TFSA Dividend Income

A few years ago when I was dipping my toes with investing in the stock market, I was apprehensive and skeptical at same time. This is coming from someone who has NO knowledge about investing in the stock market. This was something that my parents didn’t do and definitely I have no recollection that it was taught in school.

The very early days, I learned to be a trader, trying to time the market instead of time in the market. Buy low and sell high. I wasn’t happy with the results. At times, I earned some profits and at times I barely made even. There were NO predictable income streams. It became a full time job monitoring the stock market on a daily basis, sleepless nights, and lots of uncertainty. The roller coaster ride – experience led me to differentiate (trading vs. investing) short term gain vs. building long term passive income.

TURNING POINT: Becoming a full time dividend investor

I continue to educate myself on matters regarding financial literacy. In addition, I read books about dividend investing, watched YouTube videos, and learned strategies from the greatest investor of all time – Warren Buffett. Finally, I visited personal finance websites, investing forums, and joined their discussion.

In short, I continue to evolve as an investor. I’ve changed my approach and finally become a full time dividend investor. Over time, I’ve learned past mistakes and improved my strategy as new information become available to me.

TEMPERAMENT – THE KEY TO LONG TERM INVESTING!

Generally speaking, I’ve learned to be patient, disciplined, and consistent with my investing approach which has led to gradually improving our passive income through dividends.

Since 2016, I’ve invested much of my time in studying, researching, and picking dividend growth stocks that I will buy and hold.

Our goal is to live off with our growing passive income through dividends without harvesting the capital.

We both have maxed out  our Tax Free Savings Account (TFSA) for 2021 which is $75,500 each plus any gains earned over the years.

Our TFSA Portfolio consists of Canadian equities only. Beginning of this year we have added new securities to our holdings. 

We keep a watchlist of potential companies that we will partner in the future that meet our criteria.

If you follow my other post, we prioritize to max our TFSA contribution first, followed by RRSP, and finally, non-registered accounts if we still have the capacity to do so.

Below is our TFSA monthly dividend income for the current year and previous two years: 

 

Updated: Oct. 1, 2021

The effects of COVID 19 pandemic and oil price war early last year 2020 led to the temporary closure of many businesses and for some, a permanent one due to the threat of the virus. For all those reasons, this has led to massive job losses around the world and significant losses in companies earnings. No one has gotten off the hook, even the greatest dividend investor of all time Warren Buffett.

Therefore, in an effort to keep many businesses and corporations afloat, some of these companies have decided to reduce or cut their dividends.

As a consequence, you may have noticed a drop in our monthly dividend income in the month of February 2020 and also reflected in the month of May 2020. It is disappointing to see that our dividends in our TFSA have dropped significantly again for the month of August 2020. This is partly due to our conscious decision to sell some shares of one of my high yielding dividend stocks which I have too much weight on over 20%.

September 2020 has now shown slow recovery in our TFSA dividend income. Subsequently, we are now expecting a steady increase in the next few months provided these companies continue to pay dividends to their shareholders.

November 2020 has been a quiet month for many dividend investors in contrast to October 2020 as not many quarterly paying dividends fall for this month.

December 2020 showed a steady recovery in our TFSA portfolio. We made changes in our overall portfolio as reflected in here

As a dividend investor, I am disheartened to see that our TFSA dividend income was down compared to the previous year but this has been an exceptionally difficult time and no one has been spared coupled with our mistakes of exposure to only a few sectors.

January 2021 our portfolio was still overweight in some industries, particularly RNW and EIF which we have been holding for a few years. We are trying to diversify and aiming for a more balanced portfolio hence we sold some of its shares. They are both excellent stocks and still part of our long term portfolio. Moreover, proceeds were then bought new dividend growth stocks at the beginning of the year.

February 2021 It is one of the few months that dividends are a bit weaker as not many companies that pay quarterly falls into this month. We are looking of improving the passive income of this month and a few other months in the coming weeks or months by starting new positions of some great dividend growth companies.

