Here’s my March 2019 Income Fund update, following on from last month’s February update. Click on for the details…
The following chart shows the cumulative dividend income this year compared to previous years.
The red bar for this year finally makes a more significant appearance and beats the cumulative income received through May 2018.
Most of the income this month is from index funds which pay out in the third month of the quarter. Income in the other months is purely from individual stock dividends.
The chart below shows a breakdown of the income this month.
The largest contribution came from US stocks funds paying $2,129. International stock funds paid $754 and individual US stocks paid $269. 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 has increased a little.
Dividend income from stocks
Seventeen stocks paid dividends this month for a total of $269 as detailed below.
Last March my individual stocks paid $244 from eighteen stocks so income increased 10% year on year. Since last year I’ve added to existing positions in DAL, EVRG, MAR & UPS. I sold my BMS shares which paid dividends last year when it was acquired by Amcor.
The average organic increase was a little over 10% despite poor performance from LB which cut its dividend by 50%. The trailing growth percentage in the table above only includes one quarter with the lower dividend so only shows a quarter of the decline.
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||630||18%|
|US High Dividend Yield (VHYAX)||$1,356||$1,498||–|
|Total International Stock (VTIAX)||$7||$92||-1.4%|
|High Dividend Yield International (VIHAX)||$571||$662||14%|
I’m including the trailing 12 month dividend increase in the table above. This is the change from the last 4 dividend payments vs the 4 payments before that. The income from VTIAX actually decreased but is offset by additional contributions that I made in buying new shares.
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.
The following table shows the details.
Individual stocks are a little over my target as usual. International and US stock funds are a little under. Not enough to worry about however.
Purchases & Sales
I added $5,275 of new money to my Income Fund in March, an amount helped by a tax refund payment.
Total purchases this month were $575 in VHYAX, $15,585 in VTSAX and $1,900 in VTIAX. I don’t usually add to VHYAX, but decided to increase the portfolio yield by a tiny amount to get some more income.
The cost basis was $13,831 and so I incurred a capital gain of $104. The sale was before the dividend declaration date and so no dividend was paid.
The reason for selling was to put the portfolio back to its asset allocation. Originally this fund was part of a long-term savings bucket but I’ve now folded those assets into my Income Fund.
I bought 5 shares of MAR for a total of $622.05 on 3/25/19. This increases the number of shares to 10 for a total of $16.40 in projected income.
I chose MAR because it was the stock holding with the lowest projected income in my portfolio. With this purchase that honor moves to ADP who has $12.64 of projected income. This simple selection is due to my new stock purchasing rules.
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 withdrawal 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. There’s no additional tax impact since the money is already in a taxable account.
Fund Cash is now at $3,313 and held in the VMFXX money market account which is where all dividend distributions are paid into. $3,300 of this amount is reserved for three distribution of $1,100 to cover the next quarter. The remaining $13 is spare and not yet invested.
My Income Fund increased in value from $496,809 to $505,216 this month. This increase of $8,406 includes $5,275 of new capital and a distribution of $875 however, and so the overall capital gain was $4,006.
In terms of market value, the portfolio has now reached another all-time high, beating the previous high of $496,809 from February 2019.
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 am maxing out my 401(k) contributions to reach the full $19,000 contribution for 2019.
Here’s a chart of my living expenses as a percentage of income. As income from my investments increases, the living expense percentage decreases. However other factors such as changes in net salary or salary deductions affect the results too.
My net income in March 2019 was the same as 2018 but fortunately higher investment income decreased the percentage of my living expenses from last March’s 41% to 40%.
A Pay Raise!
I like to base my monthly cash withdrawal amount from my Income Fund on the average income from the first quarter in the year. The first quarter usually has the lowest income and so it should be a safe amount.
This year the total first quarter income I received was $3,316 and so I will be taking $1,100 each month as a distribution for the next twelve months. Compared to the $875 distribution from last year, this is a 25% raise which is great! It’s still a long way from my monthly living expense budget but it’s getting closer.
March was another good month and things are moving along nicely. How was your latest month? Are you one step closer to Financial Independence?
Quote of the DayChoose not to be harmed — and you won’t feel harmed. Don’t feel harmed — and you haven’t been.