Welcome to my September 2018 Passive Income report. This report helps me track all of my investment income from dividend stocks, index funds and exchange-traded funds (ETFs). I’ve also added a new section for my Blog Income. My goal is to one day be able to live off this income or at least have a significant portion of my living expenses covered by it.
Over the years, I’ve found that when I track my dividend income, it tends to grow. Maybe its because I’m focused on growing those dividends that I’m constantly scheming up ways to make more money (or save more money), so that it can be put to good use by investing it in great dividend paying companies. This approach has served me well and this year my family is on track to earning $14k in passive dividend income.
Think about it. That’s $14k that we don’t have to get up in the morning to work for. We just go on living our lives and all the while, each and every month, we receive cold hard cash in the form of dividends from our investments. Right now we re-invest these dividends to buy more shares in our favourite companies so that the dividend income continues to grow over time. But one day, we will be using that dividend income to finance an early retirement.
Our net worth dropped a bit in September due to more home renovations. We are now at $1.24 Million! Frankly, we’ve been struggling to grow our net worth since January for 2 big reasons. First, we’ve been spending money like drunken sailors on home renovations and furnishings. Second, the markets have not been very kind to dividend stocks and this has stalled the price appreciation of our investment portfolio.
I’m not worried because a similar thing happened back in 2008-2009, 2011-2012 and 2015-2016 when the markets collapsed. During those times, I kept buying and while the net worth flat-lined, it quickly jumped once the markets recovered. I expect we’ll see a big improvement now that our renos are complete and once dividend stocks fall back into favor. As it stands now, the value of our financial assets is nearly $630k for the first time ever! Keep reading below to see what I’ve been buying.
Well a big hangover for the Canadian stock market was the NAFTA negotiations. Now that all parties forged a new deal, this should remove that particular drag on the stock market’s performance. I don’t think Canada really got a good deal at all, I think we just avoided the absolute worst case scenario (ie. having 25% tariffs levied on all our auto exports).
Now that the NAFTA question has been resolved, there are lots of other concerning trends for the market to worry about. Here’s a few to ponder: the aging Bull Market is showing signs of weakness; it’s the end of the easy money of the past decade (interest rates are rising and Quantitative Easing (QE) is coming to an abrupt end); the global debt balloon has never been bigger than it is now at a mind boggling 250 trillion!!! Emerging markets are in a downward spiral and Italy is faltering and could potentially take down the Euro! Oh yeah there is also the specter of an all out global trade war between the US and China.
Most concerning for me as a student of history, is the growing dissatisfaction among the big global powers (the US, China and Russia) with the current rules based international system. History may not repeat itself but it sure can rhyme. The 1930s was also characterized by trade wars, isolationism, militarism and growing challenges to a weak Western based international system. It did not end well.
As investors we need to keep this stuff in mind. Nowadays everyone is complacent and think that because they are long term investors nothing can really hurt them. If you’re like Warren Buffett and have a 100 year time horizon, then by all means invest like crazy. But most of us aren’t like Warren Buffett. We don’t have a cool $100 billion sitting in cash to keep us safe during economic downturns.
Here’s a reality check: if you invested money at or near the peak of the market in 1929, you would still be underwater 25 years later (1954). You wouldn’t break even on that investment until 1956! That’s all adjusted for inflation. If you diligently reinvested your dividends from 1929 to 1954, then you would fare a little better. You would be up 165% with an annualized rate of return of about 4%. That’s hardly a great result for a lifetime of investing. If you waited until 1956, your results would be better (around 400% with 7% annualized rate of return).
Some of you might think those results are all good and in line with historical averages etc. But here’s the thing, a lot of people don’t have the luxury of choosing their entry and exit points in life. In the past 20 years we experienced the Dot Com bubble burst and bear market and the 2008 Global Financial Crisis. Both events forced people to delay their retirements or, worse, they were forced into retirement when their investments imploded and couldn’t recover.
