High dividends stock ETFs/MFs

[wanaberetiree]

Assuming that I want to diversify my portfolio and add an income generating position but consisting of equities, say similar to Ford (F) or ATT (T), but from ETFs/MFs list what would be your choice (e.g. ETF that can pay >%5-6 with high quality stocks)?

Wonder if someone has actually multi year experience with those.

Thanks in advance!

 

[Luck_Club]

Assuming that I want to diversify my portfolio and add an income generating position but consisting of equities, say similar to Ford (F) or ATT (T), but from ETFs/MFs list what would be your choice (e.g. ETF that can pay >%5-6 with high quality stocks)?

Wonder if someone has actually multi year experience with those.

Thanks in advance!

Love your tag line

 

[ERD50]

Have you googled for High-Div paying funds? There are a number of them. We had a long discussion on this a while back, and there didn't seem to be any advantage to them. Think total return, it's all money, whether paid out or retained in the stock, then available to sell if/when you want.

Then run them here:

https://www.portfoliovisualizer.com/backtest-portfolio

-ERD50

 

[brewer12345]

I own HDV and SCHD. While a somewhat higher dividend is nice, that isn't why I own them. I have built positions in both over time because they offer equity participation with reduced volatility compared to the indicies.

 

[ERD50]

OP, this was beat to death in this thread:

http://www.early-retirement.org/forums/f28/dividend-paying-stocks-90316-2.html

No one ever came up with evidence in favor of div payers versus the total market.

I own HDV and SCHD. While a somewhat higher dividend is nice, that isn't why I own them. I have built positions in both over time because they offer equity participation with reduced volatility compared to the indicies.

I just plugged those in here:

https://goo.gl/eFpB1s < www.portfoliovisualizer.com with data

And I didn't see any strong evidence of lower volatility. A bit lower in 2015-2016, but it looks a bit higher 2017-2018? And lag a bit in total return, at least for this time period, (Note: The time period was automatically adjusted based on the available data (Nov 2011 - Oct 2018) for the selected asset: Schwab US Dividend Equity ETF (SCHD) )

P1 = VTI
P2 = HDV
P3 = SCHD

-ERD50

 

[ESRwannabe]

Assuming that I want to diversify my portfolio and add an income generating position but consisting of equities, say similar to Ford (F) or ATT (T), but from ETFs/MFs list what would be your choice (e.g. ETF that can pay >%5-6 with high quality stocks)?

Wonder if someone has actually multi year experience with those.

Thanks in advance!

I like Vanguard's High Dividend Yield Index and the foreign stock version. I invest in them 50/50 in my taxable account. I have about $200k invested into each.

I like the mutual fund versions, but they also have ETF versions of the same funds if you prefer ETFs.

https://investor.vanguard.com/mutual-funds/profile/overview/vhdyx

https://investor.vanguard.com/mutual-funds/profile/overview/vihax

 

[brewer12345]

OP, this was beat to death in this thread:

http://www.early-retirement.org/forums/f28/dividend-paying-stocks-90316-2.html

No one ever came up with evidence in favor of div payers versus the total market.



I just plugged those in here:

https://goo.gl/eFpB1s < www.portfoliovisualizer.com with data

And I didn't see any strong evidence of lower volatility. A bit lower in 2015-2016, but it looks a bit higher 2017-2018? And lag a bit in total return, at least for this time period, (Note: The time period was automatically adjusted based on the available data (Nov 2011 - Oct 2018) for the selected asset: Schwab US Dividend Equity ETF (SCHD) )

P1 = VTI
P2 = HDV
P3 = SCHD

-ERD50

Schwab U.S. Dividend Equity ETF™ (SCHD) ETFs Risk and Morningstar Rating

As you can see, modest reductions for beta and standard deviation vs. the S&P500. Return depends on the period you look back across. It is a bit better in the last 3 years and a bot worse in the last 5. I find that SCHD does not crater as much or as quickly as the index when things get squirrelly.

 

[ERD50]

Schwab U.S. Dividend Equity ETFâ„¢ (SCHD) ETFs Risk and Morningstar Rating

As you can see, modest reductions for beta and standard deviation vs. the S&P500. Return depends on the period you look back across. It is a bit better in the last 3 years and a bot worse in the last 5. I find that SCHD does not crater as much or as quickly as the index when things get squirrelly.

That's what I mean - any reductions in std dev are modest, and time period dependent, and returns sometimes lag. I just don't see anything strong enough there to see that these div payers do much of anything for a portfolio. Nothing wrong with them either, I just don't see anything compelling.

95% VTI and 5% BND tracks SCHD very closely.

https://goo.gl/8Mgrc8

And looking at 2015 - SCHD appears to have dropped further than either?

https://goo.gl/Jw2Tp1



-ERD50

 

[brewer12345]

Different strokes. I view these vehicles as incremental risk reduction. Nothing earth shattering.

 

[Ed B]

I read thru this thread yesterday after stumbling on it again. Lots of interesting points and perspectives given.... a pretty good discussion overall.

Over time I have gone from preferring dividend funds to sector funds, to VOOG and finally to VTI for my primary equity fund. But every few months I revisit the idea of using a dividend fund as part of an income portfolio and usually leave things alone because of the current tight correlation between all the US based vanguard equity funds to SPX. Some have larger drops but also have large jumps and for the most part move together no matter what.

After reading this thread again I played with Portfolio visualizer with these three portfolios to test the differences.

In all cases, started with $100,000 beginning in 2001 (that is when the inception date for the intermediate bond fund I used). I used VWENX as a baseline for a 65/35 portfolio aimed at income with some growth.

3.5% distribution annually, and rebalance annually.

