Market drops towards the end of the month led to pretty flat results at the end of April. The S&P 500 was up only 5.6 points to 2065.3. How did my Income Fund do in comparison?
Total income from my Income Fund in March was $337, a 1% decrease compared to the $341 I received in April 2015. Underlying income was higher but the increases couldn’t compensate for TROW‘s special dividend last April which boosted last year’s income. That’s a nice problem to have so no complaining here!
The following chart shows the cumulative dividend income so far this year compared to previous years.
With a total of $1,985 so far this year, I easily beat last April’s total ($1,790) and am still making steady increases over last year.
The chart below shows a breakdown of the total income of $337.
Individual stocks contributed $48 or 14% of the total income this month. The two Vanguard bond funds paid distributions this month for a total of $280 (83%) and interest from the cash reserves in my Money Market account made up the remaining $10.
Dividend income from stocks
7 stocks paid dividends this month as detailed below.
Last April my individual stocks paid $50 from 9 stocks. Since then I’ve sold DOW, ALB and added WMT plus more JPM. I also sold DEO but after the dividend date, so I received one last dividend from them. RTN paid dividends last April too but this year their payment is included in May’s results.
I’ve included the dividend growth of each stock on a 1-year trailing basis in the table. Dividend growth is calculated from the last 4 payouts compared to the 4 before that. The yield calculations are annualized, or extended forward a year, based on the current dividend payment against the market value.
On average, dividends of the stocks I hold have increased by nearly 5% over the last year, excluding DEO’s negative contribution from currency rates. WMT and CB have the lowest dividend growth of around 3% or less.
Dividend income from funds
I received income from two Vanguard funds this month as shown below.
|Fund||Income ($)||Div Growth (%)|
|High-Yield Corporate Bonds (VWEAX)||238.78||-1.03|
|Long-Term Investment-Grade Bonds (VWESX)||40.8||-4.5|
The two bond funds pay their distributions monthly and the distributions are taxed as normal income and not the lower qualified dividend rate that dividends receive.
My Income Fund
Here’s an overview of my Income Fund and the current asset allocation as of April 2016.
I’m still slowly rebalancing to my target asset allocation. Compared to last month, cash has decreased by 1% and stocks have increased by 1%.
The following table shows the detailed asset allocation.
My long term plan is to limit individual stocks to 10% of the total, but I’ll be achieving this for the most part by adding new capital to the mutual fund components rather than selling individual stocks.
Likewise the bond funds are targeted for a 15% total weight. I added $100 to VWESX in April as it dropped below its target weight of 5%, but VWEAX is still heavily over-weight at the moment so it’s not getting any additional contributions except for any capital-gains that it generates. It remained steady this month due to capital growth at 21.7% with the final target being 10%.
Cash is overweight too although it dropped from 13.5% to 11.6% this month.
My Income Fund increased in value from $236,992 to $242,361 this month, a new record high, helped largely by the stock market although I added $2,410 of new capital. I also bought an extra $3,000 of VHDYX from the fund’s cash reserves.
The new capital I added ‘purchased’ 36.1845 shares of my Income Fund and the end of month share price increased by $0.7117 to $102.6535, the highest it’s been.
|Date||Price ($)||Change||YTD Change||Value||Cost Basis||VTSAX YTD|
I’ve been tracking my fund performance like an Index Fund since the beginning of the year and the underlying monthly investment performance in April was 0.7%. I’m comparing this performance to VTSAX which gained 0.66% in April, excluding dividends. Year to date performance is 2.65%, compared to 2.70% for VTSAX.
Just for fun here’s a typical “growth of $10,000” chart with my investments compared to VTSAX.
VTSAX has a different composition than my portfolio so I expect different results. It contains US-only stocks and includes small-cap stocks whereas my investments contain US large-value stocks, international value stocks and (volatile) US bonds. Over the long-run a 100% stock allocation should always beat an 85:15 stock/bond allocation. I’ll add dividend payments to this chart too once more have been paid out – my fund’s dividend payments are much smaller than VTSAX’s.
Does the relative performance matter? Not to me; it just helps put a boundary on the results to put it into perspective. VTSAX, being a total market stock fund, indicates the average performance that can be achieved.
I’m now making monthly purchases for the core funds with automatic monthly $1100, $600 and $100 purchases of VHDYX, VIHAX and VWESX respectively. I’m expecting to be able to add an additional $400 each month on top of that.
I’m persuaded that “time in the market” is more important than “timing the market” so I’ll be buying $13,166 more VHDYX from my cash reserves this month. At the end of April, the value of my VIHAX holding was $39,331.47. To get VHDYX to its target 2:1 ratio, it needs to increase from $65,496.93 to $78,662.94 which is a difference of $13,166.
Having the funds at their target ratio allows me to put more money into whichever fund performs worse each month, so I’m automatically buying more of the ‘cheaper’ fund.
Finally, starting this month, I’m increasing the distribution I take monthly from the Fund from $300 a month to $540 a month. I arrived at this amount since it’s the average monthly income I received over the first quarter of the year. This is always the lowest quarter for income because the income in subsequent quarters improves from more investments. So for sustainable income, I think this is a reasonable starting point, and I won’t need to keep as much cash around in the fund’s reserves.
Although I’m ‘withdrawing’ money, it really just means that I can use more of my paycheck for investing; so all in all it’s the same as re-investing dividends.
So steady progress this month I think. Dividend income wasn’t greatly improved, but was still $30 higher than in January. Most of my purchases of late have been in the stock funds so I won’t see higher income from them until June.
How was your April? Are you one step closer to Financial Independence?
Quote of the Day
Age is an issue of mind over matter. If you don’t mind, it doesn’t matter.