I sold some shares this week and also exchanged my Total International fund for the new Vanguard International High Dividend Yield Index (VIHAX) fund. Read on for more details.
Sale: Dow Chemical (DOW)
Dow Chemical is a 6-year Dividend Challenger in the David Fish CCC list. I originally bought my shares back in June and July of 2013 for $34 with smaller Sharebuilder purchases, for a total of 4.0818 shares.
I decided to sell my shares this week as part of my ongoing portfolio simplification and I sold them at $48.63 for a total long-term gain of $51 or 36% from the original $140 investment.
Dow is in the middle of a merger with DuPont that seems to be a good fit with few overlapping concerns and the long term outlook is generally positive. Longer term plans include splitting the combined company into three separate companies for agriculture, material services and specialty products.
I sold my shares because I only have a small quantity of shares to begin with and they had achieved positive capital-gains. I didn’t want to end up with three even smaller stock positions in the long term as I’m trying to simplify and not complicate my portfolio stock holdings.
I also think that the Basic Materials sector is not a great sector for long term dividend growth companies. I own Dow shares as part of VHDYX so I’m not missing out on any growth or dividends they will continue to provide.
I’m rolling the proceeds into my Income Fund cash reserves and will likely be making another purchase soon as I have a free trade credit from CapitalOne due to a birthday.
Fund Exchange: Vanguard International High Dividend Yield (VIHAX)
Vanguard recently announced two new International Dividend oriented funds: International High Dividend Yield Index (VIHAX) and International Dividend Appreciation Index (VIAAX). Both of these funds are also available as ETFs with the symbols VYMI and VIGI respectively.
I’ve been holding the Total International Fund (VTIAX) as part of my Income Fund for a while now; it was originally part of taxable Retirement accounts but I re-purposed the fund for current Income. VTIAX is a good fund to hold in taxable accounts because it’s very tax efficient with no capital gains distributions. Some of its quarterly distributions can also be counted for foreign tax credit on a US tax return too.
However, since my Income Fund is all about Income, I decided to exchange 100% of VTIAX for VIHAX today, The expense rate is higher (0.3% vs 0.12% for VTIAX) but the dividend income should be higher.
A side effect of the transfer is that I locked-in capital losses of around $1,368 as I exchanged $33,030 at a cost basis of $34,398. Mutual funds allow more flexibility for tax loss harvesting in that you can exchange between two funds with similar correlation and gain tax credit for doing so without triggering wash sale rules. I don’t expect that VIHAX will correlate very closely with VTIAX, although in the short term it probably will, but I do expect higher income from the new position which is my goal.
Quote of the Day
It takes half your life before you discover life is a do-it-yourself project.