Boost Your Income: 3 Ways to Increase your Portfolio Yield

Let’s face it: When you think of dividend investing, you think of income and not total returns. That’s where we all start until we discover dividend growth investing and realize you can have your cake and eat it.

My investing journey has taught me that there are two very distinct phases of investing:

• The Accumulation Phase: The years where we save and invest. You let the compounding do the work for years.
• The Retirement Phase: The years where you live from your portfolio. As a dividend investor, that’s the income from my portfolio.

For the record, focusing on high yield only, like REITs, is a losing approach during both phases of investing. There are better ways to boost your retirement income! Achieving a solid retirement is possible but requires planning.

Know Your Portfolio

Before applying some of the strategies below, you REALLY need to know your portfolio. Do you know how much you need for retirement? Is the potential risk worth it?

Do you know your exposure across your accounts? If you don’t, get on it and build a spreadsheet. It’s easy; you can build your own pretty quickly. Your exposure has to be calculated for the company like Royal Bank, the sector like the financial sector, and then the industry like ‘banks – diversified’.

Do you know where your income is from? If you don’t, start tracking it. If you don’t know what generates your passive income, then you can’t work on optimizing it.

Do you know your annual income growth rate? If you don’t, you don’t know if your portfolio income keeps pace with inflation over time. It needs to grow organically. Not all investments have to grow, but overall, your portfolio needs to show it can keep up with inflation.

With a clear portfolio view, you can optimize your passive income, sit back, and enjoy financial independence.

The tools below are meant to help increase your income once you have a portfolio you are happy with.

Modified Dogs of the Dow

This strategy, also known as the Beat the TSX, or BTSX strategy, automates portfolio decisions by selecting the 10 highest-yielding stocks from the TSX 60.

In my opinion, applying the original rules of the strategy has risks and is not recommended. I have added two more criteria to improve the quality of the stocks.

The first is to ensure the holdings have increased their dividends in the past 5 years and the second is to limit the number of picks in the same industry to 2. Otherwise you are loading up on many utilities, banks, telcos and pipelines.

My approach with this strategy is to find the highest-yielding blue-chip stocks rather than apply the strategy as is and add one to my portfolio or swap one with a lower yield.

How To Use The Strategy: This approach is good for a non-registered account. The TSX 60 stocks are the core companies of the Canadian economy, providing safety and the highest yield, improving your portfolio income. There is no selling; just add to existing holdings.

Be Cautious With REITs

Many dividend investors fall in love with the monthly distribution of REITs and their higher yields. Guess what? Many do suspend the dividends when hard times come around.

How To Use The Strategy: You can get good income for years until it drops. Not many REITs exist in Canada, so the pickings are slim. REITs from grocery stores could be more stable.

Covered Call ETFs

Want to trade like the pros? Well, they use all the tools in the toolbox, such as options trading.

I have often discussed it, but I have never done it. After researching covered call ETFs, I prefer to invest in one.

You could do it with the banks, but it’s just one extra thing to manage with your portfolio. You need to pick the contract and the expiry and continuously do that. It’s time-consuming, unliked dividend investing where you buy, sit and cash in the dividends.

The downside of covered call ETFs is that you do not know the potential appreciation of the ETF or the growth of the distribution.

How To Use The Strategy: You want to use it to boost your income while avoiding overexposure to some sectors or industries. The assumption is that you probably have a lot of banks and utilities in your portfolio, so go with healthcare.

Specialty Investments

Some specialty investments can boost your income, but they also have their own risks.

One investment option with higher distribution is a split corporation such as Dividend 15 Split Corp. It can help increase your income, but you must understand it and know the risks.

Another option is a specialty fund like Canoe EIT Income Fund. While this is called a fund, it’s more like an income trust and is classified as an asset management stock. You invest in the fund manager’s ability to create a return on assets, which happen to be investments like you and I do.

How To Use The Strategy: You want to decide up front how much you want to allocate to this specialty investments and monitor. While you can increase your income, it’s not a set-it-and-forget-it like other investments.