Hello readers!
It had been a while since I wrote our monthly updates and as you can see May is been written in August! It was quite a busy past few months due to travels, personal work and foremost enjoying the weather! Summer is finally here and for some reason it feels quite different in terms of weather conditions. The hot days (..which are quite few so far) are extremely hot, evening gets surprisingly colder that you need a light jacket/hoodie and it rains almost every day. I don’t recall witnessing so much rain in any of the past nine summers we have been in Canada! I don’t know whether this is a changing environmental phenomenon or just in my head, but I certainly feel the difference. Anyways we are trying to make full use of the weather by visiting places and enjoying the warm temperature. As I mentioned in our April updates, we went on a trip with family and friends to Europe and you can read about this trip of our life by clicking on the link. I am going to share detailed itinerary, hotel recommendation, places we visited and of course lot of pictures from Paris, Bern, Zurich, Jungfrau, Lucerne, Venice, Pisa & Rome!
Getting to this month’s business, please find below our May updates which as usual starts by updating below two pages with the latest data:
- 2025 Goal tracker on our homepage – At the beginning of 2023 we revised our 2025 passive income goals after careful consideration and keeping in mind heavy financial obligations we carry currently. You can read more about it here under our 2025 goals
- Dividend Portfolio with our latest holdings. We are aggressively modifying our holdings to align more with growth mindset instead of income at present.
Passive Income Pie
This month, our passive income split comprised 11% of Dividends, 88% in Rental income & a miniscule 1% interest earnings from Lending loop. Our 2025 goal is to have income from below sources with target percentage split as mentioned:
- Dividend Income: 50.00% ($1500 per month)
- Rental Income: 32.50% ($975 per month)
- Lending Interest: 0.83% ($25 per month)
- Restaurant Earning: 16.66% ($500 per month)
Over time we will work to smoothen the earning fluctuations so to have steady monthly side income from these hustles. As I mentioned in previous months we haven’t seen any income from our restaurant business yet and the first earning distribution is aimed for Oct’23 (on it’s 2nd anniversary) and thereafter we will have annual profit sharing. For now I just added a token amount of $500 monthly and will update to a more realistic number post first earnings. Also, the other Grocers business we invested isn’t considered yet as we are years if not quarters from seeing any profit! In all likeliness, we will re-strategize our financial freedom goal post more clarity on the businesses.
Monthly Dividend Earnings
Our dividend journey so far have been full of ups and downs, if last month was our record high month (read Apr’23 update if you haven’t already), this month brought us just couple of hundred dollars! Over the period of next few years of continued investment, the wide monthly fluctuations shall smoothen out and during consumption years, we will have a bucket of funds for monthly expenses with a healthy cushion for stress free expenditure.
Key highlights from this month’s dividend income are:
- We received dividend deposits from a 13 different companies (9 Canadian & 4 US), with total value of $227.85, a 6% YoY increase from May’22
- For ease and simplicity, we consider 1 CAD = 1 USD
- Top 3 dividend contributors were Royal Bank of Canada, Abbvie and Metro Inc
- We dripped 3 shares – 1 each from Pizza Pizza, Plaza REIT & Whitecap Resources
- We received 2 dividend raises this month: Enghouse Ltd: 18.92% & Apple Inc: 4.3%
- Average monthly dividends for 2023 so far is $790.43 or about $26 a day. By 2025, we aim to reach $1500 monthly (or $50 daily)
Dividend Goal Tracker – Planned vs Actual
Our aspirational dividend earnings for this year is $12000 and five months into the year, we achieved 31% of our goal so far. Due to many other expenses and financial commitments, the money is quite tight right now for investing and hence finding money to invest this year is quite a task – for now, we saves as much money as possible from our day jobs, then divert a major portion of that savings immediately towards paying off high interest debts & with a much smaller portion we invest under our TFSA accounts to narrow down the wide contribution limit gap! Most of our buys under TFSA are focused on companies with low yield but with a track record of double digits dividend growth over past 5 years minimum. While many don’t like significant debt, we are not that uncomfortable with it and hence are still trying to maintain a fine balance between debt repayment & investing. Readers may know we carry a significant debt right now which was taken to fund couple of businesses. This situation forced us to reduce our 2025 dividend goals from $30000 to $18000 and if the businesses continue to demand additional capital, we may even have to sell some/all of our TFSA holdings.
My Marketplace
In Apr’23, we sold Algonquin Powers (TSE:AQN) and used the proceeds to buy better dividend grower and a more stable Thomson Reuters Corp (TSE:TRI). Comparatively this month passed without buying anything except we just kept accumulating CIBC (TSE:CM) under automated bi-weekly contributions going straight into my RRSP account. On the other hand we sold Transcontinental Inc (TSE:TCL.A) on which I ran out of patience. Although the company has a lucrative dividend yield of 7.03% (as of writing on 13-Aug-23), the price lost almost 60% in last 5 years! At current stage of my investing life, I am looking more for total value rather then chasing high yield and hence getting rid of this was a good decision in my opinion.
