Income Fund Update for May 2017

income fund report graphicThis 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.

Dividend Income

Total income from my Income Fund in May was $418, a 4.2% increase compared to the $401 I received this time last year in May 2016.

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.

Income breakdown

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.

Fund Income ($)
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

The High Yield Bond Fund (VWEAX) was the largest contributor with $237.49, down from $255 last May. I sold some VWEAX in December last year when I adjusted my asset allocation.

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.

Asset Allocation

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.

Detailed Allocation

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.

I’m still under-allocated to VHDYX, so the majority of new money is going towards that, with a little towards VBILX and VIHAX to keep them in line.

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.

Fund purchases

Total purchases this month were $2,160 in VHDYX, $200 in VIHAX and $350 in VBILX for a total of $2,710.

The additional purchases above the $2,510 of new capital were funded from fund Cash reserves.

Funds sold


Stock purchases

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.

Stock Sales

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
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.

Portfolio Performance

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.

12 thoughts on “Income Fund Update for May 2017”

  1. Progress, that is all that counts.

    I like the system you have to invest each month and on top of invest any left over. We carry the left over to the next month and often end up spending it…

    1. Hi Amber tree,
      Yep – onwards and upwards! I aim to have every dollar ‘working’ at its assigned task. Once my saving targets and living expenses are met, every other $ is for investing. This is really just a “pay yourself first” scheme however the result is that Savings contributions are more fixed since the variable money left over goes to Investments.
      Best wishes,

  2. These are very good numbers. I recently realized that I purchased way too much stocks these months so I’m quite far from my initially planned portfolio allocation. High yield corporate bonds is something I am also looking to add myself; looks like it also serves you well! 🙂

    1. Hi Roadrunner,
      They’ve been pretty good for me as far as income, though have lost some capital along the way. They’re not a good choice to hold in Taxable Accounts, (which is where I hold them). And they’re much more volatile than regular Investment bonds and act a little like stocks. Although having said that, Vanguard’s HY fund is a little more conservative than most junk bond funds. But it all really depends what you’re using them for. I think in the longer term I’ll rely on them less and less, since their after tax yield isn’t much higher than higher yielding dividend stocks.
      Best wishes,

  3. As commented above, “Progress.” Really that’s what matters. As long as you can consistently put up year over year gains you are headed in the right direction. Nice group of companies paying you in May. Look forward to your June update.

    1. Hi DIvHut,
      Yes there’s a long way to go but I’m seeing progress and that’s always motivating. I’m really looking forward to posting the June update – I just have one stock purchase to write up first.
      Best wishes,

    1. Hi BHL,
      Thanks! I think June’s update that’ll I’ll be posting in a couple days is going to make the question of reaching my yearly goal very clear – one way or another 🙂
      Thanks for stopping by!
      Best wishes,

    1. Hi Lanny,
      Thanks & be careful what you ask for 😉 You guys are the best! Off to read Bert’s update now.
      Best wishes,

    1. Hi DFG,
      Yes maxing out the 401k is the smart thing to do. I’ve increased my contributions 1% so far this year and will probably do so again later this year. As I build up more in taxable accounts I’m looking more towards increasing tax efficiency.
      Best wishes,

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