Dividend projections?

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dizzy
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Dividend projections?

Post by dizzy » Fri Nov 21, 2008 7:25 pm

The bulk of my US equities are in VTCLX and VTSAX. VTSAX pays quarterly dividends, and VTCLX pays yearly. Is there any way to project the December dividend/share for these funds? Is yield times price per share a reasonable estimate? (divided by four for VTSAX since it pays quarterly)...

Anyone have a sense of how dividends are holding up? A quick look at GE, Proctor and Gamble, and Exxon seems like they are paying dividends at a fairly constant $$/share. (which as a percent of share price, is obviously much greater).

I'm recently retired and living off dividends & interest. Despite large capital losses in the portfolio, the monthly dividends in my bond funds have been refreshingly constant on a per share basis. I'm hoping the same is true for the equity side. Any guidance?

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ken250
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Post by ken250 » Fri Nov 21, 2008 7:36 pm

I would prepare for further dividend cuts, that way if they don't occur you won't have lost anything by being cautious.

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DaveTH
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Post by DaveTH » Fri Nov 21, 2008 8:00 pm

Neither of the 2 funds you mentioned pay much in the way of dividends. I hope you weren't counting on the distributions to pay the bills.

Sidney
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Post by Sidney » Fri Nov 21, 2008 9:11 pm

Probably fair to say that dividends will get cut by 10-15% during this recession. A lot will depend on how fast the credit markets start to thaw as well as things like whether companies get relief on the funding requirements for DB pensions.

The other ringer is cash trapped overseas. A lot of companies with large cash balances are sitting on cash outside the US which they can't use easily to pay dividends. If some type of repatriation amnesty (even partial) is passed next year you could see an influx of usable cash to the US that could prop up dividend payouts.
I always wanted to be a procrastinator.

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dizzy
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Post by dizzy » Fri Nov 21, 2008 10:54 pm

DaveTH wrote:Neither of the 2 funds you mentioned pay much in the way of dividends. I hope you weren't counting on the distributions to pay the bills.
Welcome to retirement. Equity dividend payments are an important part of our income. The portfolio is about 50-50. The bond/cd side pays about 4.5%, the stock side pays around 2.5%. So the total cash thrown off by the portfolio is around 3.5% which certainly does pay the bills. Since I'm retired, I don't care so much about NAV and share price, as long as the cash generation is reasonably constant.

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LH2004
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Post by LH2004 » Sat Nov 22, 2008 12:01 am

dizzy wrote:Since I'm retired, I don't care so much about NAV and share price, as long as the cash generation is reasonably constant.
Here's a neat trick: if the dividends are ever too low, sell some shares.

Erwin
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Post by Erwin » Sat Nov 22, 2008 12:12 am

Dizzy: I am also retired, very similar situation and own mainly single bonds from big banks/CDs/TIPs, which I keep to maturity, and I have really liked the income stability,but recently with the current situation the bank bonds have scared me. What is your position on this? Erwin

m_j_paquette
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Post by m_j_paquette » Sat Nov 22, 2008 12:52 am

dizzy wrote:Welcome to retirement. Equity dividend payments are an important part of our income. The portfolio is about 50-50. The bond/cd side pays about 4.5%, the stock side pays around 2.5%. So the total cash thrown off by the portfolio is around 3.5% which certainly does pay the bills. Since I'm retired, I don't care so much about NAV and share price, as long as the cash generation is reasonably constant.
Dizzy:

If a company reduces the dividend it pays out, the stock price tends to stay a little higher. The retained cash per share adds to the share price. (In the long term. In a market pricing in a sane manner. :wink: ) You can even see this in day to day pricing. Look at a stock's share price before and after it pays out a dividend. The price will drop by the amount of the dividend. (You may need a somewhat calmer market than we currently have to see the effect...)

Anyway, if dividends are cut back, you can sell off a small slice of the principal to make up the difference. You'll just want the total withdrawal (dividends + principal sold) to be within the Safe Withdrawal Rate you calculated for the year.

I've set things up so that all my dividends and interest go into a money market fund, from which the brokerage automatically makes a periodic withdrawal to go into my checking account. Once a year, at rebalancing time, I'll add to or withdraw from the money market fund as needed to maintain that one year of expenses I want to keep available.

The money market fund acts as both my cash reserve, and a sort of surge tank to smooth out withdrawals from a slightly fluctuating stream of dividends and interest from bond and equity funds.

During the course of the next year, I'll be making periodic withdrawals, while more dividends and interest go into the fund. The balance might drop, or it might rise. I'll take care of that at the next annual rebalance as needed.

yobria
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Post by yobria » Sat Nov 22, 2008 11:35 am

m_j_paquette wrote:If a company reduces the dividend it pays out, the stock price tends to stay a little higher.
I dunno...the stock prices of companies reducing dividends these days don't appear to be "staying a little higher" :)

Nick

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