June 2018 Income Fund Update

June 2018 income fund update report graphicHere’s my June 2018 Income Fund update, following on from last month’s May update. Yes you read that correctly – I’m finally caught up to June! This is usually a big dividend month because of the mutual fund distributions but it the same this month? Click on for the details…

Dividend Income

Total income from my Income Fund this month was $3,551, a 32% increase compared to the $2,673 I received in June 2017.

The following chart shows the cumulative dividend income this year compared to previous years.

Total dividends received so far this year are $6,377 compared to $6,015 last year.

This time last year I held high-yield bonds which paid monthly distributions. In September I exchanged these for stock funds which pay quarterly at a much lower yield.

I’m  about $300 ahead of last year, with six months to go. While it’s good to see that I’m back to beating my 2017 results, there’s still a large gap to overcome before I can reach my 2018 Target of $13,760.

Income breakdown

The chart below shows a breakdown of my income this month.

The largest contribution came from US Stock funds paying $1,814.

The $1,470 income from International Stock funds is higher than normal because many international companies only pay dividends twice a year. So dividends paid in June by the international funds tend to be quite a bit higher than the dividends paid out in March.

Individual US stocks paid $264 this month.

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

Nineteen individual stocks paid dividends this month for a total of $264 as detailed below.

Last June my individual stocks paid $205.84 from eighteen stocks. It’s the same stocks as last year with the exception of UPS which paid out in May last year.

Dividends increased by a simple average of 9% over last year all on their own. DAL and HD had the biggest increase with 38% and 21% respectively. LB had no increase while EMR had a low 1% increase.

EVRG isn’t showing an increase yet due to the new company formed in June by the merger of Great Plains Energy (GXP) and Westar Energy.

Income from funds

Fund 06/18 06/17 Organic inc
US Total Market (VTSAX) $406 4.9%
US High Dividend Yield (VHDYX) $1,409 $1,186 5.4%
Total International Stock (VGTSX) $47 6.6%
High Dividend Yield International (VIHAX) $1,423 $970 14.6%
Total $3,551 $2,673

US stock funds paid a total of $1,814 with $1,470 coming from International funds. I didn’t hold the total stock market funds this time last year.

Organic dividend growth of the high-yield international fund was 14%, much higher than the 5% increase from the other funds. The organic increase is a simple calculation of the change in dividends per share paid in June 2018 against June 2017. Additional increases in the year-on-year comparison are due to new capital added.

Asset Allocation

My Income Fund asset allocation is shown in the chart 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.

Detailed Allocation

The following table shows the details.

Individual stocks are a little over my target. International stocks are a little under. Not enough to worry about however.

Purchases & Sales

I added $3,095 of new money to my Income Fund in June.

Fund purchases

Total purchases this month were $500 in VTSAX and $2,900 in VTIAX.

Funds sold

None.

Stock purchases

I bought 10 shares of DAL in June. Total cost including the $2 commission was $549.80. This brings me to an even 100 shares and I don’t plan on adding to these shares for a while now.

I also bought 5 shares of KMB. Total cost including the $2 commission was $510.80. KMB is one of my smaller positions. I now hold 10 shares.

Stock Sales

None.

Distributions

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 simply 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

Fund Cash is now at $2,715.53 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. $90.53 is spare and not yet invested.

Cash has increased by $1,310.72 since last month due to the additional cash received from dividends this month.

Portfolio Performance

My Income Fund increased in value from $439,885 to $440,051 this month. This increase of $166 includes $3,095 from new capital so overall, capital growth was a negative $2,929.

A fair amount of the capital loss was from VHDYX which dropped 1% over the month. Since this is my largest holding even a small percentage change results in a larger amount. VTSAX on the other hand broke even. Also, since this is a dividend payout month the price of the funds dropped by the amount of the dividend. I didn’t reinvest the dividends back into the originating funds.

Retirement Accounts

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.

I decided to rebalance my retirement accounts this month. In doing so I moved all of my international stock funds from my T-IRA to my 401(k). This meant selling international and buying US stocks in my T-IRA. Then in my 401(k) I sold US stocks and bought both international stocks and US bonds. I wanted to move VTIAX out of my T-IRA to avoid any wash sales in the future.

When I combine both accounts, I’m at a 61:18:21 asset allocation to US stocks : International stocks : US bonds. My retirement accounts are about the same size as my Income Fund with a higher bond allocation. This isn’t far off from my 60:20:20 target.

I am maxing out my 401(k) contributions to reach the full $18,500 contribution this year. It’ll be the first year I’ve done this since I arrived in the US in 2000.

Outlook

I’ll be looking to buy more international stocks next month as they’re currently under my target. I don’t plan on buying any individual stocks in July but will likely do so again in August.

Summary

Although it’s been a great month for income, there’s still a long way to go if I want to meet my 2018 target. I’m not chasing yield however so I’ll just see how things play out and invest as much money as I can.

How was your latest month? Are you one step closer to Financial Independence?


Quote of the Day

It’s not the daily increase but daily decrease. Hack away at the unessential.

 

2 thoughts on “June 2018 Income Fund Update”

  1. Dividend Life,
    A 32% YOY increase in income is very impressive with the capital base you’re working with. My latest month was my best month yet in terms of dividend income, and compared to last June, my dividends were infinitely higher because I only started investing last September.

    1. Hi Kody,
      Yes, increasing income is always motivating 🙂
      Congrats on starting your FIRE journey! I’m looking forward to watching your progress on your blog.
      Wishing you all the best,
      -DL

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