Starved & Searching for Yield???

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Starved & Searching for Yield???

Post by abuss368 »

Bogleheads -

There are a lot of posts regarding the very low yield environment. How it impacts retirees and investors in general.

I enjoy thinking about investment theory and portfolio construction.

If an investor selected the Vanguard Four Fund Portfolio of Total Stock & Bonds (both US and International) but wanted additional yield from dividends, what in your opinion would be the best approach?

Two things:
* I understand the “total” return approach vs. dividends so no need to reiterate that.

* I understand that only in hindsight would anyone know what strategy worked best.

So:

1) Vanguard Four Fund Portfolio and you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?

* More of a large cap value play. Yields are 3.50% - 4.00%. Taxed a lower preferred qualified dividend rates of 15%. No sector risks.

0r

2) Vanguard Four Fund Portfolio and you add Vanguard US REITs and International REITs

* Separate asset class perhaps. Yields are pretty much same as US and International High Dividend. Sector risks. Not taxed as low as High Dividend funds but now qualify for QBI tax deduction. Maybe less correlation than Four Fund Portfolio and High Dividend funds.

Interested in thoughts and feedback.
Last edited by abuss368 on Thu Nov 05, 2020 10:13 pm, edited 1 time in total.
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Re: Starved & Searching for Yield???

Post by JoinToday »

Are you considering a third option: 3 or 4 fund portfolio, and withdraw as needed?

Do you think that option 1 or 2 is a lower risk option then option (3), that REITs or higher yield bonds are a free lunch, with higher total return with lower no additional risk?
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Re: Starved & Searching for Yield???

Post by mindboggling »

If I wanted the security of additional income, I would consider purchasing an SPIA with a modest portion of my portfolio. Betting on the markets to provide juicy returns is only one approach.
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Re: Starved & Searching for Yield???

Post by 000 »

IMO it's hard to justify holding REITs solely for the yield. If you wouldn't be otherwise interested (for such reasons as increased exposure to real estate via stocks, or a valuation play) in a REIT tilt, chasing yield in a REIT tilt seems dangerous to me.

Although less concentrated than a REIT fund, the HY funds still have a sector makeup that diverges from the total market. Whether that is a good thing is another question. The broader issue I have with HY funds is that I don't strongly believe in value indexing, i.e. I think value investing requires active management to avoid the value traps. This is especially problematic with passive funds constructed using dividends as a primary metric.
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Re: Starved & Searching for Yield???

Post by bugleheadd »

I learned to stop chasing yield. For me, it's all about growth.
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Re: Starved & Searching for Yield???

Post by abuss368 »

JoinToday wrote: Thu Nov 05, 2020 9:08 pm Are you considering a third option: 3 or 4 fund portfolio, and withdraw as needed?
As I noted in the opening post, I am passing on a total return approach for this particular question. This is a cash flow and yield focused question for a retiree who wants dividends.
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Re: Starved & Searching for Yield???

Post by abuss368 »

JoinToday wrote: Thu Nov 05, 2020 9:08 pm Are you considering a third option: 3 or 4 fund portfolio, and withdraw as needed?

Do you think that option 1 or 2 is a lower risk option then option (3), that REITs or higher yield bonds are a free lunch, with higher total return with lower no additional risk?
Not High Yield Bonds! The Vanguard High Dividend Stock Funds! VYM and YYMI.
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Re: Starved & Searching for Yield???

Post by rockstar »

I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
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Re: Starved & Searching for Yield???

Post by abuss368 »

rockstar wrote: Thu Nov 05, 2020 10:22 pm I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
I am not familiar with those tickers. Would you mind sharing the fund names?
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Re: Starved & Searching for Yield???

Post by unclescrooge »

Why are you looking for yield?

A Japanese cooperative bank that serves rice farmers just reported $3.7 billion in losses because it was trying to earn 0.55% return on it's assets.
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Re: Starved & Searching for Yield???

Post by venkman »

In addition to the high-dividend ETF's, I'd look at Utilities (VPU)--3% yield and tends to be one of the sectors least correlated with the broad market.

I would also consider CEF's, which tend to offer high, stable payouts (though you have to watch out for NAV erosion, as some of them will return principal as part of the payout).

If I were willing to put in some extra work, I would look for higher-yielding Dividend Aristocrat stocks that are attractively priced (though I wouldn't put more than 1-2% of my total portfolio in any single issue).
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Re: Starved & Searching for Yield???

Post by 7eight9 »

abuss368 wrote: Thu Nov 05, 2020 10:39 pm
rockstar wrote: Thu Nov 05, 2020 10:22 pm I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)
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Re: Starved & Searching for Yield???

