Can we live off dividends? A case study of geo-arbitrage

Since Mrs. T is originally from Denmark and I’m originally from Taiwan, one of the medium-term goals we have is to live in these countries for an extended period of time. This would allow the kids to learn the languages. It’d also provide an opportunity for me to learn Danish (and for Mrs. T to learn Mandarin). Years ago, we tentatively made the plan that we’d move to Denmark in the summer of 2021. However, with visa complications, COVID-19, school, and other various factors, we’ve decided to push this plan out by a few years. 

The other night, while we were sitting on the couch having hygge, Mrs. T had a great question – could we move to Denmark now and live off dividends? Or do we need to rely on having a full-time job?  

Can we live off dividends now via geo-arbitrage? 

Mrs. T’s question got me very curious. So I started to do some research on the cost of living for Copenhagen and a few other Danish cities. For comparison purposes, I also found the cost of living for other nearby cities in Sweden and Germany.

For the cost of living data, I used Nomadlist and Expatistan. While the data from Nomadlist and Expatistan are based on digital nomads and expats, Expatistan has a more detailed breakdown. The data from these two websites do not match 100%, so I had to do some estimates on my own. 

Since Expatistan only provides a percentage difference between the two cities, rather the actual cost of living, I used our average annual spending from the past three years ($54,427.59) as the baseline for a family of four, then use that to estimate the cost of living for the other cities. 

 CopenhagenAalborgAarhusMalmöHamburgBremenVancouver suburb
Overall Score3.553.132.883.413.463.113.52
Family scoreGoodOKOKOKGoodOKGood
Cost of living for nomad$6,076$4,859$5,347$3,565$4,754$3,479$3,121
Cost of living for family$11,509$6,017$7,082$4,521$7,786$4,938$4,522
Cost of living for expat$4,539$2,750$2,969$2,102$3,147$2,092$2,044
Cost of living for local$3,288$1,719$2,023$1,292$2,224$1,411$1,292
1 br studio$2,688$867$1,250$883$1,848$1,001$1,001
Dinner$25$21$21$12$15$9.24$9.51
Beer (0.5L)$8.48$10$10$5.87$6.16$6.16$4.75
Coca-cola (0.3L)$4.14$4.17$3.47$1.96$3.08$3.08$2
Coffee$7.65$6.94$6.94$3.91$4.62$3.85$3
Per year cost for family$138,108$72,204$84.984$54,252$93,432$59,256$54,264
% delta+155%+33.06%+56.61%-0.02%+72.18%+9.2%0%
Delta $30k-$108,108-$42,204-$54,984-$24,252-$63,432-$29,256-$24,264
Delta $50k-$88,108-$22,204-$34,984-$4,252-$43,432-$9,256-$4,264
Expatistan.com+21%N/A+9%-11%0%-16%0%
Normalized data (Avg spending)$65,857.39N/A$59,326.08$48,440.56$54,427.59$45,719.18$54,427.59
Delta $30k-$35,857.39N/A$-29,326.08-$18,440.56-$24,427.59-$15,719.18-$24,427.59
Delta $50k-$15,857.39N/A$-9,326.08+$1,559.44-$44,27.59+$4,280.82-$4,427.59

Copenhagen

Having stayed in Copenhagen every time we went back to Denmark, I knew Copenhagen would be quite expensive, but I was completely shocked by the actual numbers. According to Nomadlist, Copenhagen is +154.51% more expensive than the Vancouver suburb for a family of four. According to Expatistan, Copenhagen is 21% more expensive. Based on a dividend income of $30k, we wouldn’t be able to live off on dividends alone. We’d definitely need to work and find supplement income.  

Aalborg

Aalborg is in the northern part of Denmark and it is a city that I have not visited yet. According to Nomadlist, Aalborg is a lot cheaper than Copenhagen but still more expensive than where we currently live. Expatistan did not have any data for Aalborg. Looking at the data from Nomadlist, I would guess that the cost of living for Aalborg would be a little bit cheaper than Aarhus, but probably still a little bit more expensive than where we live now.  

Aarhus

Aarhus is the second most populated Danish city and a few high tech firms have offices in this city. Not surprisingly, Aarhus is cheaper than Copenhagen but still more expensive than where we live currently. 

