Dividend Income Questions

[Senator]

If you are retired, I am wondering few things about dividend income. I am curious, how much of your income is comprised of dividends? And also how much is your blended dividend rate across all your positions.

If you are still working, do you have a dividend income plan?

I am still working, and I mainly invest in index ETFs (IVV, IVW, DVY, IWM, QQQ), with a slightly less than ~2% dividend overall yield. My dividends are ~$8,500 now, and should basically double when I rollover my 401K to a IRA.

With additional investment between now and next year, I am hoping to have ~$20,000 annually in dividends. Add in the DGFs dividends, and we should be at least $30K a year.

That $30K will pay the essential expenses, and I have a bit of rental income.

I am curious as to what others have set up in terms of dividend income. It seems like it takes a whole pile of money just to get a base amount of dividend income without touching the principle.

 

[Hamster]

A little over 30K in dividends last year. I have added some REITs in my Roth and some preferreds so that will go up this year. Mostly living on rental income and SS so these are just reinvested for now.

 

[W2R]

If you are retired, I am wondering few things about dividend income. I am curious, how much of your income is comprised of dividends?

Before I claimed SS, around 2/3 to 3/4 of my income came from dividends. (Edited to add: Note that this is income, and less than my income was spent so dividends covered my spending).

In 2014 I had SS income for half the year, and 59% of my income was from dividends.

And also how much is your blended dividend rate across all your positions.

My dividends came to about two and a half percent of my whole portfolio (including cash), last year.

 

[Dawg52]

Dividends and interest have covered my budget for the most part. When SS kicks in, that will cover a big portion of my budget. So I might use the excess on travel or wild women. Not sure......

 

[fritz]

Retired at 58/57 (in 6th year now) living off investments in retirement - no pensions or annuities. My SS and taxable account dividends (Wellesley and Wellington funds) adequately cover basic living expenses. Taxable account dividends are used to cover 45% of basic living expenses (carry no debt). Wife's SS is used for travel/+ and not considered for covering basic living expenses. This is to remind us that it will go away when one of us does and not to count on it for basic living expenses. Taxable account LTCGs are normally reinvested or taken to replenish cash reserves used during the year. Keep 2 years minimum basic living expenses in cash reserves. Pull cash from reserves when needed and replenish year end with LTCGs to minimize taxable events. Don't utilize deferred accounts to keep taxable income with range of ACA subsidy (wife only - I'm VA and don't qualify).

 

[bingybear]

I have plans such as yours, but have not put them in place. I RE in the firs t quarter of this year. I'm using IVV, DVY, SDY, PWV and some other ETFs. I've bought some individual high dividend payers that I've sold after 20%+ price increase in less than a year... but collecting 2 or 3 quarterly dividends that started around 6 to 7 %. I thought these had run their course.

Presently I have enough cash to live on for a while... but will want to move to dividends. Many of the ETFs will kick out higher distributions in December like MF... so don't necessarily look for an equal flow during the year.

good luck

 

[audreyh1]

I think folks a few years ago were able to retire with a dividend yield of 3 to 4%. It's not easy to do now.

 

[NW-Bound]

Dividend and interest incomes paid for roughly 1/2 of my expenses last year. So, I am eating into principal or cap gain. I do not invest for dividend, but for total return. I have stocks like Berkshire that pay no dividend.

The above 1/2 is only in the figurative sense, because a lot of it is in tax-deferred accounts which I cannot and have not touched. So, I am draining down my after-tax savings for the whole load.

 

[truenorth418]

Dividends are about 2.3% of my stock portfolio this year, 100% of my AGI. They're also about 50% of my spending, and I have a bucket of cash I am gradually spending down to make up the rest. This qualifies me for an ACA PTC and reduces my state/city income tax obligation.


Sent from my iPhone using Early Retirement Forum

 

[ESRwannabe]

If you are retired, I am wondering few things about dividend income. I am curious, how much of your income is comprised of dividends? And also how much is your blended dividend rate across all your positions.

If you are still working, do you have a dividend income plan?

I am still working, and I mainly invest in index ETFs (IVV, IVW, DVY, IWM, QQQ), with a slightly less than ~2% dividend overall yield. My dividends are ~$8,500 now, and should basically double when I rollover my 401K to a IRA.

With additional investment between now and next year, I am hoping to have ~$20,000 annually in dividends. Add in the DGFs dividends, and we should be at least $30K a year.

That $30K will pay the essential expenses, and I have a bit of rental income.

I am curious as to what others have set up in terms of dividend income. It seems like it takes a whole pile of money just to get a base amount of dividend income without touching the principle.

