MMB Portfolio Dividend & Curiosity Earnings Replace – April 2024 (Q1) — My Cash Weblog


Right here’s my quarterly revenue replace as a companion submit to my April 2024 asset allocation & efficiency replace. I choose to trace the revenue produced instead metric to efficiency. The overall revenue goes up way more regularly and persistently than the quantity proven on brokerage statements (market worth), which helps encourage constant investing. Right here’s a associated quote from Jack Bogle (supply):

The true investor will do higher if he forgets concerning the inventory market and pays consideration to his dividend returns and to the working outcomes of his corporations. – Jack Bogle

Right here is the historic development of the S&P 500 whole dividend, which tracks roughly the most important 500 shares within the US, up to date as of This fall 2023 (through Yardeni Analysis):

That may be a a lot smoother trip than the value index. I think about my portfolio as a manufacturing unit that churns out greenback payments, or a tree that offers dividend fruit.

Extra particulars on dividends. Inventory dividends are a portion of income that companies have determined to distribute on to shareholders, versus reinvesting into their enterprise, paying again debt, or shopping for again shares. The dividends might undergo some short-term drops, however over the long term they’ve grown sooner than inflation.

Within the US, the dividend tradition is considerably conservative in that shareholders count on dividends to be secure and solely go up. Thus the beginning yield is decrease, however grows extra steadily with smaller cuts throughout laborious instances. Right here is the historic development of the trailing 12-month (ttm) dividend paid by the iShares Core S&P 500 ETF (IVV) through StockAnalysis.com. (They appear to have a knowledge glitch in the intervening time with respect to VTI.)

European company tradition tends to encourage paying out a better (typically mounted) share of earnings as dividends, however that additionally means the dividends transfer up and down with earnings. The beginning yield is at the moment greater however might not develop as reliably. Right here is the historic development of the trailing 12-month (ttm) dividend paid by the Vanguard Complete Worldwide Inventory ETF (VXUS).

The dividend yield (dividends divided by worth) additionally function a tough valuation metric. When inventory costs drop, this share metric often goes up – which makes me really feel higher in a bear market. When inventory costs go up, this share metric often goes down, which retains me from getting too euphoric throughout a bull market.

My portfolio revenue historical past. I began monitoring the revenue from my portfolio in 2014. Right here’s what the annual distributions from my portfolio appear to be over time:

  • $1,000,000 invested in my portfolio as of January 2014 would began out paying ~$24,000 in annual revenue over the earlier 12 months. (2.4% beginning yield)
  • If I reinvested the dividends/curiosity each quarter however added no different contributions, as of January 2024 it will have generated ~$50,000 in annual revenue over the earlier 12 months.
  • If I spent all of the dividends/curiosity each quarter and added no different contributions, as of January 2024 it will have generated ~$37,000 in annual revenue over the earlier 12 months.

This chart reveals how the annual revenue generated by my portfolio has elevated over time and with dividend reinvestment.

At any given time, this can be a fairly arbitrary quantity. However over an extended interval, I discover it a way more nice technique to monitor my progress.

TTM revenue yield. To estimate the revenue from my portfolio, I take advantage of the weighted “TTM” or “12-Month Yield” from Morningstar (checked 3/31/24), which is the sum of the trailing 12 months of curiosity and dividend funds divided by the final month’s ending share worth (NAV) plus any capital positive aspects distributed (often zero for index funds) over the identical interval. My ttm portfolio yield is now roughly 2.53%.

What concerning the 4% rule? For giant-picture functions, I assist the easy 4% or 3% rule of thumb, which equates to a goal of accumulating roughly 25 to 33 instances your annual bills. I might lean in the direction of a 3% withdrawal charge if you wish to retire younger (nearer to age 50) and a 4% withdrawal charge if retiring at a extra conventional age (nearer to 65). An excessive amount of time is spent debating this quantity. It’s only a fast and soiled goal to get you began, not a quantity despatched down from the heavens!

Through the accumulation stage, your time is healthier spent specializing in incomes potential through higher profession strikes, enhancing in your skillset, and/or on the lookout for asymmetrical entrepreneurial alternatives the place you’ve an possession curiosity.

As a semi-retired investor that has been partially supported by portfolio revenue for some time, I discover that monitoring revenue makes extra tangible sense in my thoughts. Our dividends and curiosity revenue are usually not robotically reinvested. They’re merely one other “paycheck”. As with our different variable paychecks, we will select to both spend it or make investments it once more to compound issues extra rapidly. You could possibly use this cash to chop again working hours, pursue a distinct profession path, begin a brand new enterprise, take a sabbatical, carry out charity or volunteer work, and so forth.

Working much less helps me be a greater mother or father. (I want all the assistance I can get.) I’m consciously selecting to work when they’re in school but in addition consciously turning down work that doesn’t match my priorities and targets. This portfolio revenue helps me do this.

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