Malmö

Malmö is in Sweden about 40 minutes west of Copenhagen. Mrs. T and I have visited Malmö city centre previously and enjoyed the city. Due to the lower cost of living, many people live in Malmö and commute daily to Copenhagen for their work. Last December, when we were in Denmark, we stayed with friends of ours who lived in the outskirts of Malmö and we really enjoyed our stay. 

It is interesting to note that the cost of living for Malmö is roughly the same as the suburb of Vancouver. 

live off dividends - Malmö
Visiting our friends’ place in the outskirts of Malmö before Christmas.

Hamburg

While living in Germany as a Co-op student, I visited Hamburg many times and quite enjoyed the city (as long as you stay away from Reeperbahn, aka the red-light district). The Hamburg Christmas market was really awesome too. According to Nomadlist, Hamburg is 72% more expensive than where we currently live, but Expatistan states the cost of living between Hamburg and suburb Vancouver about the same. 

According to Expatistan, clothing and transportation is more expensive in Hamburg than where we live now. Since we don’t spend a lot of money on clothing and transportation, I’d make an educated guess, that for us, living in Hamburg would be cheaper than living in the suburb of Vancouver. 

Bremen

Bremen is southwest of Hamburg and is another city that I have visited many times. According to Expatistan, Bremen’s cost of living is cheaper than the suburb of Vancouver, which I am not surprised at all. 

Live off Dividends in Denmark, Germany, and Sweden

In 2020, we should be tracking to receive around $27,000 in dividends. Due to COVID-19, we can’t just drop everything and move to Europe right now. We should be able to reach $30,000 in dividend income next year, so I decided to use this number as the baseline to determine whether we can live off on dividends alone. 

According to both Nomadlist and Expatistan, we can’t live off $30,000 in dividend income in any of the cities that we picked. However, if we had $50,000 in dividend income, it may be possible to live off dividends if we were to live in Malmö and Bremen. In other words, we currently don’t have enough dividend income to live in these European cities.

One thing to keep in mind is that the data is based on digital nomads and expats who may not have the same lifestyle as us. It is entirely possible to live in these cities with lower annual expenses. For example, friends of ours live in a small town about 35 minutes away by train from Malmö city centre. The housing cost at such a small town is much cheaper than the city centre. Therefore, it is entirely possible for some Danish small cities or towns to have a lower cost of living than the three Danish cities I have mentioned earlier. Since Germany is typically cheaper than Denmark, the border city of Flensburg Germany may be a good city for us if we want to stay close to Denmark while keeping a low cost of living.  

Having two young kids, another thing to consider is education cost. Fortunately, public schools are free in Denmark, Germany and Sweden. Since both kids are fluent in Danish, attending Danish schools shouldn’t be an issue. Attending either German or Swedish schools will mean that both kids would need to learn a new language. Given that I learned English as a teenager when my family and I immigrated to Canada, I have no doubt our kids would be able to pick up German or Swedish. 

For me, the biggest obstacle to living in Denmark, Germany, and Sweden would be figuring out how to stay in these countries legally for an extended period of time. This isn’t a problem since Mrs. T has a Danish citizenship and both kids can get Danish passports (we just need to apply). For me to stay in Denmark, the easiest way is to find a job and get a work visa, but that kind of defeats the purpose of living off dividends. From my limited research, it seems that self-employed non-EU foreigners can apply for residency permits in Germany and Sweden if they can prove that they have enough money for the first two years. 

What about living in Taiwan?

Given that $30k in dividend income is not sufficient for a family of four to live in Copenhagen, Aalborg, Aarhus, Malmö, Hamburg, and Bremen, I began to wonder, what about Taiwan? Can we live off dividends in Taiwan?

Due to work, I have been visiting Taipei quite frequently the last number of years. Whenever I was in Taipei, I certainly paid attention to how much things cost. In general, I’ve found that groceries, eating out, transportation, and clothing to be a lot cheaper than in Vancouver. 

When it comes to data from Nomadlist I was completely shocked to see that Taipei is more expensive than Vancouver suburb. However, according to Expatistan, Taipei is 17% cheaper. After examining the data more, it seems that if you live in central Taipei, housing can be quite expensive. If you live in one of the districts outside of central Taipei, housing cost quickly decreases.

live off dividends - Taipei
One meal I had in Taipei. This cost less than $10 CAD.

