This report is a little abbreviated as I’m in the UK and some files I thought were in the Cloud, aren’t. But I think I have enough data to get by. So here’s my Income Fund update for May 2017.
The following chart shows the cumulative dividend income this year compared to previous years.
Another steady increase in May continues building on April’s foundation.
The chart below shows a breakdown of the income this month.
The bulk of income this month comes from the two bond funds I hold. Together they paid $317 or 76% of the total.
Individual stocks contributed $99 or 24%.
Finally, interest from the Income Fund cash reserves made up the remaining $1; it’s a very small percentage (0.3%) which was rounded to 0% in the chart above.
Dividend income from stocks
Nine stocks paid dividends this month as detailed below for a total of $99.13. That’s a 1% increase over this time last year.
Last May my individual stocks paid $98.19 from 9 stocks. Since then, I’ve recently sold VZ but after the record date so the dividend is included in the table above. The low year-on-year comparison is due to payment schedule changes of UPS and ADP which swapped months this year. The lower UPS dividends largely cancel out the increases from the other stocks, resulting in a small $1 increase
Dividends this month increased by a simple average of 5.75% over the last year all on their own. RTN had the biggest increases with a 9.2%. PG and T had the lowest dividend growth, both coming in under 2.5%.
I’ve included the dividend growth of each stock on a 1-year trailing basis in the table. The yield calculations are annualized, or extended forward a year, based on the current dividend payment against the market value.
Income from funds
I received income from two Vanguard funds in my portfolio this month.
|High Dividend Yield (VHDYX)||0|
|International High Dividend Yield (VIHAX)||0|
|High-Yield Corporate Bonds (VWEAX)||237.49|
|IT Investment-Grade Bonds (VBILX)||79.84|
This time last year, I had significantly higher cash (about $14,000) in my Income Fund which provided $6 in interest. I was also holding VWESX, a Long-Term bond fund which had a higher yield. Together they paid $48.
In switching both to the more stable Intermediate Term Bond Fund (VBILX) for my Emergency Fund strategy late last year, I’m earning a little more income – $79 this month vs $48. The IT Bond yield is higher than the average yield of the old LT Bonds + Cash position I was holding last year.
The two bond funds pay their distributions monthly and are taxed as normal income – not the lower qualified dividend rate that dividends receive.
My Income Fund asset allocation as of May 2017 is shown below.
Compared to last month, all of the percentage changes to asset allocation are within rounding error. So no change on the allocation front. I’m trying to hold the IT bonds and International stocks at 10% and 20% respectively.
Cash is virtually zero as I just have a small amount left to manage cash-flow.
Overall the Income Fund is at a 75:25 Stocks:Bonds allocation (counting cash as bonds) which is closing on my overall target of 80:20.
The following table shows the details plus my target asset allocation.
The bond funds are targeted for a combined 20% total weight, with a target 10% in each of the Intermediate-Term and High-Yield funds.
Fund Purchases & Sales
I added $2,510 of new money to my Income Fund in May. $2,300 of this was the standard contribution I make from my salary. I’m confident this amount is at least always left over after paying for Savings and Living Expenses. I also added a further $210 which was left over from my salary.
The additional purchases above the $2,510 of new capital were funded from fund Cash reserves.
I added 18 shares to existing holding T and 5 shares in new holding DAL. I wrote about my new stock purchases earlier. Purchases were mostly funded by the sale of VZ below with the remainder coming from fund Cash reserves.
I sold my VZ shares in May which provided $671.06 of cash which was re-invested as mentioned above.
I transferred $800 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 20% of my Living Expenses that my Fund pays every month.
Money is fungible, so a dollar in one account is no different than a dollar in another account. The distribution from the income fund allows me to invest $800 more of my salary than I otherwise would be able to. Withdrawing money gives me experience in managing cash-flow from the Income Fund however. One day I won’t have a salary after all.
Fund Cash is now at $2,094.47 most of which ($1,566.87) is reserved for future distributions, a sub-account which is being filled by dividend income. The remainder ($527.60) isn’t invested yet.
Cash has decreased by $883 since last month.
My Income Fund increased in value from $358,630 to $364,077 this month, a new record high. This increase includes $2,510 of new capital.
I’m ‘withdrawing’ $800 a month towards my living expenses, this amount is paid for by dividend income. I keep three months’ worth of dividend payments in cash, although it’s limited to 3 x $800 = $2400 and I use this buffer to smooth out monthly payments. Any money above that maximum threshold is re-invested. As dividend income increases I will adjust this amount upward.
I remain confident of beating my 2017 goal of $9,925 income this year. The final FI destination is still looking very far away, however I took another solid step forward this month.
May has been a good second month of the second quarter in the build up to June which will be a much higher payout because of the stock funds.
How was your latest month? Are you one step closer to Financial Independence?
Quote of the Day
If you spend too much time thinking about a thing, you’ll never get it done.