Dividend Income – June 2022 Update & FI Journey Update

Wow, it’s hard to believe that 2022 is already half over. For the most part, June was cold and wet here in the Lower Mainland. Many people even used the term Juneary because it felt like January! Even with our thermostat set to 19 degrees Celcius during the day, the heat/furnace kicked in many times throughout the month.

Due to the cold and wet weather, the typical backyard garden summer harvest was delayed by a few weeks. Last June we enjoyed cauliflower and broccoli from our backyard garden but no cauliflower and broccoli harvest yet.

Fortunately we had a few hotter and sunnier days in the latter half of June which helped turn our backyard garden into a green oasis.

Although a few weeks later than usual, we have been enjoying homegrown strawberries which taste so much better than store-bought ones. Mrs. T and the kids would pick strawberries every other day. We have already harvested over 15 kg / 33 lbs worth of juicy delicious strawberries!

Mrs. T moved our rhubarbs to a sunnier spot this year and now the rhubarbs are growing so much better. We have had several rhubarb-based desserts. YUM!

Just before the Scouting year wrapped up, we took the Cub Scouts for a 2-day camping trip at Alice Lake. We even invited a few older Beavers to join us. In total, we had 13 kids spread out across three different provincial campsites with four Scouters in charge. Although it rained a bit on the first night, we had decent weather for the rest of the weekend. Some of the kids and one fellow brave Scouter even went swimming in the lake! I was told it was really cold. Brr!

All the kids have a lot of fun camping for the weekend and we even taught them how to use knives and axes. Baby T1.0 learned and practiced chopping wood using an axe while under close supervision. I’m looking forward to volunteering as a Scouter again next year.

I’ll wrap up the quick life update with a nice sunset we saw from our home.

Dividend Income – June 2022

Back to dividend income, in June we received 27 pay cheques from the following companies:

• Brookfield Asset Management (BAM.A)
• BlackRock (BLK)
• Brookfield Renewable Crop (BEPC/BEP.UN)
• Canadian National Railway (CNR.TO)
• Canadian Tire (CTC.A)
• Dream Industrial REIT (DIR.UN)
• Enbridge (ENB.TO)
• European Residential REIT (ERE.UN)
• Fortis (FTS.TO)
• Granite REIT (GRT.UN)
• Hydro One (H.TO)
• Intact Financial (IFC.TO)
• Intel (INTC)
• Johnson & Johnson (JNJ)
• McDonald’s (MCD)
• Manulife Financial (MFC.TO)
• Metro (MRU.TO)
• PepsiCo (PEP)
• Qualcomm (QCOM)
• RioCan REIT (REI.UN)
• SmartCentres REIT (SRU.UN)
• Suncor (SU.TO)
• Target (TGT)
• Visa (V)
• Waste Connections (WCN.TO)
• Waste Management (WM)
• iShares Core MSCI All Country World ex Canada Index ETF (XAW.TO)

All the pay cheques added up to $3,770.79, resulting in a fantastic month! It’s nice to see the trend line continues trending upward in the chart below.

Compared to June 2021 dividend income, we saw a YoY increase of 28.11%. Despite encountering the law of the big numbers already, we have managed to grow our dividend income at a good rate so far this year. We definitely have to thank to our relatively high savings rate which has allowed us to add a lot of new capital. After six months, we are averaging a 37.06% YoY growth rate. This is pretty incredible!

Out of the $3,770.79 received, $480.67 was in USD with the rest in CAD or about a 10-90 breakdown. Ideally, we’d love to receive more dividends in USD to help us buy more US dividend paying stocks. Please note, we do not convert USD to CAD when reporting our dividend income. We are doing this to keep the math easy and to avoid fluctuations in our monthly dividend income caused by changes in the exchange rate.

The top five dividend payers for June were Enbridge, Brookfield Renewable Energy Partners/Corp, Fortis, Manulife, and iShares All Country World ex Canada Index ETF (not in order). These payments accounted for $2,783.69 or 73.8% of our June dividend income. I’m happy to report that XAW accounted for more than 20% of our June dividend income. Because XAW holds 9450 different stocks, it is extremely well diversified. Since dividend paying stocks tend to be concentrated in specific sectors, we use XAW as a way to diversify our dividend portfolio. We continue to believe the hybrid investing strategy would allow us to capture the benefits of dividend growth investing and index ETFs investing.

Dividend Stock Transactions

The market has been extremely volatile the last few months, so much so that we’re now experiencing a bear market with a lot of concerns about a potential recession. Since we’re still in the accumulation phase of our financial independence journey, we are cheering very loudly for a prolonged bear market so we can purchase equities at a discount.

In June we purchased the following stocks:

• 11 shares of XAW, a few days before the ex-dividend date so we can collect the distribution
• 105 shares of MFC.TO. Given the ~6% yield, it is too hard to ignore Manulife at this point

Roughly $5,600 was deployed with these two purchases and we added roughly $210 toward our annual dividend income as a result.

Dividend Reinvestment Plans (DRIP)

While most of our dividend income growth came from investing new cash, we also rely on growing dividend income organically. To do so, we rely on companies raising dividend payout and adding more shares through dividend reinvestment plans.

Dripping additional shares regularly allows us to dollar cost average and increase our dividend income over time. Furthermore, it allows us to put some holdings on auto-pilot.

