Financial Freedom Update (Q1) 2021 – First Update of the Year

Welcome to the Million Dollar Journey 2021 (Q1) Financial Freedom Update – the first update of the year!  If you would like to follow my whole financial journey, you can get my updates sent directly to your email, via Twitter and/or Facebook.


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For those of you new here, since achieving $1M in net worth in June 2014 (age 35), I have shifted my focus to achieving financial independence.  How?  I plan on building my passive income sources to the point where they are enough to cover our family expenses.

Here is a little more detail on our passive income goals:

How it all started – Original Financial Goal

Our current annual recurring expenses are in the $52-$54k range, but that’s without vacation costs.  However, while travel is important to us, it is something that we consider discretionary (and frankly, a luxury). If money ever becomes tight, we could cut vacation for the year. In light of this, our ultimate goal for passive income to have enough to cover recurring expenses, and for business (or other active) income to cover luxuries such as travel, savings for a new/used car, and simply extra cash flow.

Major Financial Goal:  To generate $60,000/year in passive income by end of the year 2020 (age 41).

Reaching this goal would mean that my family (2 adults and 2 children) could live comfortably without relying on full-time salaries (we are currently a one-income family).   At that point,  I would have the choice to leave full-time work and allow me to focus my efforts on other interests, hobbies, and entrepreneurial pursuits.

I’m happy to report that we have achieved this goal in 2020 and fortunately, slightly ahead of schedule. While the goal is to continue building and reinvesting those dividends within the portfolio I’m finding that as the years go by, more focus is being put on indexing. Having said that, I haven’t sold any dividend positions in favour of index ETFs… yet.

The Previous Update

In the previous update, I wrote about the stock markets v-shape recovery from the COVID19 sell-off back to all-time highs.  The stock market has been a good representation of the craziness of 2020.  From market all-time highs (first half of Q1 2020), to the fastest 35% correction in history (second half of Q1), then to one of the fastest recoveries recorded (S&P500)!

sp500 aug20

Here is a summary of the last update:

Q4 2020 Dividend Income Update

 AccountDividends/yearYield
Smith Manoeuvre Portfolio$7,8004.58%
TFSA 1$4,2505.42%
 TFSA 2$3,9004.94%
 Non-Registered$3,9005.04%
 Corporate Portfolio$30,5004.10%
 RRSP 1$8,0002.87%
 RRSP 2$3,5002.47%
  • Total Portfolio Value: $1,568,867
  • Total Yield: 3.94%
  • Total Dividends: $61,850/year 

Current (Q1 2021) Update

2020 finished with making all-time stock market highs (see 10-year S&P500 image below) and 2021 has kept the trend going.

spy10year
S&P500 10 year chart

While the TSX over the last 10 years has significantly dragged behind the S&P500, it is following the same pattern in making all-time highs. Everything seems to be working in unison for the Canadian market – financials, technology, and even energy and material stocks. The one sector that’s dragging a little are utilities which are likely due to inflation fears and rising bond yields.

tsx60 10 year chart
TSX60 10 year chart

What happens next, in the short term, remains to be seen.  On the other hand, the market has proven time and time again that over the long term, it will continue to chug along in an upward direction – and that’s what I’m betting on.

As I’ve mentioned in many other updates, I like to buy quality dividend companies (and indexes) when their valuations are attractive.  In other words, when they are being sold off (ie. dip).  You can see some of my favourite Canadian dividend stocks here.

Thus far in 2021, I have deployed capital into the following positions:

  • Waste Connections (WCN);
  • Brookfield Infrastructure (BIP.UN/BIPC)
  • iShares All-World Ex-Canada Index ETF (XAW)

The goal of the dividend growth strategy is to pick strong companies with a long track record of dividend increases.  In terms of dividend increases, despite the market volatility, this year has proven to be lucrative for dividend growth investors thus far.

2021 Dividend Raises

So far in 2021, the Canadian portion of my portfolio received raises from:

  • CU.TO (1% increase)
  • MRU.TO (11.1% increase)
  • CNR.TO (7% increase)
  • XTC.TO (5.3% increase)
  • BIP.UN/BIPC (5.2% increase)
  • MG (7.5% increase)
  • CNQ (11% increase)
  • NTR (2% increase)

But what about dividend cuts? While 2020 was pretty tough for dividend cuts, I haven’t seen any cuts to my portfolio yet for 2021, but it is still early. :)

Top 10 Holdings

Our top 10 holdings have moved around quite a bit since the last update due to the big run in the financial sector.