Post by birdog »

I second venkman's mention of VPU 3.25% (Vanguard Utilities ETF) and would also take a look at ANGL 4.58% (VanEck Vectors Fallen Angel High Yield Bond ETF).
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Re: Starved & Searching for Yield???

Post by SmileyFace »

abuss368 wrote: Thu Nov 05, 2020 8:45 pm * I understand the “total” return approach vs. dividends so no need to reiterate that.
abuss368 wrote: Thu Nov 05, 2020 8:45 pm ... you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?
These are incongruous statements in my opinion.
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Re: Starved & Searching for Yield???

Post by Ramjet »

SPIA.
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Re: Starved & Searching for Yield???

Post by rkhusky »

If you want more bond yield, add lower quality and/or higher duration bonds.
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Re: Starved & Searching for Yield???

Post by hudson »

abuss368 wrote: Thu Nov 05, 2020 8:45 pm Interested in thoughts and feedback.
It's a great question.
The possible solutions that you listed are interesting but I can't warm up to any of them....too much risk.
If I was starving for yield, I would look at the fixed annuity products like MYGAs or SPIAs up to my state guaranty association's limit.
If I wasn't starving for yield, I would stick with FDIC/NCUA guaranteed products with maybe some AAA/AA/A rated/low expense mutual funds/ETFs. I might look really hard at just drawing down.
If the conservative options above weren't enough, I would look at going to work to increase income. If that wasn't enough, I might try my hand at rental houses.
Of course, cutting back on spending would probably be step number 1.
Last edited by hudson on Sun Nov 08, 2020 5:45 am, edited 5 times in total.
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Re: Starved & Searching for Yield???

Post by mickroark »

Retirement is about not needing to make money anymore. Said and done with money, No need for anymore. :sharebeer
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Re: Starved & Searching for Yield???

Post by tibbitts »

abuss368 wrote: Thu Nov 05, 2020 8:45 pm
1) Vanguard Four Fund Portfolio and you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?
* More of a large cap value play. Yields are 3.50% - 4.00%. Taxed a lower preferred qualified dividend rates of 15%. No sector risks.
I'm not sure about the "no sector risks" - have you checked the sector weightings vs., say, the S&P500?
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Re: Starved & Searching for Yield???

Post by tibbitts »

bugleheadd wrote: Thu Nov 05, 2020 9:33 pm I learned to stop chasing yield. For me, it's all about growth.
I don't think Bogleheads would agree: they would say it's all about total return. Growth has done well lately, but nobody believes it will always outperform.
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Re: Starved & Searching for Yield???

Post by bugleheadd »

tibbitts wrote: Fri Nov 06, 2020 9:16 am
bugleheadd wrote: Thu Nov 05, 2020 9:33 pm I learned to stop chasing yield. For me, it's all about growth.
I don't think Bogleheads would agree: they would say it's all about total return. Growth has done well lately, but nobody believes it will always outperform.
isnt VTI or sp500 index funds considered growth funds? isnt investing in those the bogleheadd way?
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Re: Starved & Searching for Yield???

Post by KlangFool »

bugleheadd wrote: Fri Nov 06, 2020 9:19 am
tibbitts wrote: Fri Nov 06, 2020 9:16 am
bugleheadd wrote: Thu Nov 05, 2020 9:33 pm I learned to stop chasing yield. For me, it's all about growth.
I don't think Bogleheads would agree: they would say it's all about total return. Growth has done well lately, but nobody believes it will always outperform.
isnt VTI or sp500 index funds considered growth funds? isnt investing in those the bogleheadd way?

VTI or S&P 500 = Blend of growth + value. Not tilting to either growth or value. They are not growth fund.


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Re: Starved & Searching for Yield???

Post by bugleheadd »

KlangFool wrote: Fri Nov 06, 2020 9:22 am
bugleheadd wrote: Fri Nov 06, 2020 9:19 am
tibbitts wrote: Fri Nov 06, 2020 9:16 am
bugleheadd wrote: Thu Nov 05, 2020 9:33 pm I learned to stop chasing yield. For me, it's all about growth.
I don't think Bogleheads would agree: they would say it's all about total return. Growth has done well lately, but nobody believes it will always outperform.
isnt VTI or sp500 index funds considered growth funds? isnt investing in those the bogleheadd way?

VTI or S&P 500 = Blend of growth + value. Not tilting to either growth or value. They are not growth fund.


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i see, my mistake.
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Re: Starved & Searching for Yield???

Post by David Jay »

Chevron dividend yield is 7%.
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Re: Starved & Searching for Yield???

Post by abuss368 »

birdog wrote: Fri Nov 06, 2020 8:19 am I second venkman's mention of VPU 3.25% (Vanguard Utilities ETF) and would also take a look at ANGL 4.58% (VanEck Vectors Fallen Angel High Yield Bond ETF).
Would utilities and REITs/Real Estate be a good but equal strategy for yield?
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Re: Starved & Searching for Yield???

