Dividend Income – June 2023 Update

It’s that time of the month to provide an update on our monthly dividend income. 

Since starting this blog back in July 2014, I have written dividend income reports every single month. Why do I do that? Because this is my way to keep myself accountable and also to demonstrate that it is possible to build a sizable dividend portfolio that will eventually allow us to live off those dividends. 

This year we’re on track to receive over $49,000 in dividend income, assuming no dividend cuts and no changes to our dividend portfolio. While this number is nowhere close to our $60,000 dividend income target that we think we need to sustain our current lifestyle, if we do supplement our dividend income with part time work, I think we will be just fine. 

Given there is a lot of speculation about an impending recession and that many companies are trimming workforces, it is a relief knowing that we do have options and not completely relying on my full-time high tech job. 

Since I don’t blog anonymously anymore, for privacy reasons, I purposely do not share our portfolio value, how many shares we own per each stock/ETF, sector composition, and our net worth. This is solely for privacy reasons (a lot of our friends and some co-workers read this blog). 

I’m sorry if you are looking for specific numbers from me but I have set a pretty strict boundary on what I would share and what I would not share on this blog. I hope everyone can understand.

June was a pretty busy month for Scouting. I, along with two other Scouters, took 16 Cubs out camping at Golden Ears for a weekend. We taught the youths aged 8 to 10 how to use knives and had them make meals on camp stoves. We even took them out for a 4.5-hour hike. 

It was very nice to see these young people mature over the last Scouting year and become more capable individuals. 

Later in June, two other Scouters and I took 11 Beavers out on a one night sleepover in a community hall. Some kids managed to go to bed at 11 PM but some stayed up until 2 AM. Then some kids woke up around 5 AM in the morning and started chatting away in their tents. Needless to say, the Scouters didn’t get much sleep but all the kids had a lot of fun at the sleepover. 

On the home front, we have been busy tending our backyard garden. With the weather being warmer, we also have been having afternoon coffee hygge in the backyard.

We enjoyed some delicious strawberries throughout June. I kid you not, homegrown strawberries are so juicy and delicious. Store-bought strawberries just don’t taste the same.  

While our backyard garden produces a lot of produce for us, from time to time, some plants just don’t work out. For example, we didn’t get any broccoli this year as the plants all bolted and started to seed. We couldn’t figure out why because in previous years we enjoyed broccoli throughout the summer. It was quite disappointing to not get any broccoli. 

One Saturday, my parents were nice enough to look after the kids for us to allow Mrs. T and me to attend a latte art etching class. We learned how to create some cool pictures with latte and foamed milk.

It’s been a few months since we adopted Evie and it’s nice to see her feeling comfortable at our home. It’s nice to have a cat in our household again. 

Dividend Income – June 2023

Back to the dividend income report… in June we received dividend pay cheques from the following companies:

• Brookfield Asset Management (BAM.TO)
• BlackRock (BLK)
• Brookfield Renewable Corp (BEPC.TO)
• Brookfield Corporation (BN.TO)
• Canadian National Railway (CNR.TO)
• Canadian Tire (CTC.A)
• Dream Industrial REIT (DIR.UN)
• Enbridge (ENB.TO)
• Fortis (FTS.TO)
• Granite REIT (GRT.UN)
• Hydro One (H.TO)
• Intact Financial (IFC.TO)
• Johnson & Johnson (JNJ)
• McDonald’s (MCD)
• Manulife Financial (MFC.TO)
• Magna International (MG.TO)
• PepsiCo (PEP)
• Qualcomm (QCOM)
• RioCan REIT (REI.UN)
• SmartCentres REIT (SRU.UN)
• Suncor (SU.TO)
• Target (TGT)
• Visa (V)
• Waste Management (WM)
• iShares Core MSCI All Country World ex ex-Canada index ETF (XAW.TO)

The 25 dividend pay cheques added up to $4,322.64 – a very respectable month. The semi-annual distribution from XAW helped push June’s dividend income to over $4,000.

Compared to June 2022, we saw a YoY increase of 14.63%. This puts us on a year-to-date (YTD) average of 19.57% YoY growth so far in 2023. It would be nice to end up the year with an average YoY growth rate north of 20%. 

Out of the $4,322.64 received, $3,853.83 was in CAD and $468.81 was in USD, or about a 90-10 breakdown. 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.

Dividend Hikes

May was a fantastic month for dividend hikes. We were able to increase our forward dividend income by $526.17. After such a busy month, it shouldn’t come as a surprise that we didn’t see as many dividend hikes in June. 

For the entire month of June, we only saw Target increasing its dividend payout by 1.9%, from $1.08 per share to $1.10 per share. This increased our forward annual dividend by $5.04.

$5.04 isn’t a lot of money, but a small raise is better than no raise, right?

Dividend Reinvestment Plan (DRIP)

We currently hold 47 individual dividend stocks and 1 index ETF, or 48 positions in total. Out of the 48 positions, we are dripping 27 of them or about 56%.

Whenever we add a stock to our dividend portfolio, the goal is to either buy enough shares or accumulate enough shares eventually so we can enroll in DRIP. Once we are enrolled in DRIP, we then add additional share(s) at every payout and dollar cost average over time. I believe this is an effective way to keep investing strategy as simple as possible and take advantage of compounding. 

