TFSA Dividend Income

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

I was more of a trader, trying to time the market. Buy low and sell high. Admittedly, 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 and it’s a full time job for others monitoring the stock market on a daily basis. That experience in a roller coaster ride led me to learn how to build passive income through dividends.

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 followed the strategy from the greatest investor of all time Warren Buffett. Finally, I visited personal finance websites, investing forums, and joined their discussion.

In short, I’ve changed my approach and become a full time dividend investor. Over time I continue to evolve as an investor and I am getting better at it.

CONSISTENT AND DISCIPLINE 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 only consists of Canadian equities. 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 previous post, I am personally not an advocate of Registered Retirement Savings Plan (RRSP). We prefer to hold non-registered accounts after maxing out our TFSA contribution room.

Below is our TFSA monthly dividend income for this year: 

(Updated: February 2, 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 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 and also reflected in the month of May. It is disappointing to see that our dividends in our TFSA have dropped significantly again for the month of August. 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 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 has been a quiet month for many dividend investors in contrast to October as not many quarterly paying dividends fall for this month.

December 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.

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 TFSA 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: $712.66

Jan – $712.66

Feb – 

Mar – 

Apr – 

May – 

Jun – 

Jul –  

Aug –

Sep – 

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 continued to invest in US and Canadian dividend stocks in non-registered accounts.

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, this year has been exceptional and we are in a midst of global pandemic. Many companies have struggled with revenues falling and other businesses have shut down permanently. As a result, few companies decided to cut and pause dividend distribution to their shareholders despite some having 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 in Energy, Financial sectors, and REIT’s. Lastly, few of our positions were not true dividend growth companies, only solid dividend paying companies which were great during the bull years from 2010 till the start of 2020.

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

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

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PPGal
11 months 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
11 months 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
9 months 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?

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