On the other hand, Taichung and Tainan, are much cheaper than Taipei. Since I grew up in Taichung before we immigrated to Canada, I have great memories about Taichung and the surrounding areas. Therefore, I think Taichung would be a great place to stay for a year or two. 

While $30,000 in dividend income may not be sufficient if we live in Taipei, $30,000 is sufficient for Taichung and almost enough for Tainan. At $50,000 in dividend income, we could live quite comfortably in all three of these Taiwanese cities. 

 Vancouver suburbTaipeiTaichungTainan
Overall Score3.524.323.353.37
Family scoreGoodGoodOKOK
Cost of living for nomad$3,121$2,497$1,957$2,866
Cost of living for family$4,522$4,637$2,347$2,556
Cost of living for expats$2,044$1,819$1,197$1,507
Cost of living for local$1,292$1,325$671$730
1 br studio$1,001$911$496$509
Dinner$9.51$5.13$3.88$2.07
Beer (0.5L)$4.75$5.47$2.28$2.28
Coca-cola (0.3L)$2$1.14$0.68$1.3
Coffee$3$5.47$2.28$3
Per year cost for family$54,264$55,644$28,164$30,672
% delta0%+2.54%-48.1%-43.48%
Delta $30k-$24,264-$25,644+$1,836-$672
Delta $50k-$4,264-$5,644+$21,836+$19,328
Expatistan.com0%-17%-22%-0.43
Normalized data (Avg spending)$54,427.59$45,174.9$42,453.52$31,023.73
Delta $30k-$24,427.59-$15,174.9-$12,453.52-$1,023.73
Delta $50k-$4,427.59+$4,825.1+$7,546.48+$18,976.27

Unlike Denmark, Taiwan is quite expat friendly when it comes to visas. For me, I can re-apply for a Taiwanese passport. According to the Taiwanese National Law, both kids can get Taiwanese nationality as children born abroad to any Taiwanese nationals acquire the Taiwanese nationality automatically at birth. Mrs. T can easily stay in Taiwan up to six months at a time and just needs to hop the border (i.e. go to Hong Kong or Japan) to reset the six month timer again. Alternatively, once we decide to live in Taiwan for a certain period of time, she can then apply for permanent residency. This is what Jeremy at Go Curry Cracker did.

If we were to move to Taiwan, language would be a major barrier for the kids and Mrs. T. While both kids somewhat understand Mandarin, they don’t really speak Mandarin yet. Enrolling both of them in public schools may be a bit challenging at the beginning. To learn Mandrin quickly, we’d need to enroll both kids (and possibly Mrs. T) in intensive Mandarin classes. I would also teach all three of them Mandarin at home. Living in Taichung and Tainan, where there are fewer native English speakers, would certainly force both kids and Mrs. T to learn Mandarin quicker than if we were to live in Taipei where there are more native English speakers. 

Live off dividends – what about expanding our list? 

So far, I have only analyzed Danish, Swedish, and German cities. I also looked at three Taiwanese cities. What if we expand our list and look at other cities in the world and see if we can live off dividends? 

For that, I decided to take a look at Chiang Mai, Kuala Lumpur, and Colombo in Southeast Asia, Warsaw, Budapest, Lisbon, Split, and Zadar in Europe. Lima and Buenos Aires in South America.

To my surprise, all of these cities are much cheaper than where we currently live. In fact, with $30,000 in dividend income, our family would be able to live off that income in Chiang Mai, Kuala Lumpur, Colombo, Lima, and Buenos Aires. If we could generate $5,000 through other means, Budapest, Split, and Zadar would be a possibility. 

At $50,000 in dividend income, we’d be able to live pretty comfortably in all of these cities. 

