Another month passed by and I tell you if you set a clear and achievable goal(s), working towards making it a reality is quite gratifying! You can literally see yourself inching towards the goal with the help of numbers, charts, spreadsheets; and the journey itself becomes so much exciting and fulfilling. Now I look forward to month end when I update my tracker and look at all the earnings for which we didn’t had to go out and work! The beauty of passive income is it keeps accumulating while you enjoy life. August was again a busy month for outings and we tried to make the most out of pleasant weather. While it wasn’t warm enough for beach anymore, we along with bunch of friends decided to explore small towns so each week we visited one such hidden gem. We went to Paris, Stratford & Elora and were quite impressed with their their lively & clean downtowns and laidback lifestyle. Most of our trips we plan are on weekdays, it helps avoiding the crowd and maintain social distancing (yeah I think this is going to be a thing for long long time!). I would recommend weekday trips if you have the flexibility, it is so much more relaxing and fun when you meet less traffic and fewer faces! Everytime we visit a small town, me and my wife mull over moving to one, but can’t gather the courage to make the move. I guess we are so accustomed to a city life and gotten spoilt by its offerings, be it shorter commute or easy access to facilities or proximal options with everything. But then a city also gives you smaller (and expensive) abode, traffic, crowd, noise and other headaches! I think it is a tradeoff between what you really want and what you can let go. Maybe one day we’ll be able to break the shackle and move to one of these places and I am quite certain that financial independence will give our decision a boost; more of a reason to achieve our goals sooner than later!
In contrast to July, August was a very busy month on all front which I will discuss in detail in respective sections below. As I mentioned in my June and July postings, I updated below two pages to reflect the latest data:
- 2025 Goal tracker on homepage
- Dividend Portfolio with latest holdings
Passive Income Split
Same as last two months, the passive income split doughnut depicts I am still heavy on lending income, but I plan to slowly align to our comfort level in coming months, once our ongoing real estate deals are closed. More comfortable ratio would look like:
- Dividends – 60%
- Lending Interest – 25%
- Rental Income – 15%
I will continue to keep an eye on income opportunities and revise the ratio as needed, eventually inching towards our 2025 goals.
Monthly Dividend Earnings
August dividend earnings had been quite lacklustre and lesser, as compared to August of last year. This was due to dividend cuts announced in past few months for several of my holdings such as CHW (-$35 per month), CHR (-$14 per month), VET (-$91 per month). Key highlights for this month’s dividend income are:
- I received dividend deposits from 9 Canadian & 4 US based companies, total value of $182.46
- The dividend is about $20 less than last August due to several dividend suspension and cuts as I mentioned above
Dividend Goal Tracker – Planned vs Actual
With 4 more months to go, we are only $1500 less in achieving our annual dividend goal of $5500 and even in worst of the market, I am pretty confident we will meet and exceed our target. As per our portfolio and forward yield, we may cross $6000 this year itself.
My Marketplace
A tweet by a person I follow had quite an impact on me and I decided to get active with my cleanup and rebalancing. The gist was, while you can get wrong with your picks, don’t stay wrong, instead be ruthless in cutting losers! This changed my perspective towards being lazy and giving losers time to recover, I decided to book loss (heavy ones I emphasise..) and move on. I setup several sell limit orders and none of them got executed in August but I am pretty certain I will “move on” from some of my losers especially in Oil & Gas sector. As far as adding more to the portfolio goes, I put our 3% of cash reserve to use by adding 50 shares of Manulife and initiating a position of 93 shares in Telus. I also dipped my toe in Apple the day their share split came into effect. As usual I kept accumulating about 5-7 shares (depending on price) of CIBC as part of Employee share purchase plan. Again will repeat for your benefit, if your employer offers share purchase plan then you must take advantage of it, it is FREE money and I haven’t come across a single person yet who like leaving money on the table!
As far as my Buy goes, any Canadian dividend investor will know the companies I traded in. Manulife averaged about 11% dividend growth rate in last 5 years and the last increase at the beginning of 2020 was 12%. The market haven’t been just to the share price though even after posting good last quarter result. Telus is again a household name in telecom sector and I always wanted to initiate a position. The recent stock split made it more “affordable” and impressive dividend yield made it too tempting to ignore any longer! Last but not the least, Apple – world renowned name and the first trillion dollar company and what a rally in last 1 year! Recent stock split spurred the price to an all time high and my buy was on the first day post the split, as this was probably the only time I could afford it. We had some chump change in USD, sitting in one of our RRSP which I utilized for a minuscule position. I do plan to add more when our sell order materializes. This will help us with our goal to diversify more into growth stocks based south of the border.
Rental Earnings
Few months back we thought of buying an investment property so we can increase our rental income. As I mentioned in my July post, we checked out several properties and put a conditional offer on a house subject to mortgage approval. I am quite excited to share the news that our mortgage got approved and we made our offer firm! The closing is scheduled for September end, thereafter the house will require good amount of renovation upstairs and legal second unit basement apartment will be added later on. If all goes well and our calculation holds true, we will have a positive cash flow of about $1000 per month and at least 10% appreciation in property value immediately after renovation. Our plan is to keep it for long term and let the value appreciate for higher capital gain, assuming the GTA real estate market will continue to be in top gear for coming years.
With the same hope, this month we also invested in a pre-construction condo unit. The down payment is staggered across 3 years making it less burdensome financially and there is a free assignment, meaning we will have the option to sell it before actually closing the deal. The scheduled closing is in 2024 and again going by the trend, we expect the price to appreciate by 20%, giving us a handsome gain on our investment. Pre construction market comes with several benefits primarily being no hefty upfront cost and more on this will be discussed in my upcoming blog on Rental Income, you can stay informed by subscribing via widget at the bottom of the page.
Lending Interest Earnings
Same as last month, both incoming interest and outgoing payments towards leveraged PLC account remained more or less constant. Since we have an upcoming property deal closing to take care of, we plan to redeploy half of our lending money towards 20% down payment and hence there will be a considerable dip in interest income next month onwards. This aligns well with our goal to reduce lending income and at the same time fund the new property. I strongly believe in minimum 20% down payment towards investment property to keep CMHC insurance cost out of the equation and overall cost low. You can read more on this in my earlier blog on Lending income.
To wrap up our August update, I would say I feel much more focused and confident ever since I started blogging about our goal and progress; and I hope you as a reader takeaway some action items too. Thank you once again for the read and would love to see your take on savings and investment ideas. Until next month.. Save-Invest-Repeat. 😊
