I hope readers are enjoying the 1H 2023 dividend portfolio review posts I have published in the last couple of weeks.
Part 3 and the final part of the portfolio review will go live next Monday as we take a break from the portfolio review and go over our July dividend income.
I enjoy writing these dividend income reports because they are my way to show our dividend income progress and demonstrate that it is possible to build up a sizable dividend portfolio to live off dividends one day.
There might be some repetitiveness to these dividend income reports, but that’s the nature of dividend investing – save, invest, and repeat. Since Rome wasn’t built in a day, neither should your dividend portfolio.
Having patience, staying invested throughout different market conditions, and sticking to your long term investing strategy are extremely important when it comes to DIY investing.
In July, we went to Vancouver Island and camped at Goldstream Provincial Park for five nights. We then spent one night in Victoria to use up my free Marriott free night certificate, thanks to my American Express Marriott Bonvoy credit card (referral link).
Overall, I think the $120 annual fee is well worth it considering you get a free night certificate to use. Victoria Marriott’s night rate was over $320 for our stay, making this a really good deal. Considering hotel rates are getting higher, the free night certificate is a great deal!
Our backyard garden turned into a wild green jungle in July and we spent a lot of time harvesting and enjoying fresh produce from our lovely garden.
It’s hard to beat fresh picked berries and produce! Best of all, we aren’t spending nearly as much money on groceries throughout the summer.
Summertime also meant we had a lot of ice cream. There are many excellent ice cream shops in the Lower Mainland for us to try.
I also appeared on The Passive Income Podcast. It was fun chatting with Dividend Dave.
Dividend Income – July 2023
Back to dividend income. In July we received dividend payments from the following companies:
- Algonquin Power & Utilities (AQN.TO)
- BCE (BCE.TO)
- Bank of Nova Scotia (BNS.TO)
- CIBC (CM.TO)
- Canadian Natural Resources (CNQ.TO)
- Capital Power Corp (CPX.TO)
- Dream Industrial REIT (DIR.UN)
- Granite REIT (GRT.UN)
- Coca-Cola (KO)
- RioCan REIT (REI.UN)
- SmartCentres REIT (SRU.UN)
- Telus (T.TO)
- TD (TD.TO)
- TC Energy (TRP.TO)
- VICI Properties (VICI)
The 15 dividend payments added to $5,671.94. A new monthly dividend income record!!! It’s really neat to see that we managed to increase by almost $300 in dividend income compared to April 2023.
Compared to July 2022, we saw a YoY increase of 25.25%. It sure was nice to see an above 25% YoY increase again. This marks the fourth month in 2023 that we had an above 25% YoY increase. The dividend snowball is certainly getting bigger and bigger. That’s the magic of compound interest!
Out of the $5,671.94, $295.25 was in USD and $5,376.69 was in CAD, making July a very CAD heavy month. Please note, we do not convert USD to CAD when reporting our dividend income. This is to avoid fluctuations in our monthly dividend income due to changes in the exchange rate. We plan to change this approach in January 2024 so stay tuned for that change.
Like last month, it was a very quiet month for dividend hikes. We only saw Capital Power Corp (CPX.TO) increasing its dividend payout by 6% from $0.58 per share to $0.615 per share.
The result of this lone dividend hike is that we increased our forward annual dividend income by $22.82. It’s not a lot of money but a raise is a raise. Every little bit counts – and helps.
Dividend Reinvestment Plan (DRIP)
Although it was disappointing on the dividend hikes front, it was amazing on the DRIP front.
To keep our dividend growth investing strategy as simple as possible, we always try to add and accumulate enough shares to allow us to enroll in DRIP. When the stock is enrolled in DRIP, it allows us to add more shares at each dividend payout. This is a powerful way to enable dollar cost average and take advantage of compound interest.