So I say to all you people blindly buying index funds to beware. Now is the time to have a look at your investment statements and to rebalance out of stocks and into the other asset classes (ie. bonds, cash and gold). Stocks have had a great run for sure these last 10 years, but this late stage of the Bull market is no time to become complacent. The experts foresee a slowdown or even small recession in late 2019 or early 2020. The weather forecast said there was going to be severe thunderstorms today. Who knows what will happen? We can’t control unforeseeable things but we can control how much risk we take on with our investments.
Please note: this post contains affiliate links. As an affiliate, this blog may receive a small commission for sign ups to Bluehost, Borrowell, Tangerine and Questrade.
Net Worth vs Investment Income
There’s no question that hitting the million dollar mark is an important milestone on the road to financial freedom. But like I said before, net worth is great, but unless it’s backed up with some serious cash flow, it doesn’t really mean all that much. After all, my net worth rises and falls primarily due to fluctuations in the stock and real estate markets. For me, what’s really important is that my investments keep paying me cold hard cash each and every month. That’s where my sense of financial security comes from, not whether I can sell something for more than I paid for it last week, or a month ago.
Streams of Passive Income are Key to Financial Independence
The one major thing I learned during the last recession was that, while my net worth may fall, the bulk of my dividend income remains the same. That’s why I think building streams of alternative forms of income, whether it’s from a rental property, dividend stocks or even an online source like starting a blog, is key to achieving financial freedom. Once you start hitting $1k/month, you basically have about half of your monthly expenses paid for by passive investment income. What’s even better is that I’ve found that after a few years, the income really starts to take off.
Benefits of Passive Income
I once read somewhere that millionaires have about 7 different sources of income, which is a big reason why they’re rich. If they lose 1 source it’s not the end of the world for them because the other 6 still provide financial security. On the other hand, the rest of us are almost completely dependent on 1 source: our Jobs!
This is something that I’m working hard to change for my family and is why I invest as much as I can. In these income reports I try to be as transparent as possible to show you where my investment income comes from. These reports simply show my investing approach and what has worked (and sometimes not worked) for me. I’m by no means a financial expert but I am very pleased with my results to date.
I hope these reports inspire all of you to start saving and investing your money for a healthier financial future. Now you may think that you need a lot of money to start investing, but the reality is that you can get started with as little as $25 a month! So what are you waiting for?
How You Can Build Passive Sources of Income
Some of you may be wondering how YOU can start investing and building up streams of passive income. First, just let me say that investing is NOT rocket science, but I DO recommend reading as much as you possibly can. Check out my MUST READ page for some useful articles. You can also see my Top 10 Favorite Personal Finance Books List.
If you’re hell bent and determined to start investing your money in dividend stocks and exchange-traded funds (ETFs) right now, check out my step by step guide on How to Open a Questrade Account. If you’re a bit hesitant to start buying stocks or ETFs through an online discount broker like Questrade, then you may want to try an online bank like Tangerine. They offer a range of accounts (RRSP, TFSA) and a whole menu of Tangerine Investment Funds at reasonable prices.
Now on to my monthly cash flow from investments.
Monthly Investing Activity
Dividend stocks have been hammered this year…so I’ve been buying a lot more stocks lately. Things are never really as bad as they seem and as I’ve come to learn, the stock market has a tendency to magnify our emotions exponentially!
I’ve been pouring extra money into the telecom, utility and pipeline space. In August, I bought more Telus, BCE, Fortis and Emera. These stocks are yielding anywhere from 4-6% so that’s good for me. I’m betting that interest rates won’t rise nearly as fast as the market is pricing and this wholesale slaughter of steady eddie blue chip dividend stocks is way overdone. I could be wrong, of course, but hey I’m getting a 5 plus per cent yield to wait. Long term, I’m certain that we’ll continue to use our smart phones, we’ll continue to use electricity and we’ll continue to ship oil and gas in pipelines.
I’ve also been playing the market volatility in an effort to increase my share count on some Canadian Banks. This strategy has been working out for me so far and I’m comfortable owning these stocks long term so I’m OK with taking the risks associated with this. I don’t recommend doing this unless you also feel the same.
