Here’s my March 2018 Income Fund update, following on from last month’s February update. March is usually a good dividend month but how good was it? Click on for the details…
The following chart shows the cumulative dividend income this year compared to previous years.
March’s 2018 result shows a small increase on year to date compared to last year. I’ll be relying more on added capital than dividend growth this year to reach my 2018 Target of $13,760. That’s because I bought more total market funds which pay lower dividends. On the plus side, they’re more tax efficient and should have higher total return.
The chart below shows a breakdown of my income this month.
The largest contribution came from US stock funds with $1,722. International came next at $578 with individual stocks paying $244.
Finally, interest from the Income Fund cash reserves made up the remaining $2. I keep a little cash aside to smooth out ‘withdrawals’ and the interest rate on this money market account has increased a little.
Dividend income from stocks
Eighteen stocks that I hold paid dividends this month for a total of $244 as detailed below.
Note that I sold my position in LB after the ex-dividend date. So I received dividends even though my position is showing zero. I discussed this stock sale here.
Income from funds
All stock funds that I hold paid out dividends this month. There were no capital gain distributions.
|US Total Market (VTSAX)||$365||–||–|
|US High Dividend Yield (VHDYX)||$1,356||$1,007||14%|
|Total International Stock (VGTSX)||$7||–||–|
|High Dividend Yield International (VIHAX)||$571||$383||14%|
US stock funds paid a total of $1,722 with $568 coming from International funds. I didn’t hold the total stock market funds this time last year.
Organic dividend growth of both high-yield funds was about 14%. Additional increases in the year-on-year comparison are due to new capital added.
My Income Fund asset allocation is shown below.
I hold 100% stocks in my Income Fund which is held entirely in Taxable accounts.
Cash is virtually zero as I just keep a small amount to manage cash-flow.
The following table shows the details.
Individual stocks are a little over my target and US Total Stock and International stocks are a little under.
Changing the allocation ratio via new capital takes a lot of time because of the size of my contributions vs the total value. Eventually it may not even be feasible. However I don’t plan on selling any assets to re-balance faster.
Fund Purchases & Sales
I added $5,199 of new money to my Income Fund in March. The increase in investments this month is due to the tax refund that I received.
I bought another 7 shares of DAL on 2nd March for $26.78 per share. Total cost including the $2 commission was $371.46. Delta Airlines is one of my more speculative holdings as they’re not a defensive dividend growth stock. However I think they are a well-managed company at a good valuation and it doesn’t hurt that I spend a fair amount of money each year on their services.
This purchase increases the number of DAL shares I hold to 60.
I sold all of my LB shares at a loss this month. I will buy them back next month. See this post for details.
I transferred $850 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 more of my salary than I otherwise would be able to. Withdrawing money gives me experience in managing cash-flow from the Income Fund. One day I won’t have a salary after all.
Fund Cash is now at $2,815 and held in the VMFXX money market account which is where all dividend distributions are paid into. $2,625 of this amount is reserved for future distributions of $875 a month. The remaining $190 is spare and not yet invested.
Cash has increased by $1,217 since last month as I rebuild my three month withdrawal buffer due from the higher dividend income this month.
My Income Fund decreased in value from $435,136 to $431,917 this month. This decrease of $3,219 includes $5,199 of new capital so overall loses were higher.
2018 pay raise!
I’m using the first quarter of the month to set my monthly withdrawal rate for the year. The first quarter is usually the lowest dividend payout. This is because June and December tend to include larger international payments. I’m also buying more shares throughout the year.
Overall the total dividends received in the first quarter were $2,680 which works out as $893 on average per month. I’m going to round this number to $875 and take that as a monthly withdrawal for the remainder of the year. This is a small increase compared to the $850 I withdrew each month previously.
This is a conservative withdrawal rate and any additional dividend income will be re-invested. Of course, this is all mental accounting as the $875 I withdraw for paying bills means that an extra $875 of my paycheck can be used for new purchases.
The cash withdrawal doesn’t come from any stock sales – it’s a three month drawdown of the $2,625 in cash that I will refill from dividend income each quarter.
March barely beat last year’s cumulative dividends. So although this month’s dividend was a lot higher than last year, it had to overcome much smaller payments in January and February.
How was your latest month? Are you one step closer to Financial Independence?
Quote of the Day
A goal is not always meant to be reached, it often serves simply as something to aim at.