I'm 39 and still working. If I retire early it will be based primarily on a dividend income strategy. Although I may add some "vanguard managed payout fund" in a taxable account as well.

For dividend income I have used a combination of both ETFs and individual stocks. I'd prefer to get entirely away from the individual stocks if possible. I'm lazy and would rather not have to keep up with it. Investing in individual stocks requires on going due diligence. With ETFs you just need to monitor the prospectus and the sector. Having said that stocks are much easier for getting income built up and the distributions are more consistent.

Investing in individual stocks was very important at the beginning. I started out almost 100% individual stocks and have gradually changed to almost 100% etfs over years of saving. ETFs reduced my yield and the consistency of the income. However I view etfs as safer and they require essentially no effort.

Right now I get about $22k a year in qualified dividends with a div growth rate around 6%-7%. My living expenses are around $30k a year. My w-2 income is around $60k a year. So $22k is pretty substantial for me.

I was generally expecting that by 45 I could switch to part time work and use investments to pay for 50% of living expenses (i.e. ESR). However, investment returns have taken over more than I thought they would. Its looking like working after 45 will be optional.

P.S. This is all in my taxable account. I also have a 401k, Roth IRA, and 15 years vested in a state pension. The 401k is 100% vanguard target retirement date fund and Roth IRA is 100% vanguard managed payout fund.

 

[CyclingInvestor]

57, retired 9 years. 100% of my income is individual stock dividends in IRAs (accessed thru 72t withdrawals). Average yield about 3.5%. Dividends are up about 120% in 9 years.

 

[FIREd]

Dividends and interests cover a good chunk of our expenses. The rest comes from cashing in i-bonds. We should have enough in i-bonds to supplement our dividend/interest income until SS kicks in.

Our portfolio currently yields around 2.7% (including cash, precious metals, and i-bonds that pay nada). About 1/3 of our dividend/interest income comes from individual stocks. About 1/6 comes from a CD ladder. The rest comes from an assortment of bond and equity mutual funds.

Non-income-producing assets represent about 20% of our portfolio, so there is potential to crank up the dividend income if needed.

 

[clifp]

just turned 56,retired 16+ years. 100% on my income is covered by dividends and interest (interest income is ~15%). My overall portfolio yield is about 2.8%. However my largest individual holding Berkshire pays no dividend.

 

[misanman]

Dividends run about $4,900/month and comprise about 80% of our current income. When I start to collect SS next year at age 70 it will be about 54% of income. Dividend rate as of yesterday's close is 3.7%. Yield on cost is 4.2%.

 

[bingybear]

I may not have been clear. My attempt is a total return strategy, but I do use a value tilt. Thus it relies on dividends. I try to keep qualified dividends in my taxable accounts an non-qualified in my IRAs. 55/44/1 after tax/IRA/RIRA.. Expect to roth convert for the next 15 years.

 

[Senator]

I may not have been clear. My attempt is a total return strategy, but I do use a value tilt. Thus it relies on dividends. I try to keep qualified dividends in my taxable accounts an non-qualified in my IRAs. 55/44/1 after tax/IRA/RIRA.. Expect to roth convert for the next 15 years.

Thank you for the clarification. I will mostly have qualified dividends. It's just amazing how much money you need to have a decent amount every month.

 

[pb4uski]

Are you talking about just dividends from equities or both dividends and interest?

Dividends and interest across all of our accounts (taxable, tax-deferred and tax-free) are 50% of our income (with the difference being unrealized appreciation since I am a total return investor) and are an average yield of 2.2%. That includes both dividends on equities and interest on fixed income (which technically is also dividends since most of our fixed income is in bond mutual funds).

Why would your dividend income almost double when you rollover your 401k to an IRA? Mine didn't change at all as my 401k investments received dividends as did my IRA investments.

As a total return investor, I don't much care where income comes from dividends and interest or appreciation. It seems to me that making principal sacrosanct is suboptimal and results in retiring a lot later than necessary and leaving a huge slug of money to heirs or charities at the end of your days.

 

[scrabbler1]

I had about $30k in dividends last year, most of it from bond funds. As a 52-year-old ER, that's my main source of investment income (I get some more in the erratic cap gain distributions, but not much). It covers 133% of my expenses, so I reinvest the excess. As a percent of my taxable account (I have an IRA, too, but I can't really touch it for a few more years), it is about 3.7%.

 

[marko]

About 55% of income/spending comes from dividends.

