VTSAX - Low Q2 dividend

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FOGU
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VTSAX - Low Q2 dividend

Post by FOGU » Mon Jun 17, 2019 9:54 pm

Vanguard Total Market Admiral (VTSAX) just paid Q2 dividend.

$.2647 per share, which is about 70% of Q1 dividend. Q2 is also the lowest quarterly dividend from VTSAX in about 2 years, and among the lowest over the last 5 years.

https://seekingalpha.com/symbol/VTSAX/dividends/history

What gives?
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jhfenton
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Re: VTSAX - Low Q2 dividend

Post by jhfenton » Tue Jun 18, 2019 7:36 am

1. It's probably a quirk of timing. The March dividend was much higher this year than last. And the June dividend is a week earlier. YTD dividends are still $0.6383 vs $0.5692 a year ago through June.
2. Lower dividends mean higher tax efficiency. Yay!

jebmke
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Re: VTSAX - Low Q2 dividend

Post by jebmke » Tue Jun 18, 2019 7:37 am

jhfenton wrote:
Tue Jun 18, 2019 7:36 am
1. It's probably a quirk of timing. The March dividend was much higher this year than last. And the June dividend is a week earlier.
2. Lower dividends mean higher tax efficiency. Yay!
Yes; Q1 was up ~35% if I recall correctly. I'm glad to see it come back down. I was afraid I might have to re-do my estimated taxes.
When you discover that you are riding a dead horse, the best strategy is to dismount.

drg02b
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Re: VTSAX - Low Q2 dividend

Post by drg02b » Tue Jun 18, 2019 9:02 am

Yeah, no reason to worry over what amounts to a half-percent drop in annualized yield for one quarter. Less taxes to pay.

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FOGU
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Re: VTSAX - Low Q2 dividend

Post by FOGU » Tue Jun 18, 2019 4:13 pm

No worries.
I was curious. And, I am always on the lookout for ways to better understand these mutual funds in which I am invested.
Thank you.
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Artsdoctor
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Re: VTSAX - Low Q2 dividend

Post by Artsdoctor » Tue Jun 18, 2019 4:26 pm

FOGU wrote:
Tue Jun 18, 2019 4:13 pm
No worries.
I was curious. And, I am always on the lookout for ways to better understand these mutual funds in which I am invested.
Thank you.
I gave up trying to anticipate dividend amounts many years ago. Total Stock and S&P 500 tend to have relatively even quarterly dividends although there's going to be variation from time to time. The international funds tend to have larger dividends in June and December with smaller dividends in March and September, but even this can change.

For me, the smaller the dividend, the better. It's really nothing more than a forced sale and an aggravating one at that. The NAV will drop by the amount of the equity fund dividend and then you're going to probably pay taxes on it. I'd be happy to not have any dividends at all so that I alone can decide when to induce a taxable event. Unfortunately, the laws are what they are.

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FOGU
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Re: VTSAX - Low Q2 dividend

Post by FOGU » Tue Jun 18, 2019 6:51 pm

Artsdoctor wrote:
Tue Jun 18, 2019 4:26 pm
FOGU wrote:
Tue Jun 18, 2019 4:13 pm
No worries.
I was curious. And, I am always on the lookout for ways to better understand these mutual funds in which I am invested.
Thank you.
I'd be happy to not have any dividends at all so that I alone can decide when to induce a taxable event. Unfortunately, the laws are what they are.
Are you referring to a specific law or laws that require payment of dividends by mutual funds? I would be interested in reading up on that.
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Artsdoctor
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Re: VTSAX - Low Q2 dividend

Post by Artsdoctor » Tue Jun 18, 2019 6:55 pm

This will explain the requirements behind equity fund dividend distributions:

https://www.investopedia.com/articles/i ... erview.asp

JustinR
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Re: VTSAX - Low Q2 dividend

Post by JustinR » Tue Jun 18, 2019 7:04 pm

Are you disappointed you don't have to pay more in taxes?

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FOGU
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Re: VTSAX - Low Q2 dividend

Post by FOGU » Wed Jun 19, 2019 11:57 pm

JustinR wrote:
Tue Jun 18, 2019 7:04 pm
Are you disappointed you don't have to pay more in taxes?
Heartbroken.

How does Vanguard distinguish between qualified and unqualified dividends. Is it the length of time the fund has held the dividend-paying asset? Or how long I have held different shares of the mutual fund? Or something else?