We also dripped total of 3 shares of various companies and received dividend raises from 2 companies we hold which contributed to a bit as well to our Projected Annual Dividend Income (PADI) for the month. The sell of Transcontinental reduced annual dividend by $90 impacting our PADI and hence the net PADI for the month is negative $22.52. In June I am looking forward to use the sell proceeds to buy and increase PADI yet again.
As I keep mentioning month after months, for commission free trades & fractional buys we use WealthSimple platform, which has now introduced enrolling in automated DRIP program which can be used to put earned dividends immediately to work by buying more shares of the same company you received dividends from! If you don’t have a WS Account and would like to try them out, you can use my WealthSimple referral link to earn $5-$3000 to invest in stocks!
On Crypto front, yet again we did nothing and don’t think I have any funds or appetite to deploy any more than what we currently have. Last year was pretty rough year for cryptocurrencies both in terms of price depreciation & many providers declaring bankruptcy. Unfortunately Celsius network was one such platform on which we had all our Bitcoin & Ethereum holdings and since August of 2022 they have stopped paying interests on holding cryptos & even withdrawals from their platform is halted. So money is stuck there, let’s see when we could recover our holdings. Once we are able to recover our money, we will redeploy on CoinSquare platform which apparently hold the fort pretty well when others kept collapsing! Also, once our financial situation improves we will resume investing in cryptocurrencies.
Rental Earnings
Our readers will know that at present we own one principal and two investment properties and provide an insight on our monthly cashflow. The cashflow is calculated by subtracting rent collected by all expenses including but not limited to mortgage, property tax, insurance, utilities and repairs (if any). These numbers don’t exactly translate on tax filing as I am not taking into consideration the interests we pay to the bank for mortgage or on any other loan we took to renovate the property. I will do the final calculation at the time of tax filing and don’t intent to share it here.
Two of our mortgages are unfortunately variable meaning the interest rates are tied to the underlying policy interest rate change and hence with each change, the mortgage interest rate also changes. As you can see from the graph below, the Canadian policy interest rate have increased from 2.45% (Feb’22) to 7.20% (Jul’23), which is nearly triple under a short span 1.5 years!
Due to this exorbitant rate increase, the monthly mortgage payments are going in entirety towards the interest portion only of our loan and even after that it is still not sufficient to cover it. As bank haven’t changed our monthly payments (fortunately), the principal is increasing with each monthly payment and hence the amortization period is increasing as well! Last I checked, the mortgage period have increased from 30 years to 80+ years, which is quite a scary situation to be in! Our lender presented me with below three options:
- Increase monthly payment (capped at 20%) which would still not be enough to cover interests so not a viable option.
- Convert our variable mortgage to a fixed one with nominal penalty.
- Start paying a lumpsum amount frequently which is again capped at 20% of outstanding principal. These payments will bring down the principal.
Only the third option made little sense to me but then at present I don’t have extra funds to pay so I am just letting the principal increase. Once the market becomes a little favorable, we will look at selling the investment properties and pay off towards the principal residence outstanding to bring it down. If not done, we are up for a shock at the time of renewal!
The net cashflow for all our properties for the month are as below:
Principal residence – We rent out a portion of our basement which is built as a legal second dwelling. We occupy the upstairs and a portion of the basement, for which we add $2500 as rent payable by us, which is a bit low as compared to prevailing market rentals. The net cashflow from our principal residence for this month is $242.03. While the cashflow doesn’t look appealing at all but imagine bearing all the cost by ourselves with $0 external support in this high interest market!
Investment property 1 – Net cashflow from this property for this month is $1083.25 and this property acts as a backbone to many of our financial needs including paying off the interests for all outstanding line of credits. Once the real estate market improves I plan to test the waters by putting this house for sale and see what is being offered. Depending on it we may sell it and consolidate some of the debt we carry, I will keep you’ll posted!
Investment property 2 – The net cashflow from this property for the month is $433.95 and if you read my Jan’23 updates, you will know that this house was purchased in equal partnership with a friend of mine and hence I am only going to consider 50% of the income/loss. Our near term (1-3 years) intention with this house is to sell and book profit for which we will wait for the market to improve, no rush.
Lending Interest Earnings
We earned $11.35 in total interests this month from several lending loop commitments (loans) worth combined total of $2000 dumped back in 2019. It fluctuates a bit on monthly basis but no complains for now. At present both principal and interest amounts are insignificant but if I have spare cash, I would surely lend more on this platform. You can also explore this option with a smaller capital and if you invest, we both can earn $25 each using our lending loop referral ink, once you invest $1,500 on their platform.
That’s it for now readers for this month and I hope our journey irrespective of the baby steps, help you in some way. Please do subscribe using the widget at the bottom of the page to get our once a month update, I don’t spam and you will only get an email or two in a month, whenever I post on this website.
Stay safe, stay cool, and most importantly Save-Invest-Repeat! 😊