In July we dripped the following shares:
- 34 shares of Algonquin Power & Utilities (AQN.TO)
- 7 shares of BCE (BCE.TO)
- 11 shares of Bank of Nova Scotia (BNS.TO)
- 13 shares of CIBC (CM.TO)
- 2 shares of Canadian Natural Resources (CNQ.TO)
- 2 shares of Capital Power Corp (CPX.TO)
- 1 share of Coca-Cola (KO)
- 2 shares of RioCan REIT (REI.UN)
- 6 shares of SmartCentre REIT (SRU.UN)
- 7 shares of Telus (T.TO)
- 11 shares of TD (TD.TO)
- 10 shares of TC Energy Corp (TRP.TO)
- 2 shares of VICI Properties (VICI)
A total of 108 shares were added automatically via DRIP. We also reinvested $4,326.02 right away, or a DRIP ratio of 76.3%.
Most importantly, the 108 dripped shares added $253.69 toward our forward annual dividend income.
Despite shifting to saving mode for next year’s TFSA and RRSP contributions, it doesn’t mean we are staying completely quiet on the dividend transactions front. Per my Q2 goals and resolutions update, we considered closing our positions in Dream Industrial and RioCan. My rationale:
- Dream Industrial REIT: Although we really like the industrial REIT sector, DIR hasn’t done much in terms of stock price appreciation over the last three years and there has been zero dividend payout growth since March 2013.
- RioCan REIT: RioCan’s stock price hasn’t done much lately and its distributions haven’t gotten back to the pre-pandemic level yet. Perhaps it’s worthwhile to invest our money elsewhere.
After much consideration, we decided to pull the trigger and sold all Dream Industrial and RioCan shares. This was a big transaction worth about $14,000. We closed both of these positions with a small loss (not considering dividends received over the years).
Closing out Dream Industrial REIT and RioCan REIT reduced our forward annual dividend income by $753.12.
With the money and some dividends accumulated in our TFSA accounts, we decided to add the following shares:
- 150 shares of Alimentation Couche-Tard (ATD.TO)
- 190 shares of Telus (T.TO)
Although Alimentation Couche-Tard has an extremely low dividend yield, the stock has performed very well over the year. This is why I included ATD as one of the best Canadian dividend stocks. Since we focus on total return over dividend income, I thought Alimentation Couche-Tard is a better long term investment than Dream Industrial REIT and RioCan REIT.
On the other hand, Telus has struggled for the past year due to many macroeconomic challenges the company is facing. In the recent Q2 earnings report, Telus revised its guidance due to influences from the revised outlook from Telus International.
- Consolidated operating revenue growth of 9.5% to 11.5% (down from the previous 11% to 14%)
- Adjusted EBITDA growth of 7% to 8% (down from the previous 9.5% to 11%)
- Free cash flow of $1.5 billion (down from the previous $2 billion)
To deal with the tough environment, Telus also announced reducing 6,000 jobs.
However, the Q2 earnings report wasn’t all dark and gloomy. Telus showed total customer growth of 293,000, up 46,000 over the previous year and strong Mobility results including Mobile Phone additions of 110,000. Telus also added 59,000 new Fixed customers, including 35,000 internet customers.
As a Telus shareholder, it is difficult to see that Telus is facing financial challenges. At the same time, I am confident with the Telus management and believe they will make the right decisions to steer the ship.
Given Telus’ share price is close to the 5-year low, I believe it makes sense to continue to add more shares and take advantage of the discounted price. This is exactly why we decided to add 190 shares.
The two purchases added $342.34 toward our forward annual dividend income.
In other words, all the dividend transactions we did throughout July reduced our forward annual dividend income by $410.78.
Yes, it sucks to see a reduction of our forward annual dividend income due to dividend transactions but I truly believe the moves we made put us better off for the long term.
Some Random Thoughts
In last month’s dividend income report, I posted some random observations and received positive feedback from readers so I thought I’d write up some random thoughts again.
Random Thought #1
Quite a few readers have reached out asking my thoughts on split share corporations like DFN.TO and BK.TO. These funds have yields north of 15%.