Thanks.
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Re: VTSAX - Low Q2 dividend

Post by JDDS » Thu Jun 20, 2019 12:33 am

FOGU wrote:
Wed Jun 19, 2019 11:57 pm
JustinR wrote:
Tue Jun 18, 2019 7:04 pm
Are you disappointed you don't have to pay more in taxes?
Heartbroken.

How does Vanguard distinguish between qualified and unqualified dividends. Is it the length of time the fund has held the dividend-paying asset? Or how long I have held different shares of the mutual fund? Or something else?

Thanks.
It's how long the fund has held the asset. Everybody gets the same QDI, seems mutual at least.

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House Blend
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Re: VTSAX - Low Q2 dividend

Post by House Blend » Thu Jun 20, 2019 10:01 am

JDDS wrote:
Thu Jun 20, 2019 12:33 am
FOGU wrote:
Wed Jun 19, 2019 11:57 pm
How does Vanguard distinguish between qualified and unqualified dividends. Is it the length of time the fund has held the dividend-paying asset? Or how long I have held different shares of the mutual fund? Or something else?
It's how long the fund has held the asset. Everybody gets the same QDI, seems mutual at least.
No. Fund shareholders don't always get the same QDI per share.

A. If the fund hasn't held the shares of a dividend producing stock long enough, that part of a dividend distribution will be un-qualified for all shareholders of the fund.

B. If you haven't held fund shares that produced a dividend long enough, the dividend is un-qualified for you. And note that this depends not on the age of the shares at the time of the dividend, but rather the total amount of time the shares were held before and after the dividend.

Vanguard (and other brokerages) only keep track of A. Keeping track of B is entirely your responsibility.

Example: Suppose you owned 1000 shares of VTSAX on 6/13/2019.
Those shares produced a dividend of $264.70.

And suppose that 100 of those shares were purchased on 5/22/2019. The question is whether the $26.47 dividend produced by those particular shares is qualified.

If you sell those 100 shares on or before 7/22/2019, then the holding period will be 60 days or less. Which means not qualified.

Which means that when your broker sends you a 1099 next year, it will not have accurate information regarding qualified dividends. If they report that 90% of the dividends from this fund were qualified, you will have to subtract 90% of $26.47 from the number in the box that reports qualified dividends.

If you hold on to the shares beyond 7/22/2019, then you will have met the holding period requirements for B. No 1099 adjustments needed.

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FOGU
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Re: VTSAX - Low Q2 dividend

Post by FOGU » Thu Jun 20, 2019 3:48 pm

House Blend wrote:
Thu Jun 20, 2019 10:01 am
JDDS wrote:
Thu Jun 20, 2019 12:33 am
FOGU wrote:
Wed Jun 19, 2019 11:57 pm
How does Vanguard distinguish between qualified and unqualified dividends. Is it the length of time the fund has held the dividend-paying asset? Or how long I have held different shares of the mutual fund? Or something else?
It's how long the fund has held the asset. Everybody gets the same QDI, seems mutual at least.
No. Fund shareholders don't always get the same QDI per share.

A. If the fund hasn't held the shares of a dividend producing stock long enough, that part of a dividend distribution will be un-qualified for all shareholders of the fund.

B. If you haven't held fund shares that produced a dividend long enough, the dividend is un-qualified for you. And note that this depends not on the age of the shares at the time of the dividend, but rather the total amount of time the shares were held before and after the dividend.

Vanguard (and other brokerages) only keep track of A. Keeping track of B is entirely your responsibility.

Example: Suppose you owned 1000 shares of VTSAX on 6/13/2019.
Those shares produced a dividend of $264.70.

And suppose that 100 of those shares were purchased on 5/22/2019. The question is whether the $26.47 dividend produced by those particular shares is qualified.

If you sell those 100 shares on or before 7/22/2019, then the holding period will be 60 days or less. Which means not qualified.

Which means that when your broker sends you a 1099 next year, it will not have accurate information regarding qualified dividends. If they report that 90% of the dividends from this fund were qualified, you will have to subtract 90% of $26.47 from the number in the box that reports qualified dividends.

If you hold on to the shares beyond 7/22/2019, then you will have met the holding period requirements for B. No 1099 adjustments needed.
Yowza.
That sounds complicated.
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deanmoriarty
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Re: VTSAX - Low Q2 dividend

Post by deanmoriarty » Thu Jun 20, 2019 8:38 pm

House Blend wrote:
Thu Jun 20, 2019 10:01 am
JDDS wrote:
Thu Jun 20, 2019 12:33 am
FOGU wrote:
Wed Jun 19, 2019 11:57 pm
How does Vanguard distinguish between qualified and unqualified dividends. Is it the length of time the fund has held the dividend-paying asset? Or how long I have held different shares of the mutual fund? Or something else?
It's how long the fund has held the asset. Everybody gets the same QDI, seems mutual at least.
No. Fund shareholders don't always get the same QDI per share.

