Dividends from Index Funds

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Redstorm
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Dividends from Index Funds

Post by Redstorm »

Just curious as to what dividends the 3 index funds have been returning?

A friend was discussing 75% in an US Index Fund, 25% in an Aussie Index Fund and 25% in an emerging markets (china, india, HK) index

Say VTS, VAS and VEU (ASX)

He was hoping $2M invested would bring in 5% yield or $100k p/a

Is this 5% yield achievable ?
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galeno
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Re: Dividends from Index Funds

Post by galeno »

The 12 mo dividend yield on VT (world stocks) = 2.4%.

There is no way to get a 5% dividend yield from broad based equity index funds. You'll have to use leverage or make educated guess on individual stock picks or CEFs that cater to "income investors".

If you decide to "reach for yield" try not to "fall out of the tree" <grin>.
KISS & STC.
MN Finance
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Re: Dividends from Index Funds

Post by MN Finance »

My assumption is that you're thinking one question, but actually asking another. You're asking about "yield" but that's not what you mean. Yield is a figure you look up online. You know what that is already. What are you asking?
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JoMoney
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Re: Dividends from Index Funds

Post by JoMoney »

Not a recommendation, but there are a few "index funds" that have high yields, such as:

iShares U.S. Preferred Stock ETF
http://www.ishares.com/us/products/2398 ... -stock-etf

iShares International Select Dividend ETF
http://www.ishares.com/us/products/2394 ... vidend-etf

iShares Emerging Markets Dividend ETF
http://www.ishares.com/us/products/2395 ... vidend-etf

Many international countries have tax codes that give preferential tax treatment to money paid out to shareholders (who then pay taxes on it). In the U.S. it often amount to the owners being taxed twice on those earnings, which (among other reasons) may be a argument for why U.S. companies prefer buybacks and other methods of returning value to the shareholders. Some investments are just plain out riskier, poor liquidity, and little control given to the share-holder making it necessary to pay high-dividends to attract investment at all.
Keep in mind that there's nothing special about dividends, they're not any more or less "real" than capital gains other than the fact that you have the choice as to when you realize the capital gain (for better or worse). Sometimes dividends are just a return of capital, and can be fungible... Bernie Madoff's "investors" were paid dividends.
galeno wrote:...If you decide to "reach for yield" try not to "fall out of the tree" <grin>.
:thumbsup
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Redstorm
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Re: Dividends from Index Funds

Post by Redstorm »

MN Finance wrote:My assumption is that you're thinking one question, but actually asking another. You're asking about "yield" but that's not what you mean. Yield is a figure you look up online. You know what that is already. What are you asking?
Maybe

How much would he need in a 3 fund portfolio to live off the dividends?

He was looking at $2M with 5% dividends overall
jebmke
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Re: Dividends from Index Funds

Post by jebmke »

Redstorm wrote: Maybe

How much would he need in a 3 fund portfolio to live off the dividends?

He was looking at $2M with 5% dividends overall
Off the top of my head, $5M @ 2% = $2M @ 5%. Maybe a little less but probably at least twice the original number.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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