In our overall portfolio, here are the current top 10 largest dividend holdings:

  1. TD Bank (TD)
  2. CIBC (CM)
  3. Canadian National Railway (CNR)
  4. Royal Bank (RY)
  5. Scotia Bank (BNS)
  6. Bank of Montreal (BMO)
  7. Fortis (FTS)
  8. Enbridge (ENB)
  9. Emera (EMA)
  10. TransCanada Corp (TRP)

*not counting index ETFs (they are my largest holding).

Dividend Income Update Q1 2021

Thus far in 2021, I have seen a relatively small increase in overall dividend income. Although there have been a few dividend increases, we lost some dividend income due to buyouts, namely Interpipeline (IPL) and Brookfield Properties (BPY). Overall though, it’s encouraging to see the dividend income moving in the right direction!

As you can see in detail below, we have increased our dividend income to $62,430 which represents a small increase quarter over quarter.

Here are the numbers.

Q1 2021 Dividend Income Update

 AccountDividends/yearYield
Smith Manoeuvre Portfolio$7,7803.85%
TFSA 1$4,2004.48%
 TFSA 2$3,9004.14%
 Non-Registered$4,0004.44%
 Corporate Portfolio$31,0003.42%
 RRSP 1$8,0502.31%
 RRSP 2$3,5002.13%
  • Total Yield: 3.28%
  • Total Dividends: $62,430/year 
chart 7

Final Thoughts

While we did lose some dividend income due to acquisitions this quarter, deploying some cash along with dividend raises has resulted in a small bump in dividend income.  Even though we have reached our passive income goal, we will continue to invest our savings and reinvest the incoming dividends.

I’ve noticed that other dividend investors/bloggers are comparing their dividend income to a comparable income/hr.  Depending on taxation in your area, in ON, $60k in dividend income is about equivalent to an $80k salary, which is about $40/hr.  Not a bad way to psychologically frame passive income.

To put dividend income in further context, I recently wrote a post on dividend income taxation where, with no other income in early retirement, you can make up to $50k in dividend income and pay very little to no income tax (depending on the province).

If you are also interested in the dividend growth strategy, here is a post on how to build a dividend portfolio.  With this list, you’ll get a general idea of the names that I’ve been adding to my portfolios.

If you want a simpler investing strategy that outperforms most mutual funds out there, check out my post on the best all-in-one ETFs in Canada.  I’m a fan of indexing as the iShares XAW is my top individual holding.

Keep investing that cashflow and stick with a long-term plan.  Your future wealthier self will thank you for it.

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FT

FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Jared
1 month ago

Hey FT,

Congrats on completing the goal, but what is the new Goal?? We need a new goal set, so us fans can continue to cheer you on, and also try to keep up to your family! :)

-Jared

Eric
1 month ago

Hi FT,

Good job on achieving your goal. Wondering what you use to track your portfolio for all the diff accounts to gain visibility into things like sector, portfolio balancing, dividend tracking etc. Thanks

John Reynolds
1 month ago

Just a little curious about your initial journey to $1M…

You indicate you started with $200K in net worth at age 27 and reached $1M at 35. Congratulations.
You’ve indicated previously that both your spouse and yourself had professional degrees. During those years, what were your approximate family earnings (pre-tax)?

(Just trying to compare experiences. I started out with zero net worth at 22. Bachelor’s degree – non-professional. Single. Earnings -pre-tax- averaging 50-60k (government job with little RRSP room) during my 20’s-30’s. Completed the $1M journey at 42.)

Paresh Yadav
2 months ago

Congratulations MDJ on achieving your goal to generate $60,000/year in passive income.
What was the growth of your portfolio for 2020?
I haven’t shifted to dividend investing yet. I am assuming that if one doesn’t need the yield (dividends) (yet), the portfolio growth will be overall better than dividends + (smaller growth) of the dividend investing.

GYM
2 months ago

Amazing stuff MDJ $80000 is an amazing passive income salary per tax! :)

for your total yield your yield on cost much be much higher than the 3.8%! Is your total yield calculated from market value? I would like to increase my yield but I have too much Canadian allocation already :)

GYM
2 months ago
Reply to  GYM

Oops typo— Must —not much be