April 2019 Income Fund Update

March 2019 income fund update report graphic

Here’s my April 2019 Income Fund update, following on from last month’s March update. Click on for the details…

Dividend Income

Total income from my Income Fund this month was $61, a 30% increase to the $46 that I received in April 2018. Yes, I know that’s a bit of a drop compared to the $3,000 I received last month but hey, I’ll take it.

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

The red bar for this month is largely flat since the dividends this month only came from individual stocks which are a small percentage of my Income Fund.

Income breakdown

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

Individual US stocks paid $55 this month. Interest from the Income Fund cash reserves made up the remainder. I keep a little cash aside to smooth out withdrawals and the interest rate on this money market account is above 2%.

Dividend income from stocks

Five stocks paid dividends this month for a total of $55 as detailed below.

Last April my individual stocks paid $42 from the same five stocks and so income increased 30% year on year. Since last year I’ve added more KMB shares when I bought 5 shares last June.

The average organic increase was a little over 13% with no major drama and the remainder of the increase coming from the additional shares of KMB. JPM and ADP all had large dividend increases greater than 20%.

Income from funds

No stock funds that I hold paid out dividends this month. There were no capital gain distributions.

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 as usual. International and US stock funds remain a little under. Not enough to worry about however.

Purchases & Sales

I added $2,632 of new money to my Income Fund this month.

Fund purchases

Total purchases this month were $1,530 in VTSAX and $450 in VTIAX.

Funds sold

None.

Stock purchases

I bought 6 shares of DIS for a total of $671.30 on 4/1/19 including a commission of $2. This is a new position for the Income Fund as I slowly increase the number of stocks to a total of 32.

I chose DIS because it’s a strong brand with a large portfolio of media content and IP. They’re also launching a new streaming service this year so it’ll be interesting to see how that goes. At the time of purchase they had a reasonable P/E of 12 and a dividend yield of 1.2% which I hope will grow further. With this purchase DIS are now the lowest paying dividend holding in my Income Fund.

Stock Sales

None.

Distributions

I transferred $1,100 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 25% 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).

This withdrawal from my 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. There’s no additional tax impact (other than the original dividends) since the money is already in a taxable account.

Fund Cash

Fund Cash is now at $2,255 and held in the VMFXX money market account which is where all dividend distributions are paid into. All of this amount is reserved for two more distributions of $1,100 to cover the remaining months of the quarter.

Portfolio Performance

My Income Fund increased in value from $505,216 to $524,401 this month. This increase of $19,185 includes $2,632 of new capital and a distribution of $1,100 however, and so the overall growth was $17,653.

In terms of market value, the portfolio has now reached another all-time high, beating the previous high of $505,216 from March 2019.

Retirement Accounts

Although most of the financial information I describe is about my Income Fund, I should point out that I consider it to be 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 am maxing out my 401(k) contributions to reach the full $19,000 contribution for 2019.

Financial Independence

Here’s a chart of my living expenses as a percentage of income. As income from my investments increases, the living expense percentage decreases (gets better). However other factors such as changes in net salary (e.g. salary increases or payroll deductions) affect the results too.

My net income in April 2019 was lower than in 2018 due to additional taxes withheld on a performance bonus payment that lowered my net salary. This increased the percentage of my living expenses from last April’s 55% to 57.8% which hopefully will be the worst result this year.

In real terms, since my living expense budget is fixed at $4,120 a month this year and the distribution from my income fund is fixed $1,100 a month, I’m 26% of the way to Financial Independence.

Outlook

This month is the first month I’m taking $1,100 as my new monthly distribution. Compared to the $875 distribution from last year, this is a 25% raise which is a lot higher than my annual salary increase.

I plan on buying several new stocks over the next couple of months to reach a total of 32 companies. I aim to buy about $600 each month out of the $2,500 I usually am able to invest.

Summary

April was another good month with no major drama in the stock market. How was your latest month? Are you one step closer to Financial Independence?

Quote of the Day

We know what we are, but know not what we may be.

2 thoughts on “April 2019 Income Fund Update”

  1. Thank for the quick update. Now is not the time to be adding to individual stocks but smaller amounts in your mutual funds, on down days make sense. When stock prices are so far above the moving averages it is the time to take it slow: https://stockcharts.com/h-sc/ui?s=spy it looks just like early May. You add aggressively when stocks prices look like this BELOW the moving averages.

    1. Hi Dave, I think that time in the market is better than market timing so I try to be fully invested at all times, but I will slow down on individual stock purchases for the remainder of the year and get nearer to my target allocation of 10%.
      Best wishes,
      -DL

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