 

[Cobra9777]

If you are retired, I am wondering few things about dividend income. I am curious, how much of your income is comprised of dividends? And also how much is your blended dividend rate across all your positions. ... I am curious as to what others have set up in terms of dividend income. It seems like it takes a whole pile of money just to get a base amount of dividend income without touching the principle.

The typical 60/40 portfolio will generate dividends just north of 2%. That's half of a 4% WR; 66% of 3%; etc. Fairly simple to generalize, and indeed several people have answered 50%. But most total return investors don't view dividends as anything special. Most would be fine if companies kept the cash and grew their value instead.

In our case, the overall portfolio dividend rate is 2.9%. Excluding cash and real estate, it's 2.6%, with a large-cap/high-dividend tilt on the equity side and some high-yield corporate on the fixed income side. Most of this is in tax-deferred accounts and is reinvested. The taxable portion, which we take in cash, covers about 15% of expenses. If I consider both pieces, it covers 40%. However, we also consider rental income as a kind of dividend, since we bought them with cash taken from dividend-paying stock and bond funds in the taxable account. This covers another 15% of expenses.

We have two pensions that cover 60%, so with real estate plus taxable dividends at 30%, we have very small/infrequent WDs for the rest. Plan is to delay SS and tax-deferred to age 70, most of which will just accumulate in the taxable account. Will do Roth conversions to top of 15% bracket for next 15 years, but with pensions and rentals, there's not much room.

We don't really focus on dividends per se. But we do have an income bias, evidenced by real estate, high-dividend tilt, and pension annuities, both of which could have been taken as a lump sum.

 

[eta2020]

Thank you for the clarification. I will mostly have qualified dividends. It's just amazing how much money you need to have a decent amount every month.

Like millions but it is pretty reliable, grows faster then inflations and has tax advantages.

 

[NW-Bound]

As mentioned earlier, 1/2 of my expenses come from principal, actually cap gain right now. We are spending a lot more than I first thought at start of retirement, but when I looked at my Quicken screen, about than 1/4 of the expenses are for non-recurrent items such as major home repairs and upgrades, daughter's wedding, etc..., plus some more from discretionary spending. And the time to "rebalance" some of the market gains into those non-recurrent plus discretionary items is during a market boom, not a bust.

We are both 59. If we draw SS at 62, it will be 40% of current expenses. If drawn at 66, it will be 54%, and at 70 it will be 70%. We will play it by ear, and the time to draw depends on the performance of the market. And that assumes we keep on spending like we have been for the last 3 years. And I do not see how. I am not going to change homes, buy a plane, eat or drink more. I look at cars like the Tesla with indifferent eyes. So, we should be able to live on that SS @ 70 by itself, if I take out the non-recurrent and discretionary items.

Looking at this in a very top view like the above is enough for me. No need for fancy spreadsheet.

But I still want more money, to see my portfolio grow though. Hey, I am never shy to admit that I am related to Scrooge.

 

[hesperus]

Our portfolio generates about $130K annually in dividends, or about 2.7%. Most of this is qualified dividends, except for a 25% portion that comes in from MLP distributions. We have living expenses of about half that, with no debt, so we typically invest the positive cash flow back into the market. However, we are seeing some spending 'creep' over the last couple of years. I am retired (56yrs), and DW still works part time (mainly for good healthcare). We have a 60/25/15 equity/bond cash ratio, and will keep it that way for the next few years. I have a 'hands off' the principal policy until I reach 65 years of age. I'm waiting until max SS age to draw.

 

[Danmar]

Dividends represent about half our income, the rest being my DB pension. Divs are growing at about 8% per year so over time will represent a higher proportion. In Canada these divs are qualified to attract a tax rate of about 20% about the same as cap gains. Current yield about 3.9% of our portfolio which is 100% equity (pension is a FI proxy). Our spending is totally covered by this income but I think we will gradually start to spend some of the accrued cap gains as well. Otherwise my daughter will inherit too much. Aged 65 retired 9 years.

 

[marko]

Over the past few days in different threads, people have referred to themselves as "Total Return Investors". "...I'm a total return investor, so I don't worry about dividends....."

To me a total return investor's portfolio more or less represents a fairly balanced/allocated portfolio with a mix of equities, some that deliver dividends and bonds. Not something I'd put a label on.

When someone identifies as a TRI, does that just mean that income comes from equity/bond dividends AND sale of equities?
Or is it considered a particular strategy? Aiming for the best of both worlds.
If your portfolio could cover your expenses+ on just dividends would that make you NOT a TRI?

Just trying to get my arms around the label and what the up/downsides might be.