What is your "yield"

[calmloki]

Per OP: ..." "yield" is on my investment portfolio. By that I mean income (dividend & interest) over value (not yield on cost) of your overall investment portfolio (which for me excludes emergency cash and checking account balance)".

Our rental and lending income makes us kind of the odd ducks in this flock of chickens. But our income divided by (net worth - home value+checking/daily banking accounts+emergency CD at PenFed) still works out to 7.15% - different from my reported 7.3%. 2014 appreciation on our properties increases our net worth, but isn't income. We did give away a property late in the year, after taking most of the year's income from it, so that has the effect of both increasing the dividend and reducing the divisor thus giving a higher quotient.

Still, kind of an unfair apple/orange comparison - some might view the rental/lending thing as (gasp) not as passive as just re-balancing now and again.

 

[scrabbler1]

For me, 3.6%. I have a lot of money in a bond fund which contains bonds at the low end of investment grade and just below that. This bond fund generates the monthly dividend which covers nearly 100% of my expenses.

 

[Mulligan]

Wow, I must be doing something wrong if others are getting 6-7.3% in yield alone. Yes I know it's possible but

Last year my total return was only 5.9% (Intl, VGELX & Short Term Bonds hurt overall). Of that 3.1% was appreciation and 2.8% yield (dividends/STCGs).

I know you know already that you aren't doing anything wrong. But if you are willing to take some risk you can get relatively safe yields in the preferred market. I just bought some more today in a utility preferred stock that was issued in 1968 and hasn't missed a beat with a current yield of over 6.1%. Jumped in also today on a new preferred offering from CHS Inc today that was 7.5%. They have never missed a payment. But they are an odd duck being a Fortune 100 company that is a CO-OP with no common stock.
Now it is easy for me to crow about this stuff because I am a small potatoes player and live off my pension. As you know, they are not CDs and are subject to other concerns.
Speaking of CDs, I bought a couple 3.4% 10 year ones a few months ago. Who would ever have thought these would yield a decent capital gain if I sold already? Crazy times........


Sent from my iPad using Tapatalk

 

[audreyh1]

Short term capital gains aren't yield either. I know the brokerages lump them together with dividends for tax purposes.

 

[LOL!]

I hate dividends because I get taxed on them. In contrast, capital gains are essentially tax-free to me because of previous tax-loss harvesting moves. Also I have more control when I realize capital gains than when I get dividends.

And non-qualified dividends are the worst.

Furthermore, dividends are above-the-line on Form 1040, so they change my AGI and make me ineligible for some tax breaks.

One might ask, what is your after-tax yield? That might be eye-opening for some folks.

My yield is in the 2.5% to 3% range. I have some TIAA traditional vintages paying almost 5% which helps.

 

[Looking4Ward]

Last year: 2.45%

 

[calmloki]

I hate dividends because I get taxed on them. ....

One might ask, what is your after-tax yield? That might be eye-opening for some folks.

And there is a spot our rental income and real estate lending is a big loser - we get bit at the full boat tax rate on our income and can't tailor our earnings to fit our needs - other than to earn less. A primary reason we bought some no-dividend BRKB day before yesterday. We need some money to grow for the future without impacting our AGI every year.

 

[Dd852]

2.1% I think we are all much of a muchness!


Sent from my iPad using Early Retirement Forum

 

[NotOldYet]

Current yield is 4.65%. Mostly in preferred stocks and muni bonds. 5.2M invested right now and way to scared about the volitility to invest the remaining dollars. Trying to keep enough dry powder to strike if we see a big correction. I've been buying some of the dips but geo-political stuff keeps me from being 100% invested.

 

[clifp]

I was surprised that my overall yield was only 2.35% last I checked it was 2.8%

 

[mathjak107]

I hate dividends because I get taxed on them. In contrast, capital gains are essentially tax-free to me because of previous tax-loss harvesting moves. Also I have more control when I realize capital gains than when I get dividends.

And non-qualified dividends are the worst.

Furthermore, dividends are above-the-line on Form 1040, so they change my AGI and make me ineligible for some tax breaks.

One might ask, what is your after-tax yield? That might be eye-opening for some folks.

My yield is in the 2.5% to 3% range. I have some TIAA traditional vintages paying almost 5% which helps.

i have to agree with you.

this is my first year going into retirement , i will retire in july.

we have enough cash set aside through the years leading in to have almost no taxable income this year since i am only working part time until july and dumping the max into my 401k.

but the 50k we average in dividends from our fidelity funds a year may hurt us this year with zero advantage,

i was tring to get zero capital gains rates ,the savers tax credit and a medical subsidy but the forced dividends may put all that at risk ,it will be that close.

 

[mathjak107]

Can you explain why you think this? For equities, there is no difference between receiving a dividend of 2% and selling 2% of your shares, other than the fact that by selling shares your taxes are reduced.

