2019 Year-End Distributions

[audreyh1]

Wow - so many of my funds are paying out distributions a lot higher than expected, and I had several with 0% distributions estimated that paid out more like 1-2%.

For Fidelity, the 0% estimates for year end on some funds made no sense anyway, as all their index funds always pay out some dividends, and I thought their estimates included dividends. Other active funds had distributions way higher than estimates, including 0 estimate but paying out non-trivial cap gains distributions.

Well - I had figured that I was very likely over a given IRMAA threshold anyway.......

 

[mrfeh]

Fido total US market (FSKAX) paid out about 1.5% yesterday.

 

[audreyh1]

Fido total US market (FSKAX) paid out about 1.5% yesterday.

Yes - all dividends. And of course this fund pays dividends. So why did they give 0 for the estimate? Fidelity published estimates aren't just for cap gains, they include income as well.

 

[marko]

Wow - so many of my funds are paying out distributions a lot higher than expected, and I had several with 0% distributions estimated that paid out more like 1-2%.

But my TRPrice year-end CG distributions this year are almost half of what they were last year but still a bit above my 15 year average, ranking 4th highest. Go figure.

 

[audreyh1]

Well - they were like that through Oct, but I think the end of the year is going to make up for much of the difference!

 

[scrabbler1]

Yes - all dividends. And of course this fund pays dividends. So why did they give 0 for the estimate? Fidelity published estimates aren't just for cap gains, they include income as well.

FXAIX, the SP500 Index fund, paid out no cap gain distributions this December (it did in April, barely 0.1%) but paid out a monster 4th quarter dividend of 75 cents per share, far more than its usual 35-50 cents per share the last 4 years.

The year-end Cap Gains chart in
https://www.fidelity.com/mutual-funds/information/distributions#/?table=estimated doesn't show dividends, at least not yet. I recall the chart changing late last December to include year-end dividends, so keep on eye on it in case the chart adds that all-important column.

 

[audreyh1]

I thought the one I had showed income/dividends too. Or maybe they used to give that info in prior years.

I guess that changed and I didn’t notice.....

 

[corn18]

Well, so much for fxaix being tax efficient this year. Would just prefer they saved it all up until I retired and wasn’t in the 37% tax bracket. First world problems I guess.

 

[audreyh1]

Well, so much for fxaix being tax efficient this year. Would just prefer they saved it all up until I retired and wasn’t in the 37% tax bracket. First world problems I guess.

Wasn’t that like a .7% dividend distribution 4th quarter? That is tax efficient. The underlying stocks pay dividends.

 

[Sunset]

Do people feel that the overall year long total distributions are larger or smaller than last year ?

 

[explanade]

VG distributions at the end of 2018 was much higher than in previous years, like 60% higher IIRC.

I'm guessing they will revert to the mean.

 

[audreyh1]

Do people feel that the overall year long total distributions are larger or smaller than last year ?

I think they are going to end up being a little smaller than 2018 in spite of coming in quite a bit higher than estimates.

 

[marko]

Do people feel that the overall year long total distributions are larger or smaller than last year ?

I think they are going to end up being a little smaller than 2018 in spite of coming in quite a bit higher than estimates.

This is sort of the question I asked a few weeks ago. It seems that despite a great year of growth dividends and CGs are slightly smaller. In my case, CGs are about half of last year but I'll take the growth!

At least in my case, it seems to be the inverse of what the market does...a good year=smaller distributions and vs/vs.

 

[audreyh1]

I’m just looking at the total distributions, but in my case it’s usually dominated by capital gains distributions. In other words it seems to be the capital gains distributions that grow and shrink, while the dividends stay relatively steady or very gradually increasing.

 

[EastWest Gal]

Well, so much for fxaix being tax efficient this year. Would just prefer they saved it all up until I retired and wasn’t in the 37% tax bracket. First world problems I guess.

Count yourself fortunate to be in the 37% tax bracket. You are in the 1%.

 

[Callitaday2022]

May be dumb...but what is the purpose of Dividends? I hear people say to invest in high paying dividend funds, but when they pay out the share price just drops so what's the big deal? I could sell some whenever I want rather than waiting for them to pay out in December.

Mine get reinvested so just end up paying taxes.
I understand STG, LTG come from funds selling winners, but Dividends just make me pay taxes.

Didn't do well with individual stocks so just going to continue with index funds

 

[gayl]

Here are Schwabs:

https://www.schwabfunds.com/public/csim/home/documents/distributions-tax

[emoji857] Went x 12/12 and distribution 12/17. Just tapping SCHB which means my holiday plan won't 'feel like' it costs me anything [emoji857]
I have a really easy list:
$100 each to older 3 grandkids
$20 + pjs, 1 outfit, toy in 1 gift bag to little 3 grands
$1000 check each to DD & DS
$50 check to hairdresser & dog groomer
5 $20 Sbux cards for those who just pop into Hannukah dinner (know of 3 that probably will be there)
$100 to PJ Library. Smaller than last year

 

[Sunset]

May be dumb...but what is the purpose of Dividends? I hear people say to invest in high paying dividend funds, but when they pay out the share price just drops so what's the big deal? I could sell some whenever I want rather than waiting for them to pay out in December.

Mine get reinvested so just end up paying taxes.
I understand STG, LTG come from funds selling winners, but Dividends just make me pay taxes.

Didn't do well with individual stocks so just going to continue with index funds

I have dividends pay out rather than be reinvested. I use this as part of my yearly spending money, which I would have to pay taxes on if I sold stock instead. So the tax issue is much the same for me.
The tax rate for qualified dividends (long term holding) is the same as LTG when selling.