March 2021 Sold two stocks and started positions on the remaining big banks that are not part in our TFSA portfolio. This will help increase the dividends in the weaker FMAN months in our TFSA.

April 2021 We decided to let go our gold stocks and added REITS missing in our TFSA holdings.

DIVERSIFICATION

For all those reasons, as a dividend income investor we decided to part ways with some of the companies that have reduced and cut dividends. On a similar note, we started positions in companies that we considered essentials during this crisis such as utilities, telecom, technology, and consumer staples.

Diversification helps to mitigate any losses to any dividend investors. During market downturn or recession, there are companies that will continue to thrive hence not severely impacted. In fact, some of these companies continue to increase their dividend payout during these times. Here is the link to our updated 2021TFSA Dividend Portfolio.

As countries and governments started to ease restrictions and businesses reopening with the new normal conditions, our economy will hopefully also start to improve and recover. Therefore, it is crucial for dividend investors to partner solid dividend growth companies.

Similarly, we are confident that with the new additions to our TFSA dividend portfolio, it will continue to provide us with increasing dividend income in the coming months and years.

Note: However, past performance does not guarantee future results. Therefore, dividend income may or may not change for the coming months.

2021 TFSA Dividend Income to date: $6,092.96

Jan – $717.26

Feb $486.15

Mar – $724.74

Apr – $884.33

May – $485.74

Jun – $717.37

Jul –  $844.90

Aug – $512.84

Sep – $719.63

Oct – 

Nov – 

Dec – 

 

My Final Thoughts

Our goal at the beginning of each year is to maximize our TFSA contribution. Once we achieved that, we then continue adding our RRSP – investing in US and Canadian dividend stocks, and finally in non-registered accounts if we are still able generate extra funds.

We have reached $10,019.62 of passive income through dividends in 2019, in our TFSA accounts alone. A great milestone to end the decade for us. However, 2020 showed a decline of 9.4% in our TFSA annual income down to $9,073.74.  

This was due to a couple of reasons. Firstly, 2020 has been exceptional, we are in a midst of global pandemic. Many companies have struggled with falling revenues and other businesses have shut down permanently. As a result, few companies decided to cut and pause dividend distribution to their shareholders in spite some of these companies have been dividend aristocrats for many years. Secondly, we were not well-diversified and our previous years portfolio was only about 8-13 companies and were heavily weighted on Energy, Financial sectors, and REIT’s which were mostly monthly dividend earners. Hence if you notice in 2019 there isn’t much fluctuation with our monthly dividend income. Lastly, few of our positions were not dividend growth companies, only solid dividend paying companies which were great during the bull years from 2010 till the start of 2020 which unfortunately some of them either stopped or suspend their dividend distributions.

All in all, moving forward, we believe that we have built a solid dividend growth TFSA portfolio of companies that will increase our passive income in the future.

For the purpose of this blog post, I will update our TFSA dividend income every month. More recently, I started a live Canadian non-registered account DGI portfolio. Hopefully you will continue to join and follow our journey towards financial independence. 

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PPGal
1 year ago

This inspire me to track my monthly dividends no matter how small it is. I also like receiving monthly dividends (from REIT and ETFs) and consider buying blue chip stocks. Do you also plan to have a portfolio page on which you’ll show the companies you are currently invested in? Freedomthirtyfiveblog.com has one.

PPGal
1 year ago

Will look forward to it. Because the market is down, it’s a bargain to buy stocks but not a good time to sell especially for a retiree.

PPGal
1 year ago

I noticed that your TFSA is earning monthly dividends. From what I observed, most companies hve quarterly dividends. On the other hand REITs and bonds have monthly distribution/interest.

Are there other equities that have monthly dividends which can be a good source of income in retirement?

HenryM
12 days ago

Just found your blog, and good work. My preference is less diversification and more concentration on quality. Visit my site to view my opinions.

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