For fixed income, you can reach for more yield, but that increases risk.

you are soooooo correct .

this is a concept i have to explain over and over to folks who think dividends are like interest and added on to principal.

they are really the company liquidating a piece of the share price and handing it back to you vs you liquiding a piece of a share but keeping the higher price.

most folks do not realize gains are based on your starting value each quarter.

they think if they reinvest the dividends more shares are doing something extra for them but the value before and after payment is pretty much the same if you reinvest.

being at the starting gate each quarter with more shares at a lower price is the same value as less shares at a higher price. when the opening bell rings market action takes them off and running for the next quarter with the same starting value.


gains are compound off starting and ending values each quarter or yearly if you want to figure that way.

what percentage of dividends and capital appreciation that return is made up of doesn't matter.

a 9% average return whether 9% capital appreciation or 6% capital appreciation and 3% reinvested dividend has the same value in either case.


wouldn't it be great if we could just profit buying right before the dividend is paid out.

 

[mathjak107]

The sequence of returns risk makes the difference. If I have to support myself by selling 3 or 4% of my portfolio every year, I am at greater risk of outliving my funds if the first few years of my retirement are like 2008 or 1929. If I am earning 3% in income, never have to sell a security, no sequence of returns risk. The market value of my income producing investments may decrease as well, but if I don't have to sell then I will do better when the market rebounds.

this is false.

each payment in a downturn forces the share price down from where it last closed automatically by exchange rules.


a stock that was just adjusted downward for a 5% dividend starts the quarter off compounding again on 5% less starting value than it did the night before .

if you reinvested the dividend you start off the new quarter with exactly the same dollars in value you had prior .

in theory a stock paying a 5% dividend that was flat long enough would eventually consume itself after 20 payouts and adjustments downward by the exchange.

of course except for companies like gm paying dividends up to the end and falling that wouldn't happen but it does illustrate why your thinking is wrong.

folks like to think the dividend payout gets lost in the quarters action but it does not.

like i pointed out your starting value is where all compounding takes place from. the payout if not reinvested cuts down your investment dollars in that stock by that payout amount when that bell rings and markets start the new quarter.

if it is reinvested than you pretty much have the same value you had before the payout. you just have more shares at a lower price to kick off the next quarter..





5330. Adjustment of Orders
(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($.01), as follows:
(1) Cash Dividends: Unless marked "Do Not Reduce," open order prices shall be first reduced by the dollar amount of the dividend, and the resulting price will then be rounded down to the next lower minimum quotation variation.
(2) Stock Dividends and Stock Splits: Open order prices shall be determined by first rounding up the dollar value of the stock dividend or split to the next higher minimum quotation variation. The resulting amount shall then be subtracted from the price of the order. Unless marked "Do Not Increase," the size of the order shall be increased by first (A) multiplying the size of the original order by the numerator of the ratio of the dividend or split, then (B) dividing the result by the denominator of the ratio of the dividend or split, then (C) rounding the result to the next lowest share.

 

[bingybear]

The sequence of returns risk makes the difference. If I have to support myself by selling 3 or 4% of my portfolio every year, I am at greater risk of outliving my funds if the first few years of my retirement are like 2008 or 1929. If I am earning 3% in income, never have to sell a security, no sequence of returns risk. The market value of my income producing investments may decrease as well, but if I don't have to sell then I will do better when the market rebounds.

OK... so a 2008 event and shares drop by 50% and companies cut dividends by 50%... but are still paying the same rate... but half the money. Sounds like a similar worry. 2% divys may not pay the rent when the pie is cut in half.

I really don't track my "income" as you defined it. I would suspect somewhere around 2%. However, for those wondering how people get high "income rates", I have EE and Ibonds with present yields between 4% to 4.91%. I have DLR that I bought in June... was paying over 6% divy...now under 5%... darn price is up over 20% and screwed by yeald! MIC is about flat since I bought it... about 5.6% yield. I know of others that buy preferred stock to generate higher income.

I don't buy into the pure income portfolio, more total return and use systematic withdraw to provide spending money. While the Ibonds and EE bond produce interest... you can't spend it without cashing them in. Also divys in IRAs buy you little because you have to take them out to use them. For me diys (qualified) are really best used in taxable accounts as they provide income (if not reinvested) that can be tax free to certain limits of divy and cap gains. Also if you don't need to sell to use the income.

nb, don't jump on DLR or MIC based on my inclusion. MIC has had significant trips to the downside. I'm also not sure how much longer I'll hold them (also DLR is likely not qualified divy). Plus I'm not the investing guru. Just a simple guy going to RE in 1.5 months.

 

[mathjak107]

100 billion in dividends were cut or suspended in 2008-2009 and not distributed.

that creates quite a short fall in income for those living on it and saying they do not care where share prices go. unless they have enough cash and bonds to make up the shortfall they will sell equites at a loss in that situation anyway if they run short..

 

[seraphim]

I have no clue what my yield is - never checked.