Where dividends make a difference is when the market drops a lot, companies normally keep paying the same dividend dollar amount, this saves me from having to sell stock when it's low in price.

 

[scrabbler1]

Do people feel that the overall year long total distributions are larger or smaller than last year ?

Cap gain distributions are lower than in 2018 and 2017, somewhat bigger than in 2016. Dividends are up slightly, continuing their overall upward trend.

 

[RunningBum]

May be dumb...but what is the purpose of Dividends? I hear people say to invest in high paying dividend funds, but when they pay out the share price just drops so what's the big deal? I could sell some whenever I want rather than waiting for them to pay out in December.

Mine get reinvested so just end up paying taxes.
I understand STG, LTG come from funds selling winners, but Dividends just make me pay taxes.

Didn't do well with individual stocks so just going to continue with index funds

Not sure I understand the focus of your question about the purpose of dividends.

Mutual funds pay dividends because the underlying stocks pay dividends.

Stocks pay dividends because they make revenue and don't have a strong need to reinvest it all back into the company. Rather than sit in cash, they give some of it to shareholders.

Some people like dividends because it is a steady, reliable source of income. Also dividend payers tend to be more stable because they are well established profitable companies.

Myself, I'd rather minimize dividends because I'd like to limit income to get an ACA subsidy and also have space for Roth conversions. I'd rather the companies reinvest their revenue to grow and hopefully increase value. Once I get on medicare, I may go more towards higher dividend paying stocks and funds.

All this is really basic and I'm sure it can be picked apart with exceptions and clarifications, but since I wasn't even sure which aspect of dividends you are asking about I didn't go into any depth.

 

[scrabbler1]

Hope so! I'd hate to barely miss it. I have a cap loss carryover that I'm already counting on, but no unrealized losses that I can take.

Ugh, put my end of the celebration on hold. I just discovered that the figure I had for FPL (on Form 8962, the ACA subsidy) was too high. That figure, just over $12k, never seemed to be exactly the same from source to source or from month to month, including some shown in this forum. The actual Form 8962 for 2019, which was recently released by the IRS, now has it at $12,140 (for the lower 48 states, 1-person household). Although it is only a few hundred dollars lower than the last figure I had in my spreadsheet, that reduction (which gets multiplied by 4) now puts my estimated MAGI a few hundred dollars too high to qualify for the subsidy.

I still have some shares I can sell at a loss, despite recent NAV gains. Once it gets passed the CG distribution date just after Christmas, the price will drop and it will hopefully give me some more breathing room to sell some shares at a loss, enough to pull me below the limit and give me a little cushion in case some 12/31 bond fund distributions are a little high. It's going to be close......

 

[SecondCor521]

Ugh, put my end of the celebration on hold. I just discovered that the figure I had for FPL (on Form 8962, the ACA subsidy) was too high. That figure, just over $12k, never seemed to be exactly the same from source to source or from month to month, including some shown in this forum. The actual Form 8962 for 2019, which was recently released by the IRS, now has it at $12,140 (for the lower 48 states, 1-person household). Although it is only a few hundred dollars lower than the last figure I had in my spreadsheet, that reduction (which gets multiplied by 4) now puts my estimated MAGI a few hundred dollars too high to qualify for the subsidy.

The number you had was probably $12,490.

FPL depends on where you live (lower 48 or Alaska or Hawaii). It also depends on how many are in your tax household. Finally, and this is probably what bit you, it depends on the year in question.

Every year the FPL numbers, like tax brackets and a number of other items, are adjusted (usually upward) for inflation. So for your situation, $12,140 is the number for 2019 coverage, and $12,490 is the number for 2020 coverage.

One other wrinkle that probably affected you is that the FPL numbers used are offset by one year. So the $12,140 is the 2018 number, but it is what is used on 2019 tax returns. The $12,490 is the 2019 number, but it is what will be used on 2020 tax returns.

So probably you found some reference that said that the number is $12,490 for 2019, and didn't realize there is a one year offset.

The best source on this I've found is:

https://thefinancebuff.com/federal-poverty-levels-for-obamacare.html

I don't know if they'll update it for 2021 and future years.

HTH.

 

[Callitaday2022]

So you reinvest dividends, STG, LTGs in taxable accts and pay the taxes, but when you sell you don't pay taxes again on that amount. Who keeps track of that and do you specify when selling later?
The mutual fund company, tax guy, me and tax guy??

 

[mrfeh]

May be dumb...but what is the purpose of Dividends? I hear people say to invest in high paying dividend funds, but when they pay out the share price just drops so what's the big deal? I could sell some whenever I want rather than waiting for them to pay out in December.

Not dumb. I agree with you.

Go to bogleheads.org and search for "total return vs dividend investing" for more info.

Mathematically, dividends are equivalent to a forced sale. To be avoided, IMO.

 

[RunningBum]

So you reinvest dividends, STG, LTGs in taxable accts and pay the taxes, but when you sell you don't pay taxes again on that amount. Who keeps track of that and do you specify when selling later?
The mutual fund company, tax guy, me and tax guy??

The mutual fund company has to track it, and you aren't paying taxes on the same money twice. You are taxed on the dividends, and the reinvestment adds to your cost basis.

Say you bought 100 shares at $10. You have a basis of $1000 (100*$10).

Then you get a dividend of 20 cents/share. 100*.20 is $20, and that dividend is taxed.

You chose to reinvest dividends, the they buy new shares with that $20. For simplicity, say the share price is still $10. They buy 2 new shares for you. Your basis for those shares is 2*$10 or $20. You now have a basis of $1020 on all of your shares.