FTSE Group has worked with Vanguard to create a FTSE High Dividend Yield Index, which will serve as the basis for the High Dividend Yield Index Fund from Vanguard. Both traditional Investor shares and ETF shares will be available.
The new custom index consists of stocks that are characterized by higher-than-average dividend yields, and is based on the U.S. component of the FTSE Global Equity Index Series (GEIS). Real estate investment trusts (REITs), whose income generally do not qualify for favorable tax treatment as qualified dividend income (QDI) are removed, as are stocks that have not paid a dividend during the previous 12 months. The remaining stocks are ranked by annual dividend yield and included in the target index until the cumulative market capitalization reaches 50% of the total market cap of this universe of stocks.
DaveS wrote:I will tell you that after seeing the recent poor performance of DVY due to its overloading of financial stocks, I think you should just be true to holding the Value Fund. Yes I know the Vanguard Dividend fund did not go down as much, but it costs more than the Value fund and costs matter. The reason why some people may have gone for the Dividend fund is there was not a good value index fund at Vanguard till it abandoned Barra/S & P for the current MSCI Indexes. I cant recall the specifics but the Barra/S & P price to book was really growthy in 2001. Dave
Again, for those who plan on liquidating their shares then daily NAV certainly matters. (As an aside, I pity those who've had to liquidate index fund shares of late -- hasn't been pretty.)
dumbmoney wrote:Gregory wrote:If one holds VYM for its dividend income stream, and doesn't plan to liquidate any shares, only skim off the dividends, then it cold be a good holding.
Dividends = placebo
Dividends = placebo
simplesimon wrote:This is something I've thought about when I first discovered the kinds of dividends bond funds pay.
If you had a sizable portfolio, you could just live off dividends and not even have to sell a share.
Gregory, is this what you're getting at?
Schooly D wrote:Since VHDYX costs twice as much as VIVAX (0.4% ER vs. 0.2%) why would anyone choose to invest in VHDYX rather than in VIVAX?
One reason I like the higher payout fund is because I want a steady cash flow going into my MMF that I can then withdraw automatically every month into my checking account without having to do anything.
I am not opposed to selling and buying shares and re-balancing, I just don't want to have to do it... so I am going with multiple strategies. One strategy being dividend stock funds like VHDYX.
Gregory wrote:The dividend investor collects dividends in good markets and bad. A well-capitalized dividend investor can live off the dividend without liquidating shares. Since we've carefully chosen corporations with rising dividends (e.g., JNJ, KO, PG, XOM, CVX, etc., in addition to international dividend stocks-- I personally don't allow any one stock to make up more than about 1.5-2% of my portfolio). We don't sit around and wait to be blindsided by a dividend cut -- we watch the cash flow, payout ratios, etc. I've never had to sell a stock because it cut its dividend.
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