So far, I’ve sold TD, BNS and RY and bought back in a few bucks below. My proceeds from TD went into BNS because it is the better deal among the big banks at this time. This increased my share count in these banks and, also, my future dividend payments from them. My main reason for doing this is that I haven’t had a lot of money to invest due to my home renos this Spring. So I’m taking some risks to keep up the momentum on my journey to financial freedom. No one ever said this journey was gonna be comfortable and easy.
I also keep making extra cash purchases in my DRiP account to buy more shares of great dividend-paying companies. I like to save and invest automatically because it’s a proven strategy for building long term wealth. In addition to the stock purchases, I’m also investing in low-cost index funds in our retirement accounts. These purchases amounted to about $1.6k in total.
As I said before, one of the great things about being a dividend investor is that all of my dividend income is automatically re-invested. Every month this income buys more shares in my favourite companies that will, in turn, produce even more monthly income for me. This is how compounding works and is why it’s such a powerful force…what Einstein called the “Eighth Wonder of the World”!
This month, reinvested dividend income bought more shares in Suncor (SU), Fortis (FTS), Enbridge (ENB), Canadian Utilities (CU), Manulife (MFC) and Sun Life Financial (SLF).
I’ve also sent a lot more money to my DRIP accounts to buy my favorite Canadian dividend stocks: Telus (T), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CM), Bank of Montreal (BMO), Fortis (FTS), Manulife (MFC), Sun Life Financial (SLF) and Bell Canada (BCE).
Dividend Raises
No dividend raises this month.
September 2018 Passive Income Report
Monthly Passive Dividend Income
September was a pretty strong month for dividend income coming in at a solid $1,222! This month’s dividend income has increased by 51% from September 2017 ($809).
Here is the breakdown of the numbers for my September 2018 Passive Income:
Dividend Stocks
Bank of America (BAC) – $4.83
Canadian National Railway (CNR) – $0
Canadian Utilities (CU) – $81.81
Enbridge (ENB) – $217.68
Fortis (FTS) – $115.47
Manulife Financial (MFC) – $41.52
RioCan Real Estate Investment Trust (REI) – $4.70
Suncor Energy (SU) – $22.25
Sun Life Financial (SLF) – $33.54
Mutual Funds and ETFs:
iShares S&P/TSX Canadian Preferred Share Index ETF (CPD) – $52.48
iShares S&P/TSX Capped REIT Index ETF (XRE) – $43.40
TD International Index Fund – e (TDB911) – $215.79
Total Investment Income = $833.47
It’s great to see that we are above the $833! After years of saving and investing, I’m slowly starting to see the fruits of my effort and I’m happy to finally have my money working for me.
Blog Income: $388.50
I’ve included my blog income as I’ve had a number of readers ask about its profitability. Blog income is never a sure thing. In fact, it’s all over the place. This month’s income is down quite a bit. I think it has something to do with Google’s algorithm update in early August. Hopefully the blog income will be better next month. This month’s income is a combination of Adsense and affiliate sales. I’ve been doing pretty good with my affiliate sales through Share Results. If you’re a blogger and want to promote financial or some other products that you use, check out the link below:
Join the Share Results Affiliate Network Today!
While I’m not living off of my blog income, it does help my cash flow for buying dividend stocks. For those of you interested in building solid long term wealth, it’s crucial to find ways to make more money so you can use it to make investments. I’ve been investing thousands each month in high quality dividend stocks. Without my blog income I wouldn’t be able to invest as much. I think you guys get the idea here. Generate more income to invest and you’ll really kick-start the power of compounded returns. If you want to achieve financial freedom, you gotta do some side hustling to get there.
My family’s new annual passive income goal is $14,000 and we have so far received $12,963.03 So we are 92.59% of the way there.
Thanks for reading my September 2018 Passive Income Report and remember that if you Invest Early and Stay With It for the long haul, then you’ll see these kinds of results too!
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