VDIGX - Dividends? [Vanguard Dividend Growth]

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RedRover
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Joined: Mon May 30, 2016 6:52 pm

VDIGX - Dividends? [Vanguard Dividend Growth]

Post by RedRover » Mon May 30, 2016 7:16 pm

I recently purchased VDIGX but am having second thoughts. I bought based on the distributions that I saw on the Vanguard screen which go back to Dec. 2014 and it's 8.19% return since inception. In 2015 it distributed $1.26 per share but after I purchased I realized that prior to that the distributions have been a lot less:

2014 = .78
2013 = .48
2012 = .36
2011 = .31
2010 = .27
2009 = .29
2008 = .26

Last year in March it distributed .36 but this year in March it only distributed .08.

Was there something special that caused the 2015 distributions to be so high? Was that a strange year and the other distributions around the less than .50/year mark more the norm or is the higher distribution amount the new norm? Basically, how much in distributions should I reasonably expect there will be going forward?

Any thoughts would be much appreciated. Thank you.

lack_ey
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Re: VDIGX - Dividends?

Post by lack_ey » Mon May 30, 2016 7:50 pm

Looking up the ticker... Vanguard Dividend Growth (Investor Shares), the actively managed stock fund using Wellington Management.

It's an actively managed stock fund. Those distributions aren't all dividends. A lot of it is capital gains.

The listed SEC yield is 1.88% now, which is in the ballpark of what you should expect for dividends. Realized and distributed capital gains are going to fluctuate from year to year and depend on whatever the portfolio managers want to sell, which is unpredictable. Also on the price paid for current holdings, of course, to determine the level of capital gains for a given potential sale.

RedRover
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Re: VDIGX - Dividends?

Post by RedRover » Mon May 30, 2016 7:57 pm

Thank you. Is the 1.88% yield per share price (ie., if I have the yield information what is the formula to find out how much I can expect in distribution?) Sorry for the basic questions. :happy

lack_ey
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Re: VDIGX - Dividends?

Post by lack_ey » Mon May 30, 2016 8:14 pm

RedRover wrote:Thank you. Is the 1.88% yield per share price (ie., if I have the yield information what is the formula to find out how much I can expect in distribution?) Sorry for the basic questions. :happy
A yield expressed as a percentage is a ratio, and the denominator of the ratio is price, yes. So 2% if the share price is $10 would be $0.20. And 2% of a holding of $8,000 would be $160 (or $8,000 would be 800 shares at $10 with a yield of $0.20 a share, making $160... as multiplication is obviously associative).

Again, this is just the dividends and doesn't tell you about any other distributions, which may be greater than the dividends in some years.

Also, dividends can change, and SEC yield is a measure that is time-lagged so none of this predicts actual dividend distributions perfectly.

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Gort
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Re: VDIGX - Dividends?

Post by Gort » Mon May 30, 2016 8:27 pm

In the June "Morningstar Dividend Investor" newsletter (I have free access from my public library), the author states that the golden age of dividend growth is over. Also states that the first quarter of 2016, S&P 500 dividends per share rose only 4.6%, the weakest advance in nearly six years.

RedRover
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Re: VDIGX - Dividends? [Vanguard Dividend Growth]

Post by RedRover » Mon May 30, 2016 8:49 pm

Thank you. I think I may have made a mistake with this investment.

Tommy
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Re: VDIGX - Dividends? [Vanguard Dividend Growth]

Post by Tommy » Tue May 31, 2016 12:30 am

RedRover wrote:Thank you. I think I may have made a mistake with this investment.
Give it a try. It is not really bad fund, it managed by Wellington and it is very reputable company. I compared this fund holdings with Wellington and Wellesley and they are very close , well they managed by the same company.

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nedsaid
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Re: VDIGX - Dividends? [Vanguard Dividend Growth]

Post by nedsaid » Tue May 31, 2016 12:54 am

You bought a perfectly fine investment, the problem you will face is timing. Investors have been chasing yield since the beginning of the era of very low interest rates which started in 2008 with the financial crisis. There is a big hunger for yield both on the bond side and on the stock side. After nearly eight years of yield chasing, the best values in the market are not in the dividend stocks. You might see some subdued returns the next few years but over long holding periods, this fund should do just fine.

