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Dividends vanish in thin air......
Old 05-19-2009, 09:06 PM   #1
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Dividends vanish in thin air......

I know a lot of folks here have (pssssst) Wellesley and I read a post somewhere that its' latest dividend fell 5% and this fellow was complaining about that.
Well a lot of us here might also have Fido Freedom 2010 which I had been thinking was a lot like Wellsley but listen to this....the latest dividend fell by 87%! Now that is a fall. I called my contact at Fido to discuss and he said that it's a sign of the times but expects the dividend to improve over time. This sure makes it hard on retirees who count on that income.
Other Fido investors notice that?
I'm sure there are other funds that have reduced dividends but if you have Wellesley then I thought I would brighten your day!
And darn, I don't have any....yet.
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Old 05-19-2009, 09:34 PM   #2
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VWIAX (Wellesley Admiral) dividends:

$0.57600 03/25/2009
$0.65000 12/15/2008
$0.59300 09/24/2008
$0.62400 06/25/2008
$0.57200 03/26/2008
$0.69100 12/12/2007

So, now where is this drop we supposed to be concerned about The March dividend was actually higher than that of March 2008. (Both were lower than the previous December dividends).

I don't know what post you are citing but as you can see, the numbers tell the story.
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Old 05-19-2009, 09:50 PM   #3
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Hi WTR. It wasn't on this forum but I am thinking he was comparing March 09 to December 08.
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Old 05-19-2009, 10:18 PM   #4
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This is surprising! The Fido Freedom 2010 fund seems to have a 50/50 allocation. Assuming that all the stocks in the fund have scrapped their dividend (unlikely), all these bonds should still be paying a good dividend, unless most of those bonds are TIPS. Something is not adding up... Are you comparing the March dividend with last December's dividend to come up with the 87% drop? Maybe the fund's fiscal year ends in March and they realized that after all the dividend cuts in the past year, they had distributed too much income in the last 3 quarters and could only pay a small dividend this quarter?
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Old 05-19-2009, 10:28 PM   #5
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I wonder if the December Fido dividend numbers used in the calculation might have also included a cap gains distribution. The 87% drop might not be an apples-to-apples comparison.
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Old 05-20-2009, 08:17 AM   #6
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distribution history (cap gain div total)
12/07 $0.16 $0.34 $0.50
5/08 $0.34 $0.08 $0.42
12/08 $0.06 $0.32 $0.38
5/09 $0.005 $0.055 $0.06

Cap gain is almost gone for 5/09. Pure dividend is down by over 30% - must have been heavy financials. I am surprised at the importance of cap gains for a fund with an objective to
Quote:
"seek high current income and, as a secondary objective, capital appreciation
and with an allocation strategy
Quote:
Allocating assets among underlying Fidelity funds according to an asset allocation strategy that becomes increasingly conservative until it reaches 20% in domestic equity funds, 35% in investment-grade fixed-income funds, 5% in high yield fixed-income funds, and 40% in short-term funds (approximately 10 to 15 years after the year 2010). Ultimately, the fund will merge with Freedom Income Fund.
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Old 05-20-2009, 08:26 AM   #7
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I'm wondering if there were enough capital losses to offset dividend payouts. I suspect it's possible that there was some tax loss harvesting in the underlying funds and these losses offset what would have been dividend payouts. That would make for better tax efficiency, anyway -- and would serve as a warning for someone who wants "current income" in these funds.
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Old 05-20-2009, 08:52 PM   #8
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Quote:
Originally Posted by REWahoo View Post
I wonder if the December Fido dividend numbers used in the calculation might have also included a cap gains distribution. The 87% drop might not be an apples-to-apples comparison.
Good thought REWahoo but the next post explains that.

Quote:
Originally Posted by MichaelB View Post
distribution history (cap gain div total)
12/07 $0.16 $0.34 $0.50
5/08 $0.34 $0.08 $0.42
12/08 $0.06 $0.32 $0.38
5/09 $0.005 $0.055 $0.06

Cap gain is almost gone for 5/09.
These figures tell the story.
Anyway I have a good amount of 2010 and am still w**king but was considering that for good source of dividends when I retire. Last year my dividends were ~10K and this year if nothing changes they will be ~2K.
Like I said before "now that is a drop".
It's no big deal to me now but I was just surprised at the abrupt change and it appeared that the "dividends vanished in thin air".
This makes it hard to plan for retirement no matter how you look at it.
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Old 05-20-2009, 09:28 PM   #9
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To me it just looks like December dividends are much higher than May dividends. I'd wait for the full year before kissing it off.

Strangely, my non-dividend portfolio threw off a much higher dividend year-to-date than the same period last year. I'm hoping that is not a trend, since I need to stay below the Roth IRA income limit.
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