A. If the fund hasn't held the shares of a dividend producing stock long enough, that part of a dividend distribution will be un-qualified for all shareholders of the fund.

B. If you haven't held fund shares that produced a dividend long enough, the dividend is un-qualified for you. And note that this depends not on the age of the shares at the time of the dividend, but rather the total amount of time the shares were held before and after the dividend.

Vanguard (and other brokerages) only keep track of A. Keeping track of B is entirely your responsibility.

Example: Suppose you owned 1000 shares of VTSAX on 6/13/2019.
Those shares produced a dividend of $264.70.

And suppose that 100 of those shares were purchased on 5/22/2019. The question is whether the $26.47 dividend produced by those particular shares is qualified.

If you sell those 100 shares on or before 7/22/2019, then the holding period will be 60 days or less. Which means not qualified.

Which means that when your broker sends you a 1099 next year, it will not have accurate information regarding qualified dividends. If they report that 90% of the dividends from this fund were qualified, you will have to subtract 90% of $26.47 from the number in the box that reports qualified dividends.

If you hold on to the shares beyond 7/22/2019, then you will have met the holding period requirements for B. No 1099 adjustments needed.
Is this real? I’ve been doing my own taxes for close to 10 years and always trusted the QDI reported by Vanguard. Of course, during the years I did periodic transactions (typically sell & buy for tax loss harvesting) that were sometimes very close to the dividend date and for which the personal holding period was not respected (I don’t even know to be honest, I just know that I never refrained myself whenever a TLH came up, as long as it didn’t trigger a wash sale). I assumed Vanguard would take care of it on the 1099, which might have been a mistake on my part.

Are you saying I’ve been underpaying taxes for a decade and I should go amend as many returns as I can?! And do other bogleheads who do their own taxes really double check the QDI number for every single transaction they do? That’s scary.

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House Blend
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Re: VTSAX - Low Q2 dividend

Post by House Blend » Fri Jun 21, 2019 9:34 am

deanmoriarty wrote:
Thu Jun 20, 2019 8:38 pm
Is this real? I’ve been doing my own taxes for close to 10 years and always trusted the QDI reported by Vanguard. Of course, during the years I did periodic transactions (typically sell & buy for tax loss harvesting) that were sometimes very close to the dividend date and for which the personal holding period was not respected (I don’t even know to be honest, I just know that I never refrained myself whenever a TLH came up, as long as it didn’t trigger a wash sale). I assumed Vanguard would take care of it on the 1099, which might have been a mistake on my part.

Are you saying I’ve been underpaying taxes for a decade and I should go amend as many returns as I can?! And do other bogleheads who do their own taxes really double check the QDI number for every single transaction they do? That’s scary.
Shrug. Yes, it's real.

If you rarely sell, and use average basis, you'll probably never run into this issue. But if you are tax-loss harvester, then yes, this is item #37 on the list of Details of Which One Ought to be Aware.

Of course you can't amend taxes from more than 3(?) years ago, and surely you haven't done a huge number of TLH sales in that period, and fewer still that involved a dividend not meeting the holding period. In your shoes, I would look at my records over the past 3 years and estimate what the tax consequences of any mistakes were. I'm going to guess that it is small potatoes. If so, I would probably let that sleeping dog lie. Filing an amended return for small amounts is probably a net loss for the US Treasury.

FWIW, I think the best reference for this is at Fairmark:
https://fairmark.com/investment-taxatio ... dividends/

Also mentioned here in the wiki:
https://www.bogleheads.org/wiki/Tax_los ... ibution.3F

And in IRS Publication 550:
Example 3. You bought 10,000 shares of ABC Mutual Fund common stock on July 5, 2018. ABC Mutual Fund paid a cash dividend of 10 cents per share. The ex-dividend date was July 12, 2018. The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. However, you sold the 10,000 shares on August 8, 2018. You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days.

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Re: VTSAX - Low Q2 dividend

Post by jebmke » Fri Jun 21, 2019 9:46 am

deanmoriarty wrote:
Thu Jun 20, 2019 8:38 pm
And do other bogleheads who do their own taxes really double check the QDI number for every single transaction they do? That’s scary.
I just make sure my trades (they are few now that I am not accumulating) are timed to avoid getting dividends that need adjusting.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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