Deconstructing the yield on VWINX and VWELX

[cashflo2u2]

By "deconstruct" I mean to ascertain how much of the yield for Wellesley and Wellington of 5.78% and 4.35% respectively, is attributable to equity holdings and how much to fixed. Any thoughts on how this might be revealed short of extrapolating out each holding in the their portfolio?

Why do I want to do this you say? I'm not sure myself, I am thinking about a significant allocation to both and I am a curious fellow. This might be the first step in further analysis. What prompted the thought was Cramer tonight (I know, I know) raised the concept of the "accidental high yielders". These would be stocks that are currently "high" yielding but have no history of cutting divvies even in a recession and that divvies are well covered by current earnings expectations of at least 2X the divvie.

 

[ats5g]

Not sure if this is really going to help you much, but see QDI - 2008 year to date estimates

Vanguard Funds With Declared QDI Information Year-To-Date
QDI Percentages

Vanguard Wellesley Income Fund Admiral Shares = 31.65%
Vanguard Wellesley Income Fund Investor Shares = 31.65%
Vanguard Wellington Fund Admiral Shares = 45.11%
Vanguard Wellington Fund Investor Shares = 45.11%

For 2007 the figures were roughly similar.

- Alec

 

[W2R]

I don't know the answer to your question.

However, it seems to me that as share prices decline, a given yield will represent a greater % yield. So, although I am Wellesley's greatest fan, I must admit that I am not getting 5.78% of what I bought it for (since the share price has declined). I am still happy with the dollar value of the dividends.

 

[FIREd]

Yes, I think that the percentage of qualified dividends for each fund would probably give you the best indication about where the dividends come from since stock dividends tend to be qualified and bond dividends not.

 

[cashflo2u2]

I found the answer in the "Advisor's Report" contained in the Annual and semi annual reports. There is a section called called "Equity Characteristics" and "Fixed Income Characteristics" that gives the yields of both at that time.

 

[FIREd]

I found the answer in the "Advisor's Report" contained in the Annual and semi annual reports. There is a section called called "Equity Characteristics" and "Fixed Income Characteristics" that gives the yields of both at that time.

So what is the answer? I own both funds and I would be interested to know what you found...

 

[cashflo2u2]

Glad to be of service- I like to give something back to the board, it is a great resource.


VWELX:

At 5/31/08: div. yield 2.5%; fixed yield to mat. 5.7%; total fund yield 3.0%; % of investment income breakdown: div.=46.7% int. 53.3%

VWINX:

At 9/30/08: div. yield 4.4%; fixed yield to mat. 6.3%; total fund yield 4.9%; % of total investment income breakdown: div.=30.0% int. 70.0%

Their year ends are different so the dates are not comparable. The total return on both funds have increased notably (4.35% and 5.58% respectively) since both of the above dates so the above yields are probably higher now. I was going to go equally in these funds but now I am going to greatly overweight VWELX.

 

[cashflo2u2]

The total return on both funds have increased notably (4.35% and 5.58% respectively) since both of the above dates so the above yields are probably higher now.

I presume this is because the fund share prices are down since above dates used.

 

[cashflo2u2]

VWELX:

At 5/31/08: div. yield 2.5%; fixed yield to mat. 5.7%; total fund yield 3.0%; % of investment income breakdown: div.=46.7% int. 53.3%

VWINX:

At 9/30/08: div. yield 4.4%; fixed yield to mat. 6.3%; total fund yield 4.9%; % of total investment income breakdown: div.=30.0% int. 70.0%

One more point is that I think the stocks held in both funds are somewhat identical so the marked differential in the equity yield shown above is because the values declined significantly from 5/31 to 9/30.

 

[WilliamG]

"I was going to go equally in these funds but now I am going to greatly overweight VWELX."

cashflo - just curious, but what data led you to this conclusion? fyi, agree these funds are keepers; we target for portfolio to have 15% Wellington and 30% Wellesley.

 

[ats5g]

FWIW, I did a little number crunching:

Dividend yield of VWLEX's stocks:

4.35% [current yield] x 45.11% [qualified div ratio] / 62.21% [11/30 ratio of stocks] = 3.15%

yield of VWLEX's bonds = 6.76%


Dividend yield of VWINX's stocks = 4.93%

yield of VWINX's bonds = 6.39%

I think that's all correct.