I cringe whenever I see dividend investors rely on these split share corporations to generate dividend income. I believe these distributions are not reliable and you’re taking on a lot of risks by manufacturing additional yield using leverage and covered calls. There’s a reason why we don’t invest in covered call ETFs.
I won’t get into the details on these funds as I’m working on an article to get into the specifics of split share corporations. So stay tuned…
My recommendation on these split share corporations?
Stay away from them. In addition, these super high yield funds like TSLY and NVDY that have becoming increasingly popular. Remember, you cannot create additional yields from thin air. To get higher yields, the funds are taking on additional risks.
So if these ultra high yield funds make up more than 30% of your portfolio, you better watch out. Because you’re carrying a lot of risks in your portfolio. Something’s gotta give!
On the other hand, if you already have a basket of solid dividend growth stocks that are well diversified, it may make sense to invest in these high yield funds strategically. The way to invest these speculative funds is to limit your exposure. For example, you should limit that exposure to less than 5% of your portfolio, possibly even less if you’re wary of these funds.
Does this mean we’ll begin to invest in DFN.TO, TSLY, NVDY, or APLY? I’m not sure. Perhaps we’ll dip our toes in TSLY and invest $1,000 USD as a speculative play. Despite wanting to make a speculative play with TSLY, the total return investor in me keeps reminding me that the risk is simply too high and the volatility is not worth it.
Overall, I believe one is better off investing in Apple and Tesla instead and even the all equity ETFs like VEQT, XEQT, and HGRO.
Random thought #2
For those investors who are in the accumulating phase, a bear market is what you want. The reason is that you can purchase stocks at a discounted price.
So, for long term investors, you shouldn’t be afraid to load up on the likes of Telus, BCE, TC Energy, and even some of the struggling Canadian banks.
Assuming the volatility continues, this is exactly what we plan to do in the new year with the new TFSA and RRSP contribution rooms.
“Your green days are made during the beet red days.”
“Be fearful when others are greedy, and be greedy when others are fearful.” (Warren Buffett)
I really love these two quotes. This is why one should always look to invest in profitable companies with solid track record. Invest in companies that you understand well, and examine the businesses as if you are an owner.
Dividend Score Card – July 2023
Here’s our dividend scorecard for a quick overview of how we did in July.
It’s nice to see that we had a new monthly dividend income record.
The overall total dividend decrease caused by July’s dividend transactions isn’t great. But looking long term, I think our dividend portfolio is better off by closing out Dream Industrial REIT and RioCan REIT. Alimentation Couche-Tard should provide a solid total return for many years to come. It is also nice to add another solid growth stock to the consumer staples sector.
Dividend Income – July 2023 Summary
After seven months, we have received a total of $30,357.88 in dividend income, putting us very close to the 2021 annual dividend income total with five months to go.
At $30,357.88 we are about 62% of the way to our $49,000 dividend income goal for this year. With five more months to go, I believe we are on track to accomplish this goal.
Now, putting things in perspective, our total dividend income of $30,357.88 is equivalent of:
- $143.20 per day or $5.97 per hour
- $24.48 per hour working wage or $979.29 per week after 31 working weeks
Mrs. T and I are very pleased with our dividend income progress and we feel blessed to have started our financial independence journey back in 2011. We certainly have made a lot of progress in the last 13 years. Who knew what our financial journey would look like if we weren’t given the “Secrets of the Millionaire Mind“ book that many years ago…
Knowing our respective frugal upbringing backgrounds, I have no doubt that we would have started our financial independence journey anyway, but perhaps a number of years later. I am really appreciative of all the advice I have received from like-minded people over the years.
We’re at a point where we can sustain our current lifestyle by living off dividends and working part time. This fact alone provides a lot of comfort and calmness for me, especially considering my company just recently announced a significant workforce reduction and many of the long time employees were let go thankfully, not including me).
Having options is definitely a good thing!