Keep in mind that high dividend is related to Value and dividend growth is related to growth. Presumably, companies that have increasing dividends have increasing earnings. In a slow economic growth environment, investors flock to companies that have reliable and steadily increasing earnings. So not only were you late in the game on dividends but the market was in a growth phase from 2010 through 2015. During that time, investors focused on Growth stocks and not Value stocks.

If you look back over the last 10 years or so, the last time I looked Dividend Growth barely beat Growth and High Dividend left plain old boring Value in the dust. Dividend Growth did the best, followed by Growth, then not far behind was the S&P 500, and then plain old Large Value which was left in the dust. So dividends worked as a strategy both on the Growth side (just barely) and on the Value side (by a lot).

Pretty much what I am saying is that popular investing strategies will do well for a while because of all the new investor monies thrown at them. High Dividend and Dividend Growth have been very popular and have done relatively well. High Dividend was the best of the Value strategies and Dividend Growth was a very good Growth strategy. Dividend Growth beat both the Growth Index and S&P 500 index. High Dividend slightly trailed the S&P 500 index but beat the Large Value indexes significantly. In my opinion, what you will see is a reversion to the mean. In other words, very popular strategies with strong investment performance tend to be followed with a period of relatively weak investment performance. You were late to the party.

Indeed, my plain old boring Large Value funds are doing well in 2016 compared to the S&P 500 Indexes and compared to Growth. Hard to say if this really is the beginning of a Value phase of the market but I suspect it is. Large Value had been doing relatively poorly from 2010 through 2015. It appears that the worm has turned. This might be a more fertile area of investment rather than chasing what millions of other investors have been chasing since 2008 and that is dividends.
A fool and his money are good for business.

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stratton
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Re: VDIGX - Dividends?

Post by stratton » Tue May 31, 2016 12:57 am

I read it at the library too!
Gort wrote:In the June "Morningstar Dividend Investor" newsletter (I have free access from my public library), the author states that the golden age of dividend growth is over. Also states that the first quarter of 2016, S&P 500 dividends per share rose only 4.6%, the weakest advance in nearly six years.
Basically the author states that 5 or 10 (?) years ago S&P 500 corporations were averaging 29% of profits paid out as dividends. It's now 50% of profits. Combine that with declining profit growth and the dividend growth gravy train has run out of steam.

Paul
...and then Buffy staked Edward. The end.

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nedsaid
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Re: VDIGX - Dividends?

Post by nedsaid » Tue May 31, 2016 1:11 am

stratton wrote:I read it at the library too!
Gort wrote:In the June "Morningstar Dividend Investor" newsletter (I have free access from my public library), the author states that the golden age of dividend growth is over. Also states that the first quarter of 2016, S&P 500 dividends per share rose only 4.6%, the weakest advance in nearly six years.
Basically the author states that 5 or 10 (?) years ago S&P 500 corporations were averaging 29% of profits paid out as dividends. It's now 50% of profits. Combine that with declining profit growth and the dividend growth gravy train has run out of steam.

Paul
Yep.
A fool and his money are good for business.

FactualFran
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Re: VDIGX - Dividends? [Vanguard Dividend Growth]

Post by FactualFran » Tue May 31, 2016 1:55 pm

RedRover wrote: Last year in March it distributed .36 but this year in March it only distributed .08.

Was there something special that caused the 2015 distributions to be so high? Was that a strange year and the other distributions around the less than .50/year mark more the norm or is the higher distribution amount the new norm? Basically, how much in distributions should I reasonably expect there will be going forward?
The distribution last year in March consisted of $0.015 per share in income, $0.050 per share in short-term capital gain and 0.310 per share in long-term capital gain. The distribution this in March consisted of $0.023 per share in income and $0.057 per share in long-term capital gain.

The income distribution grew, which means the manager of the fund met of the objective in the name of the fund. Capital gain distributions may widely from year to year.

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