Dividend Income: August 2021

Dividend Earner

Dividend Earner

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3 min read Affiliate Disclosure

The markets continue to go up and up and up … Yet, the Canadian banks and many financials are still in the low PE range. A good situation if you don’t know where to invest.

If you look at my portfolio, and you should, you will notice that the Canadian banks are some of my lowest-performing stocks. In fact, the best Canadian bank is the one you don’t think about. It’s also the first big bank to offer $0 transaction fees with their discount broker.

While the Canadian banks are no-brainers in terms of investing, and chances are you will beat the TSX, it lags behind the SP500. A single ETF like the Vanguard VFV ETF could make you more money.

Investors always talk about buy and hold but really, how many of you have held for 40 years? Every time the stock market pulls back, you start playing with your holdings…

In the accumulation years, my approach is dividend growth investing with the intention to grow my portfolio to the biggest I possibly can. At the point of retirement, I switch to a dividend income portfolio.

The difference between a dividend growth stock and a dividend income stock is all in the Chowder Score and the dividend yield.

This thinking is counter-intuitive when you first start with dividend investing as you think of the dividend and DRIP but dividend growth will make you a lot more money.

Stock Trades

A very quiet August with only 1 trade. I had almost $900 in cash from dividends and purchased Alimentation Couche-Tard.

I am building a full position in Alimentation Couche-Tard to benefit from the transition to electric charging. It takes way longer than fuel to charge a car … they should see an increase in convenience spending which is a high profit margin.

On the topic of trades, I am first an investor in the business and not the metrics. The metrics help with relative comparisons.

Portfolio Management

I have 25 stocks in my portfolio which includes Telus and TC Pipeline that I am working on selling from Computershare (it takes time with Computershare). It’s less than 1% of my portfolio.

My USD vs CAD ratios are the same as last month. My USD vs CAD is now 55 / 45.

Nothing wrong with that. Many shy away from investing directly in US stocks, and that’s understandable since there is a currency conversion needed. That’s why I also have Vanguard’s VFV ETF (S&P 500 Index ETF).

Since VFV and XQQ are transacted in CAD, I track it as a CAD currency but its underlying assets are in USD. If I took that into account, my USD vs CAD holdings is 62 / 38.

As you know, I went from covering most of the sectors to only covering 7 (from 11 to 7) and that’s perfectly fine as I am well-diversified when you look at my industry coverage.

Industry Diversification August 2021
Sector Diversification August 2021
wdt_ID Dividend No Growth < 6% Growth > 6% Growth > 10% Growth
2 None 7.10 0.00 0.00 0.00
3 Yield < 2% 3.28 0.00 12.06 36.75
4 Yield > 2% 0.00 0.00 3.70 5.43
5 Yield > 4% 0.00 0.00 26.45 0.00
7 Yield > 6% 0.00 0.00 4.93 0.00

Dividend Income

My August 2021 dividend income is $4,211. That’s the biggest dividend income I have received. All of it re-invested.

My total annual yield is now 1.71% at the time of writing. It’s a dividend growth portfolio for total returns and not a dividend income portfolio for retirement (not yet). Since I have barely made any changes to my portfolio, the shift to a lower yield is primarily due to the value growth.

The formula for my yield is the expected total annual dividend income divided by my total portfolio value.

Dividend Income August 2021

Part of my success is focusing on companies that operate like Tollbooth. While dividend income is not the priority today, dividend growth is!