Post by abuss368 »

rkhusky wrote: Fri Nov 06, 2020 9:08 am If you want more bond yield, add lower quality and/or higher duration bonds.
True. With bonds, higher yield almost always means higher risk.
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Re: Starved & Searching for Yield???

Post by abuss368 »

tibbitts wrote: Fri Nov 06, 2020 9:13 am
abuss368 wrote: Thu Nov 05, 2020 8:45 pm
1) Vanguard Four Fund Portfolio and you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?
* More of a large cap value play. Yields are 3.50% - 4.00%. Taxed a lower preferred qualified dividend rates of 15%. No sector risks.
I'm not sure about the "no sector risks" - have you checked the sector weightings vs., say, the S&P500?
Perhaps. High Dividend funds are often large cap value funds in disguise. So yes, that is a sector.
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Re: Starved & Searching for Yield???

Post by jebmke »

mindboggling wrote: Thu Nov 05, 2020 9:09 pm If I wanted the security of additional income, I would consider purchasing an SPIA with a modest portion of my portfolio. Betting on the markets to provide juicy returns is only one approach.
This. Seems like it would be the highest cash flow yield that doesn’t put one at risk of running out of money.
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Re: Starved & Searching for Yield???

Post by Scooter57 »

abuss368 wrote: Fri Nov 06, 2020 3:49 pm
tibbitts wrote: Fri Nov 06, 2020 9:13 am
abuss368 wrote: Thu Nov 05, 2020 8:45 pm
1) Vanguard Four Fund Portfolio and you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?
* More of a large cap value play. Yields are 3.50% - 4.00%. Taxed a lower preferred qualified dividend rates of 15%. No sector risks.
I'm not sure about the "no sector risks" - have you checked the sector weightings vs., say, the S&P500?
Perhaps. High Dividend funds are often large cap value funds in disguise. So yes, that is a sector.
Right now a lot of high dividend funds are full of small regional banks and insurers which are going to be suffering from the layoffs and low rates.. VYM, which does not have the highest dividend of the big dividend funds, is full of small and mid cap companies.

Many of them are only "value" if you consider companies with troubled business models and low P/Es "value." The term should be reserved for strong companies currently being ignored by the market, but now it is too often applied to companies with a lot of debt and declining markets that have low P/E ratios. You can boost earnings with debt-fueled buybacks lowering P/E, but the market is not fooled.
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Re: Starved & Searching for Yield???

Post by abuss368 »

Scooter57 wrote: Fri Nov 06, 2020 8:03 pm
abuss368 wrote: Fri Nov 06, 2020 3:49 pm
tibbitts wrote: Fri Nov 06, 2020 9:13 am
abuss368 wrote: Thu Nov 05, 2020 8:45 pm
1) Vanguard Four Fund Portfolio and you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?
* More of a large cap value play. Yields are 3.50% - 4.00%. Taxed a lower preferred qualified dividend rates of 15%. No sector risks.
I'm not sure about the "no sector risks" - have you checked the sector weightings vs., say, the S&P500?
Perhaps. High Dividend funds are often large cap value funds in disguise. So yes, that is a sector.
Right now a lot of high dividend funds are full of small regional banks and insurers which are going to be suffering from the layoffs and low rates.. VYM, which does not have the highest dividend of the big dividend funds, is full of small and mid cap companies.

Many of them are only "value" if you consider companies with troubled business models and low P/Es "value." The term should be reserved for strong companies currently being ignored by the market, but now it is too often applied to companies with a lot of debt and declining markets that have low P/E ratios. You can boost earnings with debt-fueled buybacks lowering P/E, but the market is not fooled.
Interesting. What do you think of the International High Dividend Fund or the International REIT / RE Fund?
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Re: Starved & Searching for Yield???

Post by bikechuck »

If I were evaluating high dividend stock funds vs REITS I would go with the high dividend stock fund.

I think that commercial real estate is going to suffer for a long time to come. You can get selective and begin picking individual REIT funds that might do better than others but I am not smart enough to do that.
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Re: Starved & Searching for Yield???

Post by justsomeguy2018 »

abuss368 wrote: Fri Nov 06, 2020 3:47 pm
birdog wrote: Fri Nov 06, 2020 8:19 am I second venkman's mention of VPU 3.25% (Vanguard Utilities ETF) and would also take a look at ANGL 4.58% (VanEck Vectors Fallen Angel High Yield Bond ETF).
Would utilities and REITs/Real Estate be a good but equal strategy for yield?
I would avoid REITs as I think commercial Real Estate is screwed.

I would go with the Utilities ETF and possibly even a Consumer Staples ETF. Decent yield and safe plays during any kind of crash.
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Re: Starved & Searching for Yield???

