If you hold US dividend-paying stocks in your taxable account, you’ll pay tax at your marginal rate on any US dividends received. Essentially US dividends are treated like interest income which is taxed at the highest tax rate (i.e. your marginal rate). Although you get a foreign tax credit for the amount you received.
For July, here’s the our dividends breakdown across the different accounts:
- Taxable: $801.91
- TFSA: $932.96
- RRSP: $647.70
Effectively, only $801.91 of our July dividend income was taxable. Given that dividends have favourable tax treatment in Canada, we pay only a small amount of taxes on this amount. Also, since the taxable dividends are split between Mrs. T and me at a 70-30 split for July, we further minimize the amount of taxes we have to pay on the dividends.
Dividend Increases
Given the current market condition, I am not expecting any dividend increases any time soon. This is why I was pleasantly surprised to hear that Saputo announced a 2.9% dividend payout increase. This announcement increased our forward dividend by a few dollars but a small increase is better than nothing at all.
Dividend Reinvestment Plan (DRIP)
There are three things that we rely on to grow our dividend income:
- Purchase more dividend-paying stocks with new capitals
- Organic dividend growth
- Reinvest dividends via dividend reinvestment plan and wait for dividends to accumulate to a big amount and purchase more dividend-paying stocks (see #1).
For now, the key driver for our dividend growths comes from point #1 but it doesn’t mean we should ignore points 2 and 3. Therefore, we are enrolled in DRIP whenever we are eligible.
In July we were able to DRIP the following stocks:
- 2 shares of Canadian Natural Resources
- 5 Shares of Telus
- 2 Shares of Inter Pipeline
- 4 shares of Algonquin Power & Utilities
- 2 shares of SmartCentres REIT
- 1 share of Dream Office REIT
- 1 share of Dream Industrial REIT
- 3 shares of RioCan REIT
- 1 share of Rogers
- 2 shares of BCE
- 1 share of European Residential REIT
- 8 shares of Bank of Nova Scotia
- 3 shares of CIBC
- 3 shares of H&R REIT
- 4 shares of TD
- 1 share of TC Energy
All these 43 shares were an equivalent of $1,591.64. In other words, we had a DRIP ratio of 66.8% in July 2020. By DRIPing these shares, we also increased our forward-looking dividend income by $96.49. This is an equivalent dividend yield of ~6%. The initial dividend yield is quite high thanks to DRIP discounts.
Dividend Stock Transactions
So far in 2020 we have been quite busy on the dividend stock transaction front. We have been buying a lot of US and Canadian dividend paying stocks. We have also closed out a number of positions to reduce the number of holdings in our dividend portfolio. July was another month where we continued this trend.
After months of debating, I decided to close out PrairieSky Royalties (PSK.TO). We received two shares of PSK.TO from owning Canadian Natural Resources many years ago. Since receiving these two shares, PrairieSky’s price had been on a downward slide. Originally I thought that selling two shares of PSK.TO didn’t make sense because the commission would take up a large percentage of the transaction cost. After months of debating, I decided to pull the sell trigger and allow us to reduce another position. It simply didn’t make sense to continue to water the weeds.
When it came to dividend stock purchases, we decided to purchase 97 shares of TD.TO at $59.54. TD share price has been getting hammered due to TD’s exposures in the US. Considering the US is one of the epicentres of the COVID-19 pandemic, many investors fear TD won’t be able to grow in the next few years. However, considering that the dividend yield is above 5% and that TD has a long dividend paying history, I decided to add some TD shares and average down our cost basis. Even if TD share price doesn’t recover and does not raise its dividends this year and next year, we can wait for things to recover. The transaction added $291 toward our annual dividend income.
Summary
After seven months, we have received a total of $15,675.04 in dividend income. It’s really neat to note that with five more months to go for the year, we have already passed the annual dividends that we received in 2017. We have definitely come a long way in the last few years.
If you are looking to build a dividend spreadsheet with Google Finance, check out the Step-by-Step Guide.
In case you’re wondering, to put our dividend income into a quantitative perspective:
- Our dividend portfolio has been working extremely hard for us to generate $3.07 per hour so far in 2020. We can be sleeping or relaxing on the beach and our portfolio will continue to generate this amount of money each hour. This is an increase of $0.04 per hour compared to our portfolio hourly dividend wage in June 2020.
- At a $40 per hour salary, our dividend income has saved us almost 49 days of work or an equivalent of almost 10 weeks worth of work.
Needless to say, both Mrs. T and I are extremely pleased with how well our portfolio is doing and how much money it is generating each month. Given the current economic conditions and that many people are without jobs due to the global pandemic, we are very grateful and feel very fortunate to have our portfolio working hard for us and generating passive income.
Dear readers, how was your July dividend income?
Hello.
I was referred by Korean youtuber to you regarding “financial indepedance”. I was really impressed about your effort and patience. I hope my future will change in a positive way. wish me luck
Thank you. Good luck. 🙂
Wow. It was another impressive month, Bob. Your YoY growth rates are awesome considering the income level. Way to go!
I see you are just a handful of months away from completing 10 years of dividend growth investing. Congrats! (even if it’s a bit early) It’s terrific to see all your progress over those 10 years. I would imagine there are a few stocks you’ve been invested in the entire time. Are there any you remember purchasing way back then and saying to yourself at the time “This is going to be long-term holding”?
Thank you Engineering Dividends. Long term holdings are definitely Canadian banks which we’ve been building up our position over the years.
Tawcan –
What a MOVE you made on TD, VERY impressive and yes – hard to pass up such an opportunity with a 5% yield. Your DRIP was fairly nice, as well ; ) Can’t wait to see August already!
-Lanny
Thank you Lanny. Here’s to an awesome August.
baaaammmm
nice pics. cool seeing the bears from a distance and that water is crystal clear. Hope you did some fishing in it!
as always a heck of a income but this time with a drip portion. Love seeing that!
Gives you a good idea on your positions sizes and you know I’m a huge fan of the drip.
surprised no us payers last month….
Anyways keep it up, doing great as always.
cheers
Thanks Rob. No fishing for us but we really enjoyed al the beautiful lakes. Yes, I was just as surprised as you seeing no US payers in July. 🙂
Great photos by the way. Congrats on another solid dividend income month with some nice year over year growth. I’m trying to navigate many cuts to my portfolio with BP, YUMC, KTB, WFC and older GE KHC cuts too. That’s why we diversify 🙂 Keep up the good work.
We’ve been fortunate that there haven’t been too many dividend cuts for us yet. We sold off quite a few stocks as well. Diversification is so important right now.
Another solid month and fantastic YoY growth!
Those steaks look amazing…looks like you had an excellent trip. Hope you packed some good wine and/or whiskey!
Also dripping 8 shares of BNS? As borat would say VERY NICE!
Cheers
The steaks were awesome. Cleaning the pan was another story. 🙂
Wow great progress. You might not hit your original goal of $30,000 this year but your accomplishments should not be overlooked. Well done.
Thank you Maria. Hitting $30k this year at this point is going to be a huge challenge.