Port 1: VWENX. 100%
Port 2: VTSAX 65% / VBILX 35%
Port 3: VDIGX 65% / VBILX 35%

I used mutual funds instead of their ETF equivalent because the MFs are older. I also wanted to use VYM because that would be my choice for an income focused dividend ETF but it and its MF equivalent only goes back to 2006.

The results are very close and surprised my a little.

 

[Ed B]

I played with this last night using VTI, VYM and BIV respectively and the results over the shorter time frame from about 2008 to now were in favor of VTI/BIV.....not by a huge margin but VTI beat VYM all the same. The difference between VYM/BIV and VWENX was insignificant for the shorter 10 year span.

 

[Ed B]

I played with this last night using VTI, VYM and BIV respectively and the results over the shorter time frame from about 2008 to now were in favor of VTI/BIV.....not by a huge margin but VTI beat VYM all the same. The difference between VYM/BIV and VWENX was insignificant for the shorter 10 year span.

I couldn't edit my last reply to add these screenshots so I had to reply to my reply to add the 2008 -2018 results using the same basic model in ETF form and substituting VYM for the older closed VDIGX.

But as mentioned VTI wins by a little and VYM/BIV is slightly better than Wellington Adm.

 

[Oz investor]

Assuming that I want to diversify my portfolio and add an income generating position but consisting of equities, say similar to Ford (F) or ATT (T), but from ETFs/MFs list what would be your choice (e.g. ETF that can pay >%5-6 with high quality stocks)?

Wonder if someone has actually multi year experience with those.

Thanks in advance!

i hold several versions of these ETFs ( issued by different companies ) all focused on the Australian market ( so we are comparing Apples v. Oranges )

i found participating in the dividend reinvestment schemes ( as opposed to just getting cash ) a useful edge .

please take into account the Australian stock make has NOT yet reached the pre-GFC highs again ( unlike US markets )

despite this i am happy with the Australian versions i hold ( aided no doubt by the magic of compounding )

also note each of the ETFs were bought at different times ( but i have kept SOME of them all ) taking advantage of different opportunities

one would think 4 different ETFs with the same concept would be close to identical however that is far from the truth ( when i bought into each and even now )

good luck ( and research carefully .. it pays off handsomely )

 

[ESRwannabe]

Assuming that I want to diversify my portfolio and add an income generating position but consisting of equities, say similar to Ford (F) or ATT (T), but from ETFs/MFs list what would be your choice (e.g. ETF that can pay >%5-6 with high quality stocks)?

Wonder if someone has actually multi year experience with those.

Thanks in advance!

I like Vanguard's High Dividend Yield Index funds, US and Foreign. Tickers are VHDYX and VIHAX.

I also recommend using www.seekingalpha.com to do research. In particular they have a lot of useful information on dividends which will save you a lot of time. The most useful is the data on dividend growth where they have the averages for 1, 3, 5, and 10 year periods.

You want to have a combination of high yield and dividend growth. IMHO, you also want to look for low turnover, low ER, and the incorporation of market cap weightings as a factor to stock selection.

EDIT: Didn't realize this was an old thread I had already replied to before posting to it again.

 

[ERD50]

I like Vanguard's High Dividend Yield Index funds, US and Foreign. Tickers are VHDYX and VIHAX. ...

And what is it you are trying to achieve?

I entered VHDYX ( VIHAX doesn't have much history) at the below link, and adjusted Vanguard's 500 index and Total Bond funds until the performance was very close. That was VFINX / VBMFX 85/15. and a 3.5% inflation adjusted withdraw, annual re-balance..

The 85/15 outperformed VHDYX slightly, with better (less) drop in any one year and a better (lower) max drawdown %., and lower std dev. (edit if you want to play some more, 81/19 will get you closer, within a few hundred $ and still ahead, but with even lower volatility and drawdowns)

Portfolio Analysis Results (Dec 2006 - Nov 2018)

Portfolio	Initial Balance	Final Balance	CAGR	Stdev	Best Year	Worst Year	Max. Drawdown
VHDYX	$100,000	$147,383	3.29%	13.88%	30.13%	-32.51%	-51.99%
VFINX/VBMFX	$100,000	$148,851	3.37%	12.14%	27.01%	-30.71%	-43.79%

https://goo.gl/x6kX5o

What is the attraction to these dividend sectors? Higher downside volatility, with lower return to boot? What's to "like"?

-ERD50

 

[ESRwannabe]

What is the attraction to these dividend sectors? Higher downside volatility, with lower return to boot? What's to "like"?

-ERD50

My withdrawal strategy is to only take the dividends, not a percentage of total return. Dividends are determined by the companies themselves using current data. The total return withdrawal strategy is based on inconsistent historical data.

I'd rather let the companies decide how much can be spent than using historical data on indexes which do not maintain the same composition over time. Take the S&P 500 as an example. The companies in the index are changing all the time. Some go out of business, some are new. Therefore looking at the past returns on the S&P 500 and assuming you can use this to create withdrawal rates for the present are illogical imho.

I have no desire to get in a debate about this. So I will not be replying to this thread anymore.

 

[TwoByFour]

My withdrawal strategy is to only take the dividends, not a percentage of total return. Dividends are determined by the companies themselves using current data. The total return withdrawal strategy is based on inconsistent historical data.

That is not true. Total return is based on tax consideration and the fact that there is no financial advantage taking dividends as opposed to total return. The tax advantage is that 100% of dividends are taxed while capital gains is only taxed on the gain above the basis.

I'd rather let the companies decide how much can be spent than using historical data on indexes which do not maintain the same composition over time. Take the S&P 500 as an example. The companies in the index are changing all the time. Some go out of business, some are new. Therefore looking at the past returns on the S&P 500 and assuming you can use this to create withdrawal rates for the present are illogical imho.

So, if the company cuts the dividend to the bone, as happens in a recession, you will let that decide what your income is?