Income Investing Results

[dobig]

Just wanted to jump in here an say thank you for this. I am new to investing/managing money. I have had a fund managed for me for the last 35 years. I am getting ready to take control of my IRA. However I have no confidence. I took 20k out of my saving account and started buying stocks, ETF.s ect. Trying to learn what is what. I have only lost money so far LOL. I really like all the different strategies so far. If you don't mind can you list some of the CEF's and ETFS your have purchased for dividend income. Seems to me some the CEFS are kinda sketchy when looking from a beginners perspective. I would really love to come up a dividend based strategy with ETFS that can grow. Along with some consistent CEFS.

When I'm buying dividend etfs I look more at yearly average increase in dividends vs current income and secondly capital appreciation. In the long run these should be the winners. My top holding is Schd with a current dividend yield of around 3.8%. Nothing eye catching. What makes it exciting for me is it's dividend growth. In 2012 it paid about .80 cents a share per year in dividends. Today those same shares pay around $2.80 a share per year. On top of that the etf is up around 300% in the same time frame.

A good companion would be DGRO. Lower yield, high dividend growth and good capital appreciation. Paired with SCHD you get a good blend of high quality dividend paying companies without much overlap. Others to possibly consider might be DVY, VYM, FDVV (interesting allocation with big tech holding top 3 positions). All are considered safe low cost investments with proven track records (except FDVV) that should give you consistent income with growing dividends that should easily outpace inflation.

You can also look at some safer international etfs such as VYMI (sister to VYM) and SCHY (sister to SCHD). Higher yields than their US counterparts with usually slower growth.

For cefs I don't mess with anything beyond UTG and UTF. Not anything sexy with around 7% yields but long term history and dividends have slightly increased over time to help with inflation protection.

Do not chase yield. Think of the tortoise and the hare. This was not meant as a shot at Flieger.

 

[Taco]

Yes, this is an Income Investing thread, and the YOC vs Current Yield discussion is just a side discussion on ways to evaluate analysis for decision making. Let's return to the main topic...

Okay, I'll drop the questions about it. Your thread your rules.

I am genuinely interested in the topic and if there is something I'm just not getting. Perhaps when you make changes to your portfolio in the future you could discuss your analysis process. Or if you'd rather not, that's cool too

 

[Flieger]

Okay, I'll drop the questions about it. Your thread your rules.

I am genuinely interested in the topic and if there is something I'm just not getting. Perhaps when you make changes to your portfolio in the future you could discuss your analysis process. Or if you'd rather not, that's cool too

I do less selling than I do adding, but I will give some info as I do!

Flieger

 

[Flieger]

Do not chase yield. Think of the tortoise and the hare. This was not meant as a shot at Flieger.

The race is over for me. At this point I am trying to develop, and increase income with a base created during the marathon.

Flieger

 

[Flyfish1]

The race is over for me. At this point I am trying to develop, and increase income with a base created during the marathon.

Exactly. I had a very nice increase in income last year, but that was from deploying more capital into the dividend portfolio. That is now over so I think it will be interesting to see how income grows over time. My hope is that it will grow beyond the theoretical calculated increase due to simple reinvestment. It seems that a couple of times a year there is an opportunity to reposition and increase income. We shall see. These market downturns are a blessing providing great buying opportunities.

 

[Flieger]

The key for increasing income with this type of investing is to reinvest the portion of Div income that is above your income requirements. That of course assumes your investments earn more than your needs. I am fortunate that I am only using about 70% of my Divs for my "paycheck" allowing me to reinvest about 30%.

Flieger

 

[COcheesehead]

Anyway you slice it, that is a high yield. What are you invested in?

The entire taxable account is a bond ladder of muni’s and corporates plus 5 muni closed end funds and some cash.

 

[Fishmasterdan]

When I'm buying dividend etfs I look more at yearly average increase in dividends vs current income and secondly capital appreciation. In the long run these should be the winners. My top holding is Schd with a current dividend yield of around 3.8%. Nothing eye catching. What makes it exciting for me is it's dividend growth. In 2012 it paid about .80 cents a share per year in dividends. Today those same shares pay around $2.80 a share per year. On top of that the etf is up around 300% in the same time frame.

A good companion would be DGRO. Lower yield, high dividend growth and good capital appreciation. Paired with SCHD you get a good blend of high quality dividend paying companies without much overlap. Others to possibly consider might be DVY, VYM, FDVV (interesting allocation with big tech holding top 3 positions). All are considered safe low cost investments with proven track records (except FDVV) that should give you consistent income with growing dividends that should easily outpace inflation.

You can also look at some safer international etfs such as VYMI (sister to VYM) and SCHY (sister to SCHD). Higher yields than their US counterparts with usually slower growth.

For cefs I don't mess with anything beyond UTG and UTF. Not anything sexy with around 7% yields but long term history and dividends have slightly increased over time to help with inflation protection.

Do not chase yield. Think of the tortoise and the hare. This was not meant as a shot at Flieger.

Thank you. I have been following

. Trying to learn how to actually value a dividend stock/ETF. Thank you for your suggestions and advise.

 

[dickoncapecod]

@Quattro73
Hi. FWIW, particularly in the CEF arena, there is an important difference between high yield junk bond portfolios and investment grade CEF portfolios that generate high yields.
Regards, Dick

 

[corn18]

I have always avoided CEF's due to fees, either upfront or ongoing.

 

[COcheesehead]

I have always avoided CEF's due to fees, either upfront or ongoing.

Investment results are quoted after fees. Fees, and this is Bogle’s original intent that gets bastardized time and time again, matter when outcomes are the same such as an index fund. Fees become less of an issue when you have a proprietary strategy and then those should be judged on outcomes alone.

