Dividend Income – May 2023 Update

Welcome to a new monthly dividend income update. 

These monthly dividend income updates are one of my favourite blog posts to write because they allow me to demonstrate that it is possible to build up a sizable portfolio and eventually live off dividends.

Now, how much dividends do we need to live off them? We estimate that we’ll need about $60,000 in dividend income to sustain our current lifestyle. For the extra expenses on top of that amount, we plan to supplement via part time income or selling some of our investments.

As of this writing, we are still on track to hit the $60k target by 2025. But it’s always important to remind myself that we’re not in a rush to get there. Enjoying the journey and gaining valuable memories is more important than rushing to get to the finish line. 

In May, I spent a week in Taiwan with a quick day trip to Hong Kong. This was my second work trip to Taiwan this year. Hopefully, I’ll visit Taiwan again later this year.

One night in Taiwan when I had the rare chance to be by myself with no work-related activities, I visited Raohe Street Night Market. It was packed with people! It took me about 2 hours to go through the entire night market (without crowds, it’d probably take about 15 minutes max to walk the entire length).

Despite all the different types of food available, I only had a cup of wax apples (aka lian-woo) and the Michelin guide black pepper bun. Both were delicious.

A few days after my trip to Taiwan, the four of us then hopped on a plane for a quick four-day trip to Calgary. Originally we were going to visit some family friends in Calgary but they had a last minute conflict, so we changed our plan and toured around Calgary instead.

Our favourite part of the trip was downhill karting and attending the children’s festival in Airdrie. 

We had a great time in Calgary. We plan to go back another time to visit our family friends.

On the home front, we have been busy with our backyard garden. We have been enjoying fresh radishes from the garden.

Dividend Income – May 2023

Alright, enough pictures… in May, we received dividend income from the following companies:

• Apple (APPL)
• AbbVie (ABBV)
• Bank of Montreal (BMO.TO)
• Costco (COST)
• Dream Industrial REIT (DIR.UN)
• Emera (EMA.TO)
• Granite REIT (GRT.UN)
• Metro (MRU.TO)
• National Bank (NA.TO)
• Omega Healthcare (OHI)
• Power Corp (POW.TO)
• Procter & Gamble (PG)
• RioCan REIT (REI.UN)
• Royal Bank (RY.TO)
• Starbucks (SBUX)
• SmartCentres REIT (SRU.UN)
• Verizon (VZ)
• Waste Connections (WCN)
• Wal-Mart (WMT)

The 19 dividend pay cheques added up to $3,098.12. Considering May is one of our weaker dividend income months, I was pleased with an amount over $3k. 

Furthermore, it’s nice that we had a very slight increase in dividend income compared to February’s $3,008.56.

Compared to May 2022, we saw a YoY increase of 27.43%. This is the highest monthly YoY growth so far this year so it’s very encouraging. After five months, we have an average YoY growth of 20.67%. We continue with this +20% YoY growth in order to reach our $49,000 annual dividend income goal for 2023. 

Out of the $3,098.12 received, $507.55 was in USD and $2,590.57 was in CAD. 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. Despite using a 1:1 exchange rate since I started posting monthly dividend updates, I am planning to convert USD to CAD using a constant exchange rate starting January 2024. 

Dividend Hikes

In May, we saw a number of companies raising their dividend payout.

• Pepsi Co (PEP) increased its dividend payout by 10% to $1.265 per share
• Apple (APPL) increased its dividend payout by 4.3% to $0.24 per share
• Telus (T.TO) increased its dividend payout by 3.6% to $0.3636 per share
• Hydro One (H.TO) increased its dividend payout by 6% to $0.2964 per share
• Bank of Nova Scotia (BNS.TO) increased its dividend payout by 3% to $1.06 per share
• Bank of Montreal (BMO.TO) increased its dividend payout by 2.8% to $1.47 per share
• CIBC (CM.TO) increased its dividend payout by 2.4% to $0.87 per share.
• Royal Bank (RY.TO) increased its dividend payout by 2.3% to $1.35 per share.
• National Bank (NA.TO) increased its dividend payout by 5% to $1.02 per share

All of these dividend hikes increased our forward annual dividend income by $526.17. A very solid month for organic dividend growth!

