Announcement: The annual Plutus Award is open for nomination. In the last couple of years, this blog was one of the finalists for Best Canadian Finance Content. If you enjoy reading this blog, I would really appreciate it if you could nominate this blog for the following categories for this year’s Plutus Award:
- Best Canadian Finance Content
- Best Investment Content
- Best Financial Independence or Retire Early Content
You can submit your nomination here.
With BC’s Restart Plan, I’m finally seeing light at the end of the tunnel. If BC meets all the criteria, we may be back to normal social contact by September 7 at the earliest. It is encouraging to see the COVID-19 curves trending down across Canada and things slowly starting to re-open again. However, it will remain interesting to see when overseas international travel without quarantines will be possible. I suspect this won’t happen until early next year.
Normal social contact would mean heading back to the office by this fall. I have really enjoyed working from home since mid-March last year. The biggest draw for me has been the disappearance of my daily commute. I have also noticed that I am more focused and more efficient when working at home. I do miss the social interactions with my fellow co-workers though.
The other day I was talking to my manager and we both agreed that we probably can just work from home full time and only head into the office occasionally once the office does re-open. My manager even went as far as saying that we probably wouldn’t need a desk at the office anymore. This is music to my ears and it would be absolutely amazing if I could work from home permanently.
Maybe this would be the first step to allow us to geo-arbitrage in the future?
Like the previous months, we spent most of May at home. Since the weather was warmer, we kept ourselves busy in our backyard garden.
Both kids have been helping out in the garden, too. When they aren’t helping out, their favourite activity has been digging holes, filling them up with water, and getting themselves covered in dirt from head to toe!
We feel very fortunate and blessed to have our backyard garden, especially during the COVID-19 global pandemic.
Dividend Income – May 2021
Anyway, back to the main topic – dividend income!
In May 2021, we received dividends from the following companies:
- Apple (APPL)
- AbbVie (ABBV)
- Bank of Montreal (BMO.TO)
- Costco (COST)
- Dream Office REIT (D.UN)
- Dream Industrial REIT (DIR.UN)
- Emera (EMA.TO)
- European Residential REIT (ERE.UN)
- Granite REIT (GRT.UN)
- H&R REIT (HR.UN)
- National Bank (NA.TO)
- Omega Healthcare (OHI)
- Procter & Gamble (PG)
- RioCan REIT (REI.UN)
- Royal Bank (RY.TO)
- SmartCentre REIT (SRU.UN)
- AT&T (T)
The 18 pay cheques that we received added up to $1,778.16. According to the Canadian all star dividend calendar, Feb, May, August, and November are months with low dividend payouts. Therefore, it shouldn’t come as a surprise that our dividend income lines up with this trend. After a very solid month in April where we received over $3,000 in dividend income, it is totally OK to have a lower dividend income month.
Out of the $1,778.16 received, $426.68 was in USD and $1,351.48 was in CAD. Long time readers will remember that we do not convert USD to CAD when reporting our monthly dividend income. I have been using this approach to avoid fluctuations in our monthly dividend income due to changes in the exchange rate.
If we had been converting USD back to CAD, we would have inflated our dividend income over the last few years. Now the Canadian dollar is stronger, our dividend income would have been arbitrarily lowered.
The top five dividend payers were Royal Bank, Bank of Montreal, Omega Healthcare, National Bank, and Emera (not in order). These top five dividend payouts accounted for $1,256.29 or 70.6% of our May dividend income. Seeing that these five companies made up over 70% of our May dividend income means we need to spend some time reviewing our dividend portfolio and try to diversify our dividend income further.
Since the dividend growth YoY parameter compares each month, it will take the rest of 2021 for our dividend income to stabilize and establish a new trend.
If we look at the overall YoY growth so far in 2021 (five months), we have a YoY growth rate of about 12%. This is definitely lower than the +15% target we’re aiming for. We definitely need to add more new cash and purchase more dividend paying stocks.
For May, we made a few changes in our dividend portfolio. First, after seeing news on the AT&T and Discovery merger and that AT&T plans to cut its dividends, we decided to close out our AT&T position completely.
A few months ago I opted to sell all Verizon shares and kept AT&T shares because I liked the idea of HBO Max. So far, HBO Max hasn’t panned out as well as I expected. The AT&T share price hasn’t really moved anywhere the last number of years. Since we care about the total return of our portfolio and not just dividend income alone, it makes sense to sell AT&T shares and invest the money elsewhere.
The merger between AT&T and Discovery will create a giant content creator and provider but there are so many details that need to be worked out. As an investor, I wanted to see these details laid out before we continue to invest in AT&T (or whatever the new company will be called).
The recent news of Amazon acquiring MGM for more than $8 billion is another indictor to me that there’s a huge war brewing in the streaming content world. I prefer to sit on the sideline and observe how things will play out before joining the playing field. Who knows, maybe in the near future we may decide to invest in the new AT&T/Discovery company.
Although I wrote about the idea of selling Canadian Tire and Saputo shares in last month’s dividend income update, I did absolutely nothing with them. As it turned out, both Canadian Tire and Saputo saw a nice jump in share price in late May. It just shows that sometimes, it is simply best to just leave your investments alone and not tinker too much. With that said, we plan to continue to add more shares of the best Canadian dividend stocks, most of which we already own.
In May, with the proceeds from the AT&T shares and some new cash, we then purchased 52 shares of Verizon and 56 shares of Enbridge, roughly $5,500 total. I invested in Verizon again so we have a play in the US telecommunication sector. I added more Enbridge shares to take advantage of the recent price slide caused by the possible Line 5 closure.
These transactions added roughly $150 toward our annual dividend income.
We were very pleased to see several dividend increases throughout May. These increases were nice to see, considering there were no increases last May at all.
- Pepsi Co (PEP) increased its dividend payout by 5.1% to $1.075 per share.
- Algonquin Power & Utilities (AQN.TO) increased its dividend payout by 10% to $0.1706 per share.
- Telus (T.TO) increased its dividend payout by 1.6% to $0.3162 per share.
- Hydro One (H.TO) increased its dividend payout by 5% to $0.2663 per share.
All these dividend raises increased our annual dividend income by $99.21. At 4% dividend yield, that’s equivalent of investing $2,480.33 of new capital.
By receiving organic dividend growth, we essentially doubled our annual dividend income (organic dividend growth plus investing new capital). This is a perfect example of having your money working hard for you, so you don’t have to.
With five months in the books, we have received a grant total of $12,119.87 in dividends. We are very close to exceeding the annual dividend income from 2016. Given that June dividend income should be strong, I expect by the end of next month, our dividend income for the year will exceed the 2017 total of $14,834.38.
It is certainly very nice to see how much progress we have made over the last ten years. I have no doubt by 2031 our dividend income will exceed our expenses and we can live off dividends and continue to share our experience with the Canadian dividend blog community.
At $12,119.87, it means our dividend portfolio has generated $13.17 per hour, assuming working 40 hours a week and 23 weeks so far in 2021. Since most of our dividend income is generated within TFSAs and RRSPs, only a very small portion is taxed. In fact, only slightly over $4,000 dividends came from our taxable accounts. In other words, we would pocket a lot more money than if we were earning $13.17 per hour salary from an actual job.
Dear readers, how was your May dividend income?