 Chiang MaiKuala LumpurColomboWarsawBudapestLisbonSplitZadarLimaBuenos Aires
Overall Score4.513.913.533.8444.693.863.523.984.27
Family scoreOKOKOKOKOKGoodOKOKOKGood
Cost of living for nomand$1,424$1,677$1,264$2,465$1,998$2,626$3,505$2,450$1,360$1,135
Cost of living for family$2,342$3,726$1,555$3,091$2,677$3,985$2,910$1,866$1,898$917
Cost of living for expad$998$1,389$897$1,664$1,490$1,892$2,239$1,350$834$570
Cost of living for local$669$1,065$444$883$765$1,138$831$533$542$262
1 br studio$430$796$426$645$697$1,001$513$416$432$140
Dinner$2.58$4.14$1.78$8.65$6.34$9.23$16$3.08$3.6$4.12
Beer (0.5L)$2.58$5.26$0.89$3.46$1.73$3.08$2.67$1.54$1.98$1.24
Coca-cola (0.3L)$0.75$0.8$0.3$1.15$1.21$1.41$2.46$0.51$0.75$0.63
Coffee$3.18$3.19$0.59$2.35$1.53$1.54$2.05$1.64$1.2$0.99
Per year cost for family$28,104$44,712$18,660$37,092$32124$47,820$34,920$22,392$22,776$11,004
% delta-48.21%-17.6%-65.61%-31.65%-40.8%-11.88%-35.65%-58.74%-58.03%-79.72%
Delta $30k+$1,896-$14,712+$11,340-$7,092-$2,124-$17,820-$4,920+$7,608+$7,224+$18,996
Delta $50k+$21,896+$5,288+$31,340+$12,908+$17,876+$2,180+$15,080$27,608+$27,224+$38,996
Expatistan.com-50%-47%-58%-41%-44%-26%-36%-37%-52%-61%
Normalized data (Avg spending)$27,213.8$28,846.62$22,859.59$32,112.28$30,479.45$40,276.42$34,833.66$34,289.38$26,125.24$21,226.76
Delta $30k+$2,786.2+$1,153.38+$7,140.41-$2,112.28-$479.45-$10,276.42-$4,833.66-$4,289.38+$3,874.76$8,773.24
Delta $50k+$22,786.2+$21,153.38+$27,140.41+$17,887.72+$19,520.55+$9,723.58+$15,166.34+$15,710.62+$23,874.76$28,773.24

If we were to decide to live in one of these cities for an extended period of time, we need to do more research on how one can extend the traveller’s visa.   

Chiang Mai and Thailand used to be quite expat friendly but I believe the Thai government has now limited how long expats can stay in the country. With my limited research, Malaysia (Kuala Lumpur) and Sri Lanka (Colombo) have it pretty straightforward in regards to extending your visa for an extended stay. Applying for an extended stay visa in Portugal, Poland, Croatia, Peru, and Argentina all appear to be somewhat straightforward as well. Much more research would be needed. 

For us, language would be the biggest challenge if we were to move to one of these countries and stay there for an extended period of time. Having said that, I have no doubt that we’ll be able to have some basic knowledge of the language if we put in some serious effort.

Summary

Our financial independence plan is to one day live off dividends. Based on our historical annual spending, we estimate we need between $50,000 to $60,000 in dividends if we continue to live in the suburb of Vancouver. However, if we decide to geo-arbitrage by living somewhere else, living off on dividends is definitely a possibility. 

Living off dividends in a number of Danish, Swedish, and German cities isn’t a possibility for us right now. To live there, we’d definitely need to find a full time job. If we decide to move to Taiwan, living off on dividends becomes a possibility if we were to live in Taichung. If we were to expand our list further, we can live comfortably in a number of cities with $30,000 dividend income. 

So, can we live off dividends now? 

By geo-arbitraging and moving to a city with a low cost of living, we can certainly live off dividends now. How cool is that? 

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26 thoughts on “Can we live off dividends? A case study of geo-arbitrage”

  1. If you and your wife are collecting $60,000 a year in eligible dividends while living in Canada, you would pay no tax (because of the dividend tax credit). I wonder if that is the same if you are non-resident.

    Also, if you become an ex-pat, isn’t there a declaration that has to be made, that causes any non-registered investments to be deemed “sold”, triggering a tax event? My memory is fuzzy on this.

    Reply
    • Typically you need to pay a 25% withholding tax on the dividends unless there are treaties between Canada and the country that you reside in.

      I believe you may be able to continue hold and add non-registered investments. You can’t add any more contributions to registered accounts when you’re not living in Canada.

      I didn’t get into all the tax detailed information as I wanted to show that it is possible to geo-arbitrage with our current amount of dividend income. Obviously there are some details to be worked out. 🙂

      Reply
  2. I wonder if you’d find that you can “work the system” in each of the cities to live more frugally. I would that these might be mostly averages, and maybe you’ll be able to find the cheap grocery store or need only one car (not sure if you have two now).