In June we dripped the following shares:

• 4 shares of BEPC/BEP.UN
• 25 shares of ENB.TO
• 1 share of ERE.UN
• 3 shares of FTS.TO
• 1 share of H.TO
• 1 share of INTC
• 8 shares of MFC.TO
• 2 shares of REI.UN
• 5 shares of SRU.UN
• 20 shares of XAW

Thanks to DRIP, we accumulated 70 additional shares and reinvested $2,825.75 of our dividend income right away. More importantly, we added about $134 toward our annual dividend income.

Dividend Increases

It was a relatively quiet month on the dividend increase front but that shouldn’t come as a surprise given we saw ten dividend hikes in May. The only company that announced a dividend hike in June was Target. Despite a very poor quarterly result, the Target board decided to reward its shareholders with a 20% dividend increase. This announcement gave us an additional $45.36 toward our annual dividend income.

1H 2022 Review

We have been very transparent with our dividend stock transactions in these monthly dividend income reports. This is our way to keep ourselves accountable and demonstrate that it is possible to build a sizable dividend portfolio. Since we got serious with the dividend growth investing strategy around 2011, we have been building up our dividend portfolio consisting of dividend paying stocks and index ETFs.

Throughout the last 11 years we have enjoyed fantastic YoY growth rates. As mentioned already, most of this was contributed to adding sizable new cash every year.

Years	YOY Growth %
2012	267.94%
2013	119.62%
2014	53.26%
2015	23.39%
2016	21.73%
2017	18.11%
2018	26.29%
2019	23.03%
2020	17.03%
2021	14.60%
22022 (so far)	37.06%

In case you don’t want to go through our monthly dividend income reports, we have added the following dividend paying stocks in 1H 2022:

• 203 shares of SmartCentres REIT
• 64 shares of Granite REIT
• 320 shares of Enbridge
• 387 shares of Algonquin Power & Utilities
• 26 shares of Brookfield Renewable Corp
• 34 shares of Apple
• 88 shares of CIBC
• 119 shares of BCE Inc.
• 157 shares of Power Corp
• 87 shares of Bank of Montreal
• 10 shares of Starbucks
• 25 shares of Bank of Nova Scotia
• 2 shares of Costco
• 111 shares of XAW
• 105 shares of Manulife

We also sold 270 shares of Canadian Utilities and closed our position in that company.

Altogether, we added slightly over $86k worth of dividend paying stocks in 1H 2022. Subtracting money from the Canadian Utilities sale, we have deployed around $77,000 of new cash so far this year. We realized that not everyone can add such a huge amount of money each year, therefore, we are extremely thankful that we have a relatively high savings rate.

Because we’re doing quite well financially, we remind ourselves that we need to provide helping hands to others in need. It is important for us to donate to local charities each month and donate a lump sum of money from time to time.

At the time of writing, most of these purchases are in the red. We are down by about $7,000 or 8.1%. Some of the biggest losers include Granite REIT (purchased in January 2022), Apple (tech stocks got hit quite hard lately), and CIBC. However, given all these companies are highly profitable and operate at good margins, we believe the stock price should recover in the long run.

Like other years, our purchases will most likely slow down for 2H 2022 as we start saving up money for next year’s RRSP and TFSA contribution rooms. Depending on what happens to the market, we may decide to move some money from our LTSS to take advantage of significant market drops.

Financial Independence Journey Update

I have made it abundantly clear that our plan is to live off dividends in the near future. Our target is to hit our target of $50,000 by 2025. Given that we want to have some buffers, it would be nice to receive more than $60k in dividend income per year. So it may take us a few more years to be able to live off dividends. Having said that, one option is to live off $50k worth of dividend income and work part time.

After six months, it is very nice to see that our dividend income covered 72.4% of our expenses assuming no taxes on our dividend income.

What amazes me is that our dividend income covered more than 100% of our core expenses! Please note that core expenses do not include things like eating out, charitable donations, vacations, massages, and educational courses.

It’s interesting to note that last year our dividend income ($30,912) was able to covered 79.4% of our necessities/core spending and 43% of our total spending.

Needless to say, we are extremely grateful and happy with our financial independence progress.

Summary

Lately I have received many reader emails asking me about my prediction of the market. The thing is, I do not know which way the market will go. But I do know this for sure, in the long run, the market has a tendency to go up. Since the best day to start investing was yesterday, it means today is the second best day to invest. Therefore, I continue to believe to invest money into the market regularly and take advantage of time in the market, rather than trying to time the market. There are a lot of benefits when you keep your investment strategy simple.

After six months, we have received a total of $20,645.13 in dividend income. If we keep at this pace and assume no dividend cuts or increases, we should be able to hit our goal of receiving $36,000 in dividend income for 2022.

If we look at the dividend income breakdown between TFSA, RRSP and taxable, 58.7% of our dividend income is either tax-free or tax-deferred. This is why it’s unfair to bluntly declare that capital gains are more tax-efficient than dividend income. We need to consider where the investments are being held.

Only 41.3% of our dividend income or $8,518.26 is taxable. This is split between Mrs. T and me at about 35% to 65%. Furthermore, since Candian dividend income is more efficient than working income, the actual taxes we’ll pay on the dividend income should be minimal.

To keep things in perspective, $20,645.13 dividend income after six months means…

• Our dividend portfolio is generating $4.75 per hour after 181 days. So after eight hours of uninterrupted sleep, we’d wake up with $38, enough to buy breakfast and a cup of coffee at Tim Hortons for both Mrs. T and me.
• After 27 weeks, our dividend income translates to $19.12 per hour, assuming a 40-hour work week.

July is typically one of our strongest months, so I would not be surprised if we end up with an amount that’s pretty close to our 2020 annual dividend income by end of July.

Dear readers, how was your June dividend income?