Dividend Reinvestment Plan (DRIP)

To keep our dividend investment strategy as simple as possible, we try to accumulate enough shares to enroll in DRIP. Once we’re enrolled in the DRIP, we’d put things on autopilot and dollar cost average over time. 

At the time of writing, we are dripping 25 out of 47 positions in our dividend portfolio.

In May we dripped the following shares:

• 3 shares of Bank of Montreal (BMO.TO)
• 1 share of Emera (EMA.TO)
• 5 shares of National Bank (NA.TO)
• 4 shares of Omega Healthcare (OHI)
• 6 shares of Power Corp (POW.TO)
• 2 shares of RioCan REIT (REI.UN)
• 5 shares of Royal Bank (RY.TO)
• 5 shares of SmartCentres REIT (SRU.UN)

In total, 31 shares were dripped and $2,041.69 was invested without having to pay any commissions.

These 31 shares added $105.53 toward our annual dividend income. 

Dividend Transactions

In the April dividend income update, I hinted that we were considering closing out both Omega Healthcare and Verizon positions. The reason? These two stocks have become a bit of a dividend yield trap. Both stocks haven’t done much in terms of share price appreciation. While the yields are quite high and attractive, I want my capital to grow, not decrease. 

Remember, despite income from dividends, total return matters.

When I write about something, I usually follow through with the idea. So not surprisingly, after receiving dividends from both Omega Healthcare and Verizon, we closed out both positions.

As a result of closing out these two positions, we decreased our annual dividend income by $652.96. 

Ouch, that was quite a big hit to our dividend income! But again, I wanted to focus on total return, rather than focusing solely on the total amount of dividends.

Why? Let me ask you, which scenario would you rather pick?

1. $50,000 in annual dividend income but your invested capital is down 50%.
2. $30,000 in annual dividend income but your invested capital has grown by 200%.

I’d take scenario #2 without any hesitation.

For scenario #1, while you’re getting a nice juicy dividend income, having your capital down by 50% is not desirable at all. One way to think about scenario #1 is that you’re essentially paying yourself an annuity.

While scenario #2 has a lower dividend income, because your invested capital has grown, you can always sell some capital to supplement your income needs. This is a far better way to live off your investments in retirement.  

With capital appreciation in mind and knowing brand name power, we decided to reinvest the money from selling OHI and VZ and some USD cash from dividends to purchase 46 shares of Apple.

This purchase added $44.16 toward our annual dividend income. In other words, the three transactions decreased our annual dividend income by $608.80. It’s not ideal but we’ve made up this dividend income loss from DRIP and organic dividend growth.

Given that we have purchased a large amount of dividend paying stocks already this year, our stock purchases for the remaining of the year will either slow down or stop completely. We now shift our focus to saving money for next year’s TFSA and RRSP contributions.

Dividend Score Card – May 2023

Here’s our dividend score card for May 2023.

Overall, it’s nice to see that we came out positive in total dividends added considering we closed out our positions in Omega Healthcare and Verizon. Both are considered very high dividend income generators. 

Dividend Income – May 2023 Summary

After five months of the year, we have received a total of $20,363.27 in dividend income. 

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

• $134.86 per day or $5.62 per hour. 
• $925.60 per week or $23.14 per hour after 22 work weeks.

All these numbers are a slight decrease compared to numbers from April but this is expected since we had a very strong April dividend income. 

From a quarterly dividend income point of view, assuming no dividend cuts, I’m optimistic that we’ll end up with slightly more dividends in Q2 than in Q1. 

It was amazing to see dividends coming in while I was on the road for almost 2 weeks in May. As I write this post, June is shaping up to be a great dividend income month for us.

I’m looking forward to writing and sharing our June dividend income report next month.

Dear reader, how was your May dividend income?