 

[corn18]

Investment results are quoted after fees. Fees, and this is Bogle’s original intent that gets bastardized time and time again, matter when outcomes are the same such as an index fund. Fees become less of an issue when you have a proprietary strategy and then those should be judged on outcomes alone.

Might be true, but I hate fees. Doesn't have to be a rational hate for it to be true.

 

[OldShooter]

Might be true, but I hate fees. Doesn't have to be a rational hate for it to be true.

Actually, it's completely rational. Morningstar's studies have repeatedly shown that low fees are the only reliable predictor of good fund performance. Morningstar Spotlight

 

[Flute McG]

Corn18 - Most CEFs use leverage to increase returns. This leverage is probably the greater part of the "fees".
This is actually a good thing, but it increases volatility and the number of "moving parts" to be tracked.
Much attention is devoted by portfolio managers to obtaining and hedging this leverage

Flute

 

[COcheesehead]

Borrowing expenses are included in CEF fees which makes them appear high, but it’s the borrowing that creates the above market income.

 

[COcheesehead]

Actually, it's completely rational. Morningstar's studies have repeatedly shown that low fees are the only reliable predictor of good fund performance. Morningstar Spotlight

When you lump funds together like they did in the study it’s no doubt you’d get the results they did. There are a lot of crummy funds that charge high fees sold by the unmentionable brokerages. If you use just fees to make investment decisions and it sounds like some might, it’s too myopic.

 

[OldShooter]

When you lump funds together like they did in the study it’s no doubt you’d get the results they did. ...

Oh? How so?

... There are a lot of crummy funds that charge high fees sold by the unmentionable brokerages. If you use just fees to make investment decisions and it sounds like some might, it’s too myopic.

The studies, I think, would lead one to avoid the "crummy", high fee funds. Not a bad strategy IMO. The question then becomes whether eliminating those funds from the pool would cause the pool return to increase. Seems logical that it would and, if so, the Morningstar result becomes useful in one's box of selection tools.

Note the study says nothing about the performance of "crummy" funds. Obviously, among thousands of funds there will be some winners there too, but their fees obviously are not predictive for good performance.

 

[GBcycling]

Might be true, but I hate fees. Doesn't have to be a rational hate for it to be true.

Along those lines, I have been managing my mom's account. She was upset with me this week when we did her taxes. She was mad about the taxes she paid on her dividends/interest/capital gains. She didn't say a word about the gain in her account value. Human nature, but not sure it was rational. At least she didn't ask me to move her balance back to passbook savings where it came from

 

[Koolau]

Along those lines, I have been managing my mom's account. She was upset with me this week when we did her taxes. She was mad about the taxes she paid on her dividends/interest/capital gains. She didn't say a word about the gain in her account value. Human nature, but not sure it was rational. At least she didn't ask me to move her balance back to passbook savings where it came from

Heh, heh, no matter how old (or even how rich) you get, you never grow out of hating to pay taxes.

 

[Fotodog]

I have been laddering corporate bonds and CD’s for my fixed income after ditching my traditional bond fund a few years ago. I like knowing my return as long as I hold to maturity. The CEF’s from Invesco and BlackRock look interesting to me, but I’m not entirely clear on how to determine the YTM when purchased. If I understand correctly, an exact number may not be possible because as bonds mature throughout the last year of the fund, the proceeds are held in a liquid account that pays the prevailing interest rate, and that cannot be known ahead of time.

The screenshot below from BlackRock shows 3 different yields. When I click on the little info icon, it shows that the SEC yield includes fees, where average YTM does not include fees. Am I correct to assume that SEC yield would give me a close approximation of the actual yield I will receive?

 

[pb4uski]

....If I understand correctly, an exact number may not be possible because as bonds mature throughout the last year of the fund, the proceeds are held in a liquid account that pays the prevailing interest rate, and that cannot be known ahead of time. ..

That is correct, and was a problem with these ETFs back when short term rates were really low but IMO less of a concern today with short term money rates paying well and a relatively flat yield curve. Another option is to just sell 6-12 months before the terminal distribution.

 

[DuluthGA]

The CEF’s from Invesco and BlackRock look interesting to me, but I’m not entirely clear on how to determine the YTM when purchased.

I dont think IBSX is a CEF. I use CEFdata and CEFconnect websites to investigate mine. I have 6 Blackstone funds scattered across IRA and taxable accounts. (BDJ, BCAT, BGX, BTX, CII, ECAT) I have one Invesco - VKI. I like to buy when they are at a discount which most are now. I look at current distribution, prior 5 years distribution where available, and how well they cover/earn their distribution. If they go to a good premium I might sell or if their trends don’t look good I’ll sell.

 

[Flyfish1]

Any advantage to CEFdata vs CEFconnect? I just started looking at CEFdata. Do either of them allow you to screen for a discount that is better than their average discount?

Edited: I think I figured it out you can sort by Zstat.

 

[Flieger]

Update on Income Investments basis, Div status (growth, flat, increase) upcoming. Been a rough month for basis for sure! So far, not as bad as if it had been invested as a comparable S&P 500 or NASDAQ equivalent fund though...

Flieger

 

[DuluthGA]

For individual funds you can see the historical discount on the main page on both sites. Sometimes CEfdata will have a fund CEFconnect doesn’t list. I use the CEFconnect app which has easy sort/filter options that includes 52 week avg discount/premium. Some good funds historically run at a premium which I think is ok as long as the distribution holds. Many of the PIMCO are this way, Just very little upside potential on the price,