Brexit put a brake on the markets during June; the S&P 500 gaining 0.17% during the month for a total of 2.89% year to date. But it didn’t stop my dividend income and I made two new records this month for dividend income and total value! Click on for my Income Fund update.
Total income from my Income Fund in June was $1,619, a 49% increase compared to the $1,083 I received this time last year in June 2015. The increase mostly came from my two stock funds and it’s the highest monthly income yet since I started my FI journey!
The following chart shows the cumulative dividend income so far this year compared to previous years.
With total income of $4,005 so far this year, I beat last June’s total ($3,252) and even beat last August’s total of $3,987, so I’m two months ahead over last year! This is mostly from the June quarterly payout of the two Vanguard funds that I’ve been funneling most money into lately.
The chart below shows a breakdown of the $1,619 I received this month.
Individual stocks contributed $191 or 12% of the total this month. The two stock funds (VHDYX and VIHAX) paid a total $1,145 or 71%. The two bond funds (VWEAX and VWESX) paid a total of $279 or 17%. Finally interest from the Income Fund cash reserves made up the remaining $4.
Dividend income from stocks
21 stocks paid dividends this month as detailed below.
Last June my individual stocks paid $136 from 19 stocks. Since then I’ve added 10 shares of XOM, 12 of LB, 16 of EMR, 11 of NHC, 10 of WMT, 10 of TROW and 16 of QCOM. Had I not bought any new shares since last year, the dividend payment this month would have increased from $139 to $145 by itself; a 6.9% increase. So the additional shares I bought contributed $45 to the increase this year.
I’ve included the dividend growth of each stock on a 1-year trailing basis in the table. Dividend growth is calculated from the last 4 payouts compared to the 4 before that. The yield calculations are annualized, or extended forward a year, based on the current dividend payment against the market value.
On average, dividends of the stocks I hold have increased by nearly 10% over the last year. CVX and WMT have the lowest dividend growth of less than 3%. Top performers are LB, MAR and HD this month with 20+ percent increases over the year; their yields are lower however.
Income from funds
I received income from four Vanguard funds this month as shown below.
|Fund||Income ($)||TTM Div Growth(%)|
|High-Yield Dividend (VHDYX)||697.64||7.1|
|High-Yield Intl Dividend (VIHAX)||447.48||n/a|
|High-Yield Corporate Bonds (VWEAX)||237.84||-5.8|
|Long-Term Investment-Grade Bonds (VWESX)||40.88||-19.5|
VHDYX increased its payout a little over 7%. VIHAX is too new to have a year’s worth of history, but its current dividend implies a 4% yield which is the level I was expecting from this international fund (it’s about 1% higher than a total international fund).
The two bond funds pay their distributions monthly and are taxed as normal income – not the lower qualified dividend rate that dividends receive. Income decreased (this calculation isn’t very accurate as I couldn’t get precise data) since they’re bonds and are linked to interest rates. Together both bond funds had a total of $27 more income at this time last year compared to this year. Despite the decrease they still pay a good yield (4+%) but are suffering from the current low interest rate environment.
Here’s my Income Fund asset allocation as of June 2016.
Compared to last month, International stocks have increased by 1% and Cash has decreased by 1%. The US stock allocation didn’t change overall, although there was a 2% increase in the stock fund and a 2% decrease in individual stocks.
The following table shows the detailed asset allocation.
I’m still slowly rebalancing to my target 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.
Fund Purchases & Sales
I added $2,664 of new money to the Fund this month; all leftover income that isn’t used for Living Expenses, Savings and my Emergency Fund is transferred into the Fund’s cash account first, and I then purchase investments from the Fund’s Cash account.
In addition, I spent down some of the Fund Cash reserves. I exchanged $3,000 of Cash into $1654 of VHDYX and $1,345 of VIHAX. Towards the end of the month I also bought another $750 of VIHAX during the Brexit drop.
My Income Fund increased in value from $245,254.41 to $250,445 this month, a new record high, helped partly by the stock market and partly from the $2,664 of new capital.
The new capital I added ‘purchased’ 25.6227 shares of my Income Fund and the end of month share price increased by $1.06 to $103.8416, the highest it’s been.
|Date||Price ($)||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 June was 1.03%. I’m comparing this price performance to VTSAX which lost 0.19% in June, excluding dividends. My Year to date increase is 3.84%, compared to 4.32% for VTSAX.
The growth percentages only reflect price changes, not total return. Total Return is higher since I pay a monthly dividend from the Income Fund, which lowers the price and thus the growth percentage. A Total Return calculation would include the dividend plus the capital growth of the shares purchased with that dividend.
Just for fun here’s a “growth of $10,000” chart with my Income Fund compared to VTSAX, (this data excludes re-invested dividends).
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 Income Fund 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 so I expect my total return to be lower.
Does the relative performance matter? Not to me; it just puts a boundary on the results to put it into perspective. VTSAX, being a total stock market fund, indicates the average performance that can be achieved by the US Stock Market. Average doesn’t mean bad – even average performance beats the majority of active investors.
VIHAX is a little under its targeted 2:1 ratio with respect to VHDYX so I’ll be buying a little more of it in July to balance it out. Keeping the funds at their target ratio allows me to put more money into whichever fund performs worse (is ‘cheaper’) each month.
I’ll be exchanging another ~$1,000 of Fund Cash into stock funds in July as I draw down my cash reserves, and I may purchase some individual shares as well. I want to keep as little cash in the Fund as I can but I need to keep a certain buffer for smoother cash-flow.
I’m continuing to withdraw $540 each month from Fund Cash which goes towards my Living Expenses. Although I’m ‘withdrawing’ money, it just means that I can put more of my paycheck towards investing; it’s really the same thing but gives me practice in managing the Fund Cash flows since my paycheck will stop when I reach Financial Independence.
Income from the next two months will be significantly lower than this month since only the bond funds and some individual stocks will pay any income.
A great month all in all with little real impact from the Brexit volatility. I’m on track to easily reach $8,000 dividend income this year and beat my goal of $7,800.
How was your June? Are you one step closer to Financial Independence?
Quote of the Day
What happens is not as important as how you react to what happens.