May 2015 – Dividend income and portfolio update

May has come and gone and that means another monthly summary is due. This is the first of two posts summarizing my progress towards financial independence. This post describes how my investment portfolio performed last month.

Most of my portfolio is actually in Vanguard funds; the individual stock portion is steadily growing and the portfolio as a whole is slowly tilting towards individual stocks and stock funds. But first let’s see take a look at the income for May since that’s probably what you’re interested in!

Dividend Income

Total dividend income from my portfolio in May was $379, an increase from last month’s $341 since the first month of the quarter is typically the weakest link. Back in May 2014, I earned $293 so this is an increase of 29% over the same time last year; not quite as good as the 37% increase I achieved year-on-year in April but I’ll take it!

The following chart shows the cumulative dividend income so far this year compared to previous years. I even crossed a line too – while that’s usually a bad thing; this particular line is the $2K mark as my cumulative income increased to $2,169.

Income breakdown

The chart below shows what contributed to my total income of $379 this month.

I received income from stocks as well as my two Bond mutual funds.

Dividend income from stocks

8 stocks paid dividends this month as shown below.

The yield calculations are annualized, or extended forward a year based on the current dividend payment against the market value. The value amounts include contributions from stocks added after the ex-dividend date so yield shown may be a little lower than the current yield.

Dividend income from funds

I received most of my income this month from my two bond funds, VWEAX (Vanguard High-Yield Corporate Bonds) and VWESX (Vanguard Long-Term Investment Fund). These pay their distributions monthly. The two stock funds that I own pay quarterly income so they only show up in March, June, September and December.

My Income Portfolio

Here’s an overview of my Portfolio and how it’s made up as of the end of May 2015.

It consists of individual dividend stocks as well as 4 Vanguard mutual funds and cash.

Asset Allocation

The following table shows the detailed asset allocation in my portfolio.

This month my percentages in VHDYX and Cash allocation increased by about 1% as I added more cash to my portfolio than I spent on purchases.

Portfolio Performance

Overall this month my portfolio of both stocks and funds increased by $3,210 to $203,301, an increase of 1.6% from last month’s $200,091. The underlying performance isn’t as high however since I added additional capital and my unrealized gains decreased from $14,491 (7.81%) to $13,711 (7.23%).

This month I added $3,989 to my portfolio. And here I have a confession to make as I bought $733 worth of PG shares last month and never managed to blog about it. In addition to that, I also purchased $875 of VHDYX, $100 of VTIAX and $200 of VWEAX via recurring automatic purchases. Finally I added $2,081 of new cash to my cash reserves as I’m transferring some savings into my income portfolio.

Since the overall increase in portfolio value was $3,210 and I added $3,989 of new money, this implies a market value decrease of $779 or about 0.38%. Overall however I managed to compensate for a slight dip in the market by adding new capital and my current portfolio total is now $28,435 higher than at the end of last year.

 

Quote of the Day

Never mind what others do; do better than yourself, beat your own record from day to day, and you are a success.

0 thoughts on “May 2015 – Dividend income and portfolio update”

  1. Ciao DL,

    One question (that maybe was posted also in the past), why the presence of dividend funds together with the direct investments in the stocks? Isn’t that a bit of a redundancy in terms of investing strategy?

    I see you have bonds and C-bonds funds, that makes sense as you don’t cover them with the stocks, but if I am not mistaken the other two funds invest pretty much in the same way as the main portfolio does.

    Is it done to reduce risk? Are the two things de-correlated?

    Ciao!

    Stalflare

    1. Hi Stalflare,

      There are a couple of different reasons. I started out investing originally with income oriented bond funds rather than individual stocks then I saw no reason to take the capital gains tax on selling them. A second reason is that part of my retirement accounts are held at Vanguard and I’m quite close to reaching their next level of service which significantly reduces commissions for buying / selling stocks to $2 per purchase/sale. So my plan is to reach that threshold early next year and then put more money directly into stocks.

      VHDYX is a diverse fund holding about 163 dividend stocks; I consider it a good source of low taxable income with low-risk.

      I actually have two different investment portfolios with different goals; my Income Portfolio is what I write about mostly in my blog and it’s held in normal taxable accounts. I also have a Retirement Portfolio held in tax-advantaged (retirement) accounts – VTIAX used to be in my retirement portfolio even though I owned it in taxable accounts but I’ve since re-classified it into my income portfolio:

      VTIAX is an international stock fund so it covers a lot of stocks that VHDYX fund doesn’t cover. It’s a very tax-efficient fund meaning that it doesn’t generate much capital gains and the dividend income is qualified so is taxed lower in the US, plus I can claim some of the foreign taxes back. It was originally part of my retirement portfolio when I didn’t have enough space in my tax-advantaged accounts (I was using all my tax-advantaged accounts for tax-inefficient holdings such as REITs / TIPS & bonds). Now that I have more flexibility in my retirement accounts after changing jobs, I’ve repurposed VTIAX into my income portfolio and I keep it as a diverse partner to VHDYX.

      The two bond funds pay consistent high-yield income which is my main reason for holding them although the income is taxed higher than dividends from stocks. Price-wise, the C-bond fund typically follows the stock market; the long term bond fund typically goes against the market.

      Best wishes,
      -DL

      1. Ciao DL,

        I see… But if they are not tax efficient wouldn’t switching to accumulation ETF postpone the issue of immediate taxes on dividend?
        Having said that I also tend to stay away from ETFs because in Pizzaland they are not only taxed in a bad way, but if you have capital losses (which are totally possible) you cannot compensate with the gains, while you can do that with the stocks…

        Currently I am looking for a fund/ETF to put in the money that is “sacred”, i.e. that I cannot afford to risk. It is a difficult task in the present market, I thought I found them and typically they lost 3/4% in 2 months which for gvt.bond instruments it’s a lot :(…

        1. Hi Stalflare,

          I don’t have any problem with paying the higher taxes on the bond fund distributions; it’s the same tax rate I have to pay on interest earned in a bank account. But I’m adding more money to stocks than bonds as the tax rate is lower for qualified dividends in the US.

          That’s interesting about the capital losses in Italy; in the US an ETF is handled the same as individual stocks or even mutual funds. However some ETF / Mutual Funds that rebalance their investments may generate short-term capital gains or distributions which are taxed higher than long-term gains.

          I think there’s really no such thing as a “sacred” fund – even cash held in an account loses value by inflation each year, so you’d have to continually add cash to keep it at its real buying power.

          For my Emergency Fund, if I want to guarantee that I have $1000 and I think that the most that the investments will go down is ~10%, then I’ll put $1000 + 10% of $1000 = $1,100 into my EF. If it ever drops in price below the minimum level, I’ll prioritize adding more money to it until it’s above the level again. My EF is part cash, part VBIRX (Short Term Bond Index) and part VTSMX (Total Stock Market).

          Best wishes,
          -DL

    1. Hi Dividend Beginner,

      Yes that’s definitely true, and it’s a lot higher than any salary increase I’ve had!

      Congrats on starting your blog and journey to Financial Independence – it looks like you’re off to a great start! My first month’s dividend income payment was $0.64 when I started.

      Best wishes,
      ~ DL

    1. Hi D²,

      Thanks. I bought 9 PG shares @ $80.78 early in the month – not the best price but the yield was good enough for me. It’s quite a bit cheaper now though!

      It’s funny I meant to write about the purchase, then work happened and one day went by, then another and the next thing I know it’s June already. Lesson to self: “It’s always better to make time than find time.”

      Best wishes,
      -DL

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