My readers will know that I left my paycheque behind in June of 2018. Here's my Seeking Alpha article Saying Goodbye To Your Paycheque, It Ain't Easy.
In that article, I suggested:
"We can design our new life. Having marketable skills that are desired on a freelance or part-time basis might also be key. I'd suggest that when you have the freedom to carve your own path, develop those skills in your areas of passion. Do stuff you like. Don't get another job. Have a purpose. Create a purpose. Follow your heart and the monies might follow as well. If one creates a twilight career, that full retirement might never arrive. One might decide to keep that enjoyable venture running for decades; only the final ticks of the life clock will tell us that 'our work is done'."
I joined the legions of semi-retirees who design their own life and new career path with purpose. I left a job that I loved at Tangerine Investments where I was an advisor and trainer to launch my own blog and to restart my writing career. Yes, I've also been writing on Seeking Alpha from 2012.
When I left that job at Tangerine, I essentially cut my paycheque to zero. The plan was to eventually make half a living. My personal retirement portfolio was not ready to fund a full retirement. In fact when I started that new advisory career at Tangerine Investments in 2013, I cut my income by half or more, and we moved into a negative cash flow situation for four years. While I did have a generous employment group plan that matched 7% of my own contributions (so I was building some registered retirement monies in a modest way), we were also spending our savings. Yes, it cost me money to explore my passion and turn it into a career.
The new plan from June of 2018 was to make half a living by way of my site and by way of some freelance writing. I am starting to make some monies, perhaps enough so that I won't have to rely on my portfolio to top up our household income needs. Over the last year, I have harvested some dividend income, and I also sold some Apple (NASDAQ:AAPL) shares to fund two trips to Prince Edward Island. From last spring, here's This Summer Apple Is Taking Me To The Island, And Apple Is Picking Up The Tab.
Perhaps I can become an accumulator once again, I don't know. But for now, I'm going to be optimistic with the hope that I can earn enough to pay my way. I'm going to reinvest the dividends and bond income that accumulate in the portfolio. Yesterday that meant pulling the trigger and purchasing more shares of one of my favourite Canadian banks Toronto-Dominion Bank (TD). As my readers will know, for my Canadian stock allocation, I hold a concentrated portfolio of just seven Canadian big dividend payers, I call it My Canadian Dividend Growth Wide Moat 7. For the US, I hold Dividend Achievers (VIG).
That Canadian portfolio includes the three largest banks in Canada with TD joined by Royal Bank of Canada (RY) and Scotiabank (BNS). You may not know that due to the unique oligopoly situation in Canada, it allows these banks to operate without serious competition. The big Canadian banks even outperform the world's greatest investor, Warren Buffett. They are perhaps the best-performing, long-term, large-cap sub-sector in North America, beating Mr. Buffett at his own wide-moat game.
The Canadian banks have not had a well-received earnings season. That said, they obviously still churn out incredible profits and big juicy dividends. On the dividend front, many of the big Canadian banks have paid dividends from the 1800s. The dividend streaks have been in existence longer than Canada herself. In my books, they are beyond dividend kings. They were forced to hold their dividends in the financial crisis. They all then went back to raising those dividends.
TD Waterhouse offers that TD makes $6.01 per share and pays out $2.68 in annual dividends. These figures are in Canadian dollars. Along with its not-so-liked earnings report, it also increased its dividend right on schedule.
Along with that 10%-plus dividend increase, I also increased my TD share count by over 10%. TD and that share addition have orchestrated a nice income boost. If I need to go back to income harvesting, well, I now have more income, and what one might continue to be perpetual income and growing income.
When TD announced yesterday (February 28th), the stock fell by over 2.5%.
Another boost. Of course, a lower stock price means more shares and greater dividend payments. Not a big deal. But buying at $75.43 was certainly better than buying at $77.
TD Bank beat on revenues, but missed on profits.
Oh, well. I'll take that revenue increase; that might be the most important factor in the long run. As many write, revenue is the one financial metric that you can't fake. You can "fake" earnings, and even though there is that famous saying that you can't fake a dividend, well, you can fake a dividend for a while until the lack of free cash flow catches up to you. A company certainly has to have that ability to turn revenues into profits, and that's not a given. But Canadian banks certainly have not had difficulty in turning revenues and increasing revenues into profits and free cash flow, and those increasing dividends.
Here's the revenue line for TD from Morningstar.
And while I would certainly appreciate some outrageous capital gains at some point, I'm not averse to share harvesting of course. For now, I am happy to collect the increasing dividends. In 2015, TD paid out $2.00 in dividends, and it now pays out $2.68. I would be happy with another 34% increase over the next few years. But certainly past performance does not guarantee future returns.
US retail banking is great, wholesale is in the tank
As you many know, TD is the most American of the Canadian banks. It has more branches in the US compared to Canada. Of course, it makes considerably more monies from retail banking in Canada - see oligopoly.
From the TD press release:
"U.S. Retail reported net income was $1,240 million (US$935 million), an increase of 30% (25% in U.S. dollars) and up 21% (16% in U.S. dollars) on an adjusted basis, compared with the same quarter last year. TD Ameritrade contributed $311 million (US$235 million) to the segment this quarter compared to $106 million in the same quarter last year.
The U.S. Retail Bank, which excludes the Bank's investment in TD Ameritrade, reported net income of $929 million (US$700 million), up 10% (5% in U.S. dollars) on a reported basis and 9% (4% in U.S. dollars) on an adjusted basis, from the same period last year. Earnings reflect loan and deposit volume growth, and higher margins."
And on the wholesale banking side:
"Wholesale Banking reported a net loss for the quarter of $17 million, compared to net earnings of $278 million in the first quarter last year, reflecting lower trading-related revenue and origination activity, and higher expenses. Revenue was down 35% from the same period last year, impacted by challenging market conditions and reduced client activity. Non-interest expenses were up 14%, from the same quarter last year due to continued investment in the global expansion of our U.S. dollar business and the benefit of a revaluation of certain liabilities for post-retirement benefits in the prior year, which was partially offset by lower variable compensation accrual in the current quarter."
So down the stock goes.
North of the border, revenues continue to grow.
Reported net income for Canadian Retail was $1,379 million, down 22% from the first quarter last year. Adjusted net income, which excludes the Air Canada and Greystone charges above, was $1,855 million, an increase of 6% over the first quarter of 2018. Revenue growth was 8%, reflecting contributions across all businesses."
Retail great, and wholesale not so much. But I am happy to add to an incredible profit machine. As a Canadian investor, I like that US exposure. We can benefit from the strong US dollar and the US financial sector. Mr. Warren Buffett (NYSE:BRK.A) (NYSE:BRK.B) takes care of our other US financial exposure.
It felt great to buy shares again. I hope there's more to come.
Author's note: Thanks for reading. Please always know and invest within your risk tolerance level. Always know all tax implications and consequences. If you liked this article, please hit that "Like" button. Hit "Follow" to receive notices of future articles.
Disclosure: I am/we are long BNS, TD, RY, AAPL, BCE, TU, ENB, TRP, CVS, WBA, MSFT, MMM, CL, JNJ, QCOM, MDT, BRK.B, ABT, BLK, WMT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.