Here’s my April 2018 Income Fund update, following on from last month’s March update. I closed one of my brokerage accounts this month, otherwise it was a quiet month for dividends. Click on for the details…
The following chart shows the cumulative dividend income this year compared to previous years.
The month on month decline for April 2018 results in lower cumulative income than this time last year. I switched from high-yield bonds which paid monthly distributions to stock funds which pay quarterly so this decline is expected.
Overall I’m relying more on added capital than dividend yield this year to try to reach my 2018 Target of $13,760. Hopefully there will be enough dividend growth in the funds to reach my target. I know hope isn’t a strategy…but the best I can do is to keep investing as much as I can. Bruce Lee’s quote at the end of this post makes much more sense now.
The chart below shows a breakdown of my income this month.
The largest contribution came from individual stocks paying $42.
Interest from the Income Fund cash reserves made up the remaining $4. 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
Five stocks that I hold paid dividends this month for a total of $42 as detailed below.
The basis numbers are a little reduced for the italicized values because I sold some fractional shares. More on that further below.
Income from funds
None of the stock funds that I hold paid out dividends this month.
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. Not enough to worry about however.
Fund Purchases & Sales
I added $2,867 of new money to my Income Fund in April.
I bought another 30 shares of DAL in April. Total cost including the $4 commission for two transactions was $1,592.10. 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.
This purchase increases the number of DAL shares I hold to 90.
I also bought 50 shares of LB for $1,751.75 including $2 commission to replace the shares I sold earlier in the year. This is another more speculative purchase but I think they have a strong brand name as well as potential for international and online sales growth. The 6% dividend yield doesn’t hurt either but time will tell if the dividend is sustainable.
I sold all of my T shares this month pretty much at cost for $2,976.95 resulting in about $3 of capital gains. I will buy them back next month. See this post for details.
In other news, I also closed my Capital One investing account and transferred all the assets in-kind to Vanguard so that all my stocks are in one place. The transfer cost $75 although Capital One refunded the fee back. However, the transfer meant liquidating the partial shares left over from my Sharebuilder days. The liquidation raised $1,070 in cash that went towards the purchases above so there will be a little bit of long-term capital gains to pay.
On the plus side though, I now have all shares in one place to simplify book-keeping and they can be more easily transferred in-kind to another brokerage should I chose to do that down the road.
I transferred $875 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 21% 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 (although an argument can be made that tax-deferred money is different). 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 because one day I won’t have a salary.
Fund Cash is now at $2,146 and held in the VMFXX money market account which is where all dividend distributions are paid into. $1,903 of this amount is reserved for future distributions of $875 a month. $243 is spare and not yet invested.
Cash has decreased by $662.58 since last month as I spend down my three month withdrawal buffer.
My Income Fund increased in value from $431,917 to $434,911 this month. This increase of $2,884 includes $2,867 from new capital so overall the investments broke even.
Although most of the financial information I describe is about my Income Fund, I should point out that I consider this one piece of the bigger picture. Ideally I’d like to reach Financial Independence based solely on my taxable accounts which is 100% stocks, but I still have Retirement accounts in case I can’t.
When I combine both accounts, I’m at a 60:20:20 asset allocation to US stocks : International stocks : US bond allocation. My retirement accounts are about the same size as my Income Fund with a higher bond allocation.
I max out my 401(k) contributions to reach the full $18,500 amount this year.
As a result of my stock transfer shenanigans this month, all my investments are at a single brokerage. This reduces the amount of cash transfers that I had going on since all dividends from all stocks can now be paid into my cash account. Previously I was doing monthly cash transfers from Capital One.
Future Stock Purchases
Next month I’ll be buying more shares in AT&T to replace the ones I sold this month.
Not a bad month by any means, but the dividend amount I set as a target this year seems very far away at the moment.
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.