Sent from my iPad using Early Retirement Forum

 

[seraphim]

VTSAX 62% TTM 1.76%
VTIAX. 10% TTM 3.40%
VBTLX 10% TTM 2.255%
SV cash 28% approximately 2.25%

My math teacher always said I'd have a reason to remember those formulas that would help me figure out the overall average. If he weren't dead, I'd tell him he was finally right.

So I guess about 2%... Maybe a little more.


Sent from my iPad using Early Retirement Forum

 

[phil70]

Thanks for everyone's feedback. Sounds like a wide variety of strategies to produce income. Since I'm reluctant to invest a lot in junk bonds, don't have the time or inclination to become a landlord, sounds like I'll remain in the ~2% range with my 60/40% stock/bond allocation.

 

[seraphim]

Just because of you're income comment, I'm not income oriented. That's why I've never checked my yield. Total value/total return is all I concern myself with


Sent from my iPad using Early Retirement Forum

 

[target2019]

I'm trying to get an idea of what a reasonable "yield" is on my investment portfolio. By that I mean income (dividend & interest) over value (not yield on cost) of your overall investment portfolio (which for me excludes emergency cash and checking account balance). Last year my yield was just below 2%. That sounds reasonable to me because I am still 10 years from our FIRE goal and I am 70/30 stocks/fixed income. I have no particular focus on dividend stocks or high income investments.

In the future, I would like to get more income from our portfolio, so I'm curious what other people have been able to achieve.

Never thought to calculate the number until you mentioned.

We are at 2.5% yield.

I looked up each fund's yield on Yahoo. Then weighted that with each fund's allocation in the portfolio. Added the results, and there you have it. Can't speak to whether that is reasonable, unreasonable, or what. The holdings are broad-based index funds.

In another stock and ETF portfolio I take care of, the yield is 3.8%. That is a mixture of stocks (telecommunications, utilities, energy), REITs, bond funds, etc.

 

[target2019]

VTSAX 62% TTM 1.76%
VTIAX. 10% TTM 3.40%
VBTLX 10% TTM 2.255%
SV cash 28% approximately 2.25%

My math teacher always said I'd have a reason to remember those formulas that would help me figure out the overall average. If he weren't dead, I'd tell him he was finally right.

So I guess about 2%... Maybe a little more.

Simple to calculate a simple portfolio like that. I get 2.2862%.

 

[phil70]

Thanks to both mathjak and mrfeh (and others) for their comments. Good points re: dividends. I am still trying to get into the mode of thinking about my "decumulation" phase in 10 years. I avoid high dividend stocks for the reasons you both mentioned. So essentially, what you are saying is that there is no investment portfolio that mitigates against sequence of returns risk (except for simply minimizing equity investments). The only way to mitigate the SOR risk is to get lucky as to when my first year of retirement occurs and/or be able to cut spending in negative return years.

I have been reading about "income floors" using risk-free investments (ha!) to provide "guaranteed" income to cover the absolute essential expenses. In my case, my wife and I should have a decent pension, which would serve this purpose. Sounds like the best approach may be the simple strategy of a (i) low-cost Boglehead diversified portfolio with (ii) a conservative but dynamic withdrawal plan (which to me means a lot less than 4% generally and even less in years when the market tanks). My wife wants a nice cushion in our plan and a reasonable chance of leaving a modest inheritance to our kids/grandkids.

 

[mrfeh]

Thanks to both mathjak and mrfeh (and others) for their comments. Good points re: dividends. I am still trying to get into the mode of thinking about my "decumulation" phase in 10 years. I avoid high dividend stocks for the reasons you both mentioned. So essentially, what you are saying is that there is no investment portfolio that mitigates against sequence of returns risk (except for simply minimizing equity investments). The only way to mitigate the SOR risk is to get lucky as to when my first year of retirement occurs and/or be able to cut spending in negative return years.

I have been reading about "income floors" using risk-free investments (ha!) to provide "guaranteed" income to cover the absolute essential expenses. In my case, my wife and I should have a decent pension, which would serve this purpose. Sounds like the best approach may be the simple strategy of a (i) low-cost Boglehead diversified portfolio with (ii) a conservative but dynamic withdrawal plan (which to me means a lot less than 4% generally and even less in years when the market tanks). My wife wants a nice cushion in our plan and a reasonable chance of leaving a modest inheritance to our kids/grandkids.

Yup, I agree with what you've written here. Folks don't like to admit it, but luck can play a significant role in the success of a retirement plan.

Another option you haven't mentioned above would be an SPIA, if you really want to avoid SOR risk. Might want to read Unveiling the Retirement Myth by Jim Otar for more info.

 

[phil70]

Yup, I agree with what you've written here. Folks don't like to admit it, but luck can play a significant role in the success of a retirement plan.

Another option you haven't mentioned above would be an SPIA, if you really want to avoid SOR risk. Might want to read Unveiling the Retirement Myth by Jim Otar for more info.

In theory, I agree about the SPIA. For us, however, my wife's pension should serve in place of the annuity, as long as it remains healthy.