In June we dripped the following shares:

• 1 share of Brookfield Asset Management (BAM.TO)
• 3 shares of Brookfield Renewable Corp (BEPC.TO)
• 36 shares of Enbridge (ENB.TO)
• 3 shares of Fortis (FTS.TO)
• 1 share of Hydro One (H.TO)
• 13 shares of Manulife Financial (MFC.TO)
• 2 shares of RioCan REIT (REI.UN)
• 6 shares of SmartCentres REIT (SRU.TO)
• 1 share of Suncor (SU.TO)
• 17 shares of Core MSCI All Country World ex ex-Canada index ETF (XAW.TO)

Thanks to DRIP, we added 83 shares immediately and reinvested $3,247.22 out of the $4,322.64 received. The dripped shares also added $186.54 toward our forward annual dividend income. 

Dividend Transactions

Per my random thoughts on the market a couple of weeks ago, we have shifted to saving mode for next year. Basically, we are saving money now so we can max out our TFSAs and most of our RRSPs by the beginning of next year. Given the high inflation rate, I suspect that the TFSA contribution limit will likely increase to $7,000 in 2024.

So it shouldn’t come as a surprise that we didn’t buy or sell any dividend stocks in June.  

However, Canadian banks are getting quite attractive in terms of price and initial dividend yield. In particular, TD and Royal Bank are looking very attractive. Perhaps it may make sense to deploy some of the saved up cash, buy TD and/or Royal Bank in our non-registered accounts, then transfer some of the shares in-kind to our TFSAs and RRSPs next year. 

Such investing now, transfer in-kind later strategy is something we’ve done in the past. It takes a bit more planning and some paperwork (i.e. to do an in-kind transfer with the broker), but it’s something we’re comfortable doing. 

Some random observations

Here are a few more random observations/thoughts on the market. 

Observation #1

Apple’s market cap hit $3 trillion recently. I truly believe it’s simply a matter of time before Apple hits the $4 trillion market cap. Apple is an amazing brand blessed with a very wide moat. The strong ecosystem allows Apple to retain customers and get customers to spend more money. Since 15-inch laptops are really popular, the new 15-inch MacBook Air will help Apple to generate even more revenue. 

While the new Vison Pro is still a very niche product, I do see it getting more widely adopted by the third or fourth generation. We saw a similar trend with the Apple Watch. 

So it shouldn’t come as a surprise that we plan to add more Apple shares. 

Observation #2

To everyone’s expectation, the Bank of Canada raised its benchmark interest rate by 25 basis points on July 12. This marked the 10th rate hike by BoC since March 2022. The overnight interest rate is now at 5%. 

While the inflation rate appears to be easing, the ever-increasing interest rate will cost homeowners with variable mortgages more money. A larger percentage of monthly income is going to mortgage payments and house-related expenses. Will we see a housing crisis? I think the housing crisis may be exaggerated to some extent (as over one-third of all homeowners are mortgage-free) but I guess we will have to wait and see what happens. It is also possible that we’ll see the BoC rate going down later this year.

From what I can find, it appears that the housing supply continues to be low compared to the number of buyers. With high demand and low supply, I suspect the housing market will remain hot for the next little while. (And the identical argument applies equally to the rental market.)

Observation #3

It was interesting to hear that Laurentian Bank has put itself up for sale. We used to own LB shares and that backfired on us early on during the pandemic. The lesson I learned from our LB adventure is to focus on the big banks rather than the smaller ones. 

It will be interesting to see which of the Canadian banks bid for Laurentian Bank. I suspect the Bank of Nova Scotia and the Bank of Montreal will be in the lead. But I wouldn’t be surprised if National Bank were also to put in a bid. 

We’ve seen collapses and struggles of many of the US regional banks in recent months. Although the smaller Canadian banks are well regulated, I suspect we will see smaller Canadian banks selling themselves and starting to see some consolidation in the Canadian bank sector. 

Dividend Score Card – June 2023

Here’s our dividend scorecard for a quick overview of how we did in June.

We are happy to receive over $4,300 in dividend income with 51.3% of the amount in tax-advantaged or tax-deferred accounts. It’s nice to see that we have been increasing our June dividend income consistently over the last few years. 

Dividend Income – June 2023 Summary

With 2023 officially halfway done, we have received a total of $24,685.91 in dividend income. I’d say that we’re on track for our $49,000 in dividend income goal for this year. Given that we invested a lot of new capital in the first half of the year and many companies have raised their dividend payout, I’m optimistic that we’ll see a strong performance in the second half.

To put things in perspective, our dividend income is equivalent of:

• $136.39 per day or $5.68 per hour
• $23.74 per hour working wage or $949.46 per week after 26 working weeks. 

The quarterly dividend income graph is looking quite nice, with the 2023 Q2 bar being much higher than in previous years. We plan to continue this positive trend in both Q3 and Q4. 

I’m very excited about the second half of 2023 and believe we will have a stronger second half than the first half despite moving to savings mode for next year already.