Post by rockstar »

7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm
rockstar wrote: Thu Nov 05, 2020 10:22 pm I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)
If I want preferred exposure, I buy preferred, not a fund. I find the actual preferred stock to be less volatile, and I can better time how long I will end up holding by the first call date. I can also target buying under par when available.
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Re: Starved & Searching for Yield???

Post by venkman »

abuss368 wrote: Fri Nov 06, 2020 3:47 pm
birdog wrote: Fri Nov 06, 2020 8:19 am I second venkman's mention of VPU 3.25% (Vanguard Utilities ETF) and would also take a look at ANGL 4.58% (VanEck Vectors Fallen Angel High Yield Bond ETF).
Would utilities and REITs/Real Estate be a good but equal strategy for yield?
Utilities are generally low-beta stocks, so you'd expect them to have a lower long term total return than the broad market. But they tend to have very dependable payouts, even during economic downturns; so slower growth could be an acceptable trade off for an income investor.

REIT's, as far as I know, are about average beta; so you'd expect to have close to the same long term total return as the market. You'll get relatively high yields; but it's a cyclical sector and the dividends are subject to getting cut when the economy goes south.
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Re: Starved & Searching for Yield???

Post by Schlabba »

abuss368 wrote: Thu Nov 05, 2020 8:45 pm Bogleheads -

There are a lot of posts regarding the very low yield environment. How it impacts retirees and investors in general.

I enjoy thinking about investment theory and portfolio construction.

If an investor selected the Vanguard Four Fund Portfolio of Total Stock & Bonds (both US and International) but wanted additional yield from dividends, what in your opinion would be the best approach?

Two things:
* I understand the “total” return approach vs. dividends so no need to reiterate that.

* I understand that only in hindsight would anyone know what strategy worked best.

So:

1) Vanguard Four Fund Portfolio and you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?

* More of a large cap value play. Yields are 3.50% - 4.00%. Taxed a lower preferred qualified dividend rates of 15%. No sector risks.

0r

2) Vanguard Four Fund Portfolio and you add Vanguard US REITs and International REITs

* Separate asset class perhaps. Yields are pretty much same as US and International High Dividend. Sector risks. Not taxed as low as High Dividend funds but now qualify for QBI tax deduction. Maybe less correlation than Four Fund Portfolio and High Dividend funds.

Interested in thoughts and feedback.
Have you considered EM bonds? “Equity-like returns and risks” with a high yield: https://personal.vanguard.com/pdf/ISGEMB.pdf

I myself chose the high dividend yield approach. If I look at the amount of holdings of the REITS available to me (investing from Europe here) they seem much less diversified than my FTSE All-World High Dividend Yield with roughly 1600 companies.
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Re: Starved & Searching for Yield???

Post by ankonaman »

How about adding a little Vanguard Wellesley.
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Re: Starved & Searching for Yield???

Post by Scooter57 »

abuss368 wrote: Fri Nov 06, 2020 8:42 pm
Scooter57 wrote: Fri Nov 06, 2020 8:03 pm
abuss368 wrote: Fri Nov 06, 2020 3:49 pm
tibbitts wrote: Fri Nov 06, 2020 9:13 am
abuss368 wrote: Thu Nov 05, 2020 8:45 pm
1) Vanguard Four Fund Portfolio and you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?
* More of a large cap value play. Yields are 3.50% - 4.00%. Taxed a lower preferred qualified dividend rates of 15%. No sector risks.
I'm not sure about the "no sector risks" - have you checked the sector weightings vs., say, the S&P500?
Perhaps. High Dividend funds are often large cap value funds in disguise. So yes, that is a sector.
Right now a lot of high dividend funds are full of small regional banks and insurers which are going to be suffering from the layoffs and low rates.. VYM, which does not have the highest dividend of the big dividend funds, is full of small and mid cap companies.

Many of them are only "value" if you consider companies with troubled business models and low P/Es "value." The term should be reserved for strong companies currently being ignored by the market, but now it is too often applied to companies with a lot of debt and declining markets that have low P/E ratios. You can boost earnings with debt-fueled buybacks lowering P/E, but the market is not fooled.
Interesting. What do you think of the International High Dividend Fund or the International REIT / RE Fund?
I haven't looked at the International REIT fund, but I have looked int the international High Dividend Fund. It has a VERY high percentage of banks, a lot of insurance companies, and raw materials/extractive industry stuff like oil and mining.

The median market cap of the International High Dividend Funds' holdings is much, much smaller than the corresponding US high dividend fund (VYM). The return on investment much poorer and the rate of growth slower.

So for a very similar dividend to a lot of US funds, with potentially poorer value, you end up owning companies that operate under the accounting standards and regulation of dictