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What is your cash yield on assets?
Old 11-29-2007, 09:21 PM   #1
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What is your cash yield on assets?

The question about withdrawal rates started me thinking about this. I have always kept track of my cash yield on all invested assets. By this I mean the same thing as we mean by portfolio when we are using that as the denominator for our withdrawal rates.

So for example if your portfolio is $1mm and you receive cash payments of interest, dividends, partnership distributions, REIT distributions, etc. of $40,000 then your cash yield is 4%. Realized capital gains on assets including mutual funds are not included. Ordinary income on funds is included, even if it is re-invested.

Mine is right about 4%, actually 3.9%. This is accross all accounts, taxable and tax deferred, and it includes only the coupon from TIPS and I-bonds, not the increment. So it is a pretty imperfect measure, as it depends on exactly what sort of assets you hold.

My comfort would be greatest if my ordinary taxable accounts throw off enough cash to handle my spending without any need to withdraw from IRA, or to sell securities in my taxable account.

It is close, but not quite there for me.

Ha
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Old 11-29-2007, 09:56 PM   #2
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I don't get the question. Are you suggesting to ignore capital gains on equities and changes in your TIPS bond values (i.e. do not mark to market, but just include the coupon payments and inflation adjustment of principle) ? I'm interested in total return and not just yield. On some investments high yield is just return of capital.

Would consider answering more fully if I could fully understand the question though.

As a partial answer my taxable money consists of (1) "cash" in Vanguard Prime MM @ around 5% currently (2) Ibonds which will be held for maybe 25 years because they pay 3.4% real, (3) equities which I'll harvest the cap gains on in the next 3 years when cap gains rates go to zero in 15% bracket. But that is certainly not the full picture as the portfolio is marked to market regularly so all cap gains, bond price changes, etc. are part of the picture as to whether I'm confortable with my withdrawal rate or not. After withdrawals the portfolio is up 23% (inflation adjusted) from what it was in April '03.
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Old 11-29-2007, 10:21 PM   #3
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E-Loan, Capitol One 4.8~, FNBO 4.95, Vanguard & KMS 5.~, OnPoint CU CD 6., PenFed CDs 6.25, secured property loans 8.5 - 10%, cash-on-cash on the rentals probably pretty darn outrageous after lo these many lustrums. Not counting the rentals i recall figuring that savings and loans gave a combined yield of something like 7.1% back 6 months or so. We don't have enough tax deferred (again, not counting the elephant rental properties) to pay for 6 months of living.
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Old 11-29-2007, 10:34 PM   #4
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HA, I know what you mean. I will need to go over my records and segregate out dividend and interest payments to do the calculation. I plan on having all interest and divends be directed to a MM fund when I RE and use this first.
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Old 11-30-2007, 03:31 AM   #5
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I guess I wasn't very clear. For this purpose I am not interested in capital gains, whether realized or not. I am not interested in the increment to the principle value of TIPS, only the coupon payment received. Same with I bonds. OTOH, if you buy zeros, I would count the amortization of discount.

So I am interested in payments that show up in your brokerage account, or your CD or savings accounts. These payments might be called dividends, return of capital, partnership distributions, interest, etc. There are several retirees on this board who adopt the approach of spending only "dividends and interest", the idea being that these payments are less volatile than market prices of the assets that are throwing off the payments. This was the approach taken by most well to do people for many years, until the last 25 years or so when total return and asset liquidation became more popular. This is essentially what I am talking about.

Personally, I am interested in total return in order to make money; but I intend to also emphasize income to the extent that my funds will allow me to follow this dual approach. This makes me feel better. I have very few nominal bonds or CDs, so my interest income is mostly indexed. So this part of my portfolio gives me 2.7% or so, real. So if I have $100,000 TIPS at 2.7%, I earn $2700 from this source.

My dividend paying stocks and partnerships have been chosen for their likelihood of increasing dividends at least as fast as inflation, and mostly faster. So the cash I get from this source should be either steady in real terms, or actually getting me ahead.

I have some stocks and partnerships with high yields; but my biggest position at 6% of my portfolio yields only 0.2%, and several smaller positions pay no dividend at all.

I then add up all the cash payments that I receive or that get credited to one of my accounts, and divide by my invested assets. For me, at present this figure is 3.9%

I am counting on Alan to explain this better, because I guess I just take it for granted while for many people it may be an odd idea.(And perhaps even a dumb one. )


Ha
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Old 11-30-2007, 05:04 AM   #6
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I pay pretty close attention to my cash yield. Once or twice a quarter I update a spreadsheet which shows my income projected yearly income. Currently my taxable account yield is at 3.6% (I try and live on this) and my overall yield is 3.1%
Just recently I started tracking my income growth, it is gratifying to watch my dividend income grow as companies increase incomes. I am guessing growth will slow as my higher yield financial stock stop increasing dividend payments for a while.
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Old 11-30-2007, 09:14 AM   #7
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I'm a little amazed by some of the answers. Either some of you lucky folks have huge portfolios, your portfolios are biased towards non-deferred or your expenses are tiny......... or some combination.

My AA is structured fairly simply leaning towards index funds for equities and managed bond funds for fixed. I keep much of the fixed portion in deferred accounts to defer the interest from taxation, leaving the non-deferred accounts biased towards equities/dividends. Therefore, on the non-deferred side, interest + div / NAV = 3.2%.

My split between deferred and non-deferred = about 50/50. So it seems, Ha, you're suggesting a WR for me of only 3.2% of 50% of my portfolio which would be 1.6% of the total portfolio? I'm conservative, but not that conservative!

Or are you suggesting structuring the deferred/non-deferred split to place more of the higher yielding fixed investments on the non-deferred side to increase the yield substantially above the current 3.2%?
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Old 11-30-2007, 09:37 AM   #8
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I'm getting about 4.7% interest overall on my cash and fixed income, which is about 30% of my portfolio. Looks like I took in about 1.8% on dividends from my stocks (including REIT dividends) in the last 12 months, which is about 70% of my portfolio.

So overall, my "yield" is (4.7% * 0.3) + (1.8% * 0.7) or about 2.7%. Assuming I understand the question correctly, and that's with roughly 70/30 allocation.
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Old 11-30-2007, 09:52 AM   #9
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My current blended yield is 4.2%, which is unusually high for me - normal it is around 3.0 - 3.5%. This
is due to the recent collapse of REIT prices, which caused me to shift substantial $$$ over to them.
I stay 100% in what I consider top-quality US stocks, so no interest payments for me (except
from a $10k muni bond I bought in 1984 - $950/year)
All shifts are done in my IRAs, which account for about 90% of my assets.
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Old 11-30-2007, 10:12 AM   #10
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3.4375%. 50/50 allocation.
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Old 11-30-2007, 04:20 PM   #11
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I never calculated my cash yield based on my total portfolio balance since I don't see the point, but in doing that calculation now it is 1.89%.

My cash yield based only on the assets generating a cash yield is 5.54%.

Overall return on investments is 15.93% through Oct 31.

I guess this tells me I have a lot of growth funds.
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Old 11-30-2007, 06:01 PM   #12
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5.42% on my taxable account.

3.82% on my retirement accounts.
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Old 11-30-2007, 06:50 PM   #13
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Quote:
Originally Posted by youbet View Post
So it seems, Ha, you're suggesting a WR for me of only 3.2% of 50% of my portfolio which would be 1.6% of the total portfolio? I'm conservative, but not that conservative!
Youbet, I am actually looking for information, rather than giving advice. So please continue doing whatever you are doing that works for you!

Previously I lived solely on earnings from my taxable account with no trouble. But my expenses are higher now. I no longer have a paid for house to live in, but I also haven't sold it yet so I still have associated expenses. Additionally I now pay rent, need a cellphone, and find a lot more atractive things to do which take a bit of money. I wouldn't mind taking all the cash earnings from both my taxable and deferred-tax accounts, as I think they will be completely sustainable, even in a fairly harsh economic climate. I haven't done that as I have had income too high to want to add IRA withdrawals to my AGI. So lately I have taken income from my taxable account, plus a modest cash supplent from taxable cash reserves. I could begin to favor higher income assets in the taxable account, but because of tax issues that seems not a very good approach. So this is what makes me a bit nervous. I would like my expenses to be covered by my cash earnings that are handy and tax efficient for me to get at.

Quote:
Or are you suggesting structuring the deferred/non-deferred split to place more of the higher yielding fixed investments on the non-deferred side to increase the yield substantially above the current 3.2%?
I hope I answered that. Still, if all else is equal, I may favor higher yielding equity type assets in the taxable account going forward. I am particularly attracted to infrastructure partnerships, as some look good to me, and the payouts are tax favored.

Ha
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Old 11-30-2007, 06:52 PM   #14
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haha,

Interesting (and useful) question! I don't keep track of the %, as I'm still in the accumulation phase and look at year-to-year growth/reduction in total portfolio.

Company dividends have been decreasing over the last several decades. Perhaps the trend will reverse.
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Old 11-30-2007, 07:48 PM   #15
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It seems that many companies have substituted share buy-backs for the old dividend payouts.

In some ways, thats good. In other ways, maybe not.
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Old 11-30-2007, 10:01 PM   #16
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4% average. 4.5% from rent collection + 3.4% from dividends.
But I don't live off neither of these incomes, I have enough from renting my room out in the place that I live in.
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Old 11-30-2007, 11:42 PM   #17
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DAMN those illiquid real estate holdings and personal dwellings that you just cant possibly make money on!!!
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Old 12-01-2007, 12:29 AM   #18
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4% average. 4.5% from rent collection + 3.4% from dividends.
But I don't live off neither of these incomes, I have enough from renting my room out in the place that I live in.
Do you live in the Palace at Versailles?

Ha
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Old 12-01-2007, 12:54 PM   #19
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Quote:
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I am counting on Alan to explain this better, because I guess I just take it for granted while for many people it may be an odd idea.(And perhaps even a dumb one. )
Bit late on this as I've been out. I looked at all my accounts for the year 2006. I added up all the interest income and dividends from the various investments and did not take into account capital gains including those generated inside MF's.

I then divided the sum of those monies by the total value of my investments at the start of 2006.

$39,206 / $1,182580 = 3.15%

If I was actually RE'd today I would have a pension of $50K/year, so I could manage very nicely on just the interest and dividends and not sell any MF shares. (I don't have any individual shares
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Old 12-01-2007, 01:08 PM   #20
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Bye the bye - current yield listed by Vanguard for Wellesley is 4.34% in case anyone is interested.

Handgrenade wise the Norwegian widow watches that stuff like a hawk - because it is real money, not Mr Market fluff or MPT with emphasis on theory.

3% ballpark - all in (taxible and IRA and Roth and MM cash) total portfolio.

heh heh heh - still plan to continue 5% variable but 3% is my 'if hard times hit' number. Crap - that reminds me to update my turbotax and start my best and final for the last estimated tax payment 1/15.
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