    This sounds like an excellent exercise even if it’s not entirely practical to do it now (due to life situations, money, and/or COVID-19). All those things seem to be fluid for you, so they could be options down the line.

    Reply
    • You can probably work the system by living in a certain city for only a set period of time and move around that way.

      Yea, definitely need to be able to travel around the world in order to pull this off.

      Reply
  3. What a fantastic article Bob! I also plan on geo arbitraging when we hit our FI number, though our number is based on SF Bay Area costs. We’ve been looking at Valencia Spain for the weather and low costs and supposed ease of non-worker visa. I also think you can probably live quite cheaper than the averages you’ve used from those sites. Looking forward to hearing more about your plans and research!

    Reply
  4. IMHO, the dividend stocks you chose are tilted too much to yield. Put it another way, not really safe enough from getting cut, let alone growing over time. This may sound hash, but in reality everyone who want to live off dividend should first consider safety of the dividend

    Reply
    • Hi there,

      Dividend safety is obviously important and is certainly something that we are looking out for.

      Since I don’t disclose the breakdown of our portfolio, not sure how you have come to the conclusion that we have stocks that are tilted too much to yield.

      Reply
      • I am long time follower of your blog. My impression is that the US portion of the portfolio is more “blue chip” kind of. The Canadian stocks are more into natural resource kind of thing (probably due to the nature of Canadian economy). Nature resource has cycle that from time to time, the dividend cut is kind of unavoidable. My general observation is that US based company took dividend increasing record much more seriously than company based outside. For example, today I found that the Vanguard International Value and Explorer funds I had cut dividend also to half of last years (probably due to covid-19). I appreciate your are willing to publish my comments. Just my 2 cents. Wish your portfolio are doing great in the coming years.

        Reply
  5. Pretty good. I’m planning to live in Chiang Mai and travel around SE Asia for a year.
    It’s easy for me because I have a Thai passport, but I’ll have to look into long-stay for Mrs. RB40. I’m sure she can get some sort of spouse visa.
    The cost of living there is lower than normal right now. Rent is cheap due to a large amount of vacancy.

    Reply
    • Chiang Mai would be amazing! I think Thailand recently changed how long foreigners can stay in the country so you’d definitely want to check for MRs. RB40. Hopefully, it’s easy for you to get some sort of spouse visa.

      Reply
  6. You’ve certainly looked into the costs, but have you looked into employment opportunities in either country? It’s one thing to live of your current dividend income, but if you could offset your expenses by even 50% it would make you much less dependant upon your dividends.

    Reply
  7. Whenever I start dreaming of doing this,
    I head to numbeo.com

    Lots of data and many ways to do comparisons.
    It helps when my daughter starts looking at
    colleges in Taiwan.

    Reply
  8. Hi Bob,

    Great thought experiment! Funnily we have been talking about moving abroad and Vancouver is one of the options – amongst Southern Europe. We will only pull this off after the kids are out of school. So let’s see how the world looks like then.
    Germany is actually a great country to live – many of our friends are expats and „got stuck“. Relatively cheap living expenses with a superb (and cheap) healthcare system. One of the best public school systems (the main reason for us to stay here).

    Let me know when you are in Europe – happy to show you guys around!

    Cheers
    Finanzr

    PS. We estimate a monthly dividend income of 5.000€ to fully support our lifestyle. That is 80.000€ per year before tax – or roughly 96.000 usd. Yikes! But hey, we are no frugalists… 🙂

    Reply
    • Having lived in Germany for 8 months, I agree with you, Germany is a great place to live. The cost of living is generally cheap as long as you stay away from Munich. 🙂

      Are universities still free in Germany or you now need to pay for post secondary education in Germany?

      Reply
      • Hi Bob,

        all universities are actually for free (if it is your first degree, including masters). We used to have a fee for the university, but it was very controversial and they got rid of it. I don’t see it coming back anytime soon.
        Yeah, Munich is very expensive, but also a beautiful area with all the mountains, lakes and beer gardens. Normal people find it impossible to buy a house there (well above 1Mio). But even Hamburg is too expensive if you are looking to buy a house for your family.
        Generally speaking, I am a happy to not own the house we live in. Instead we are also landlords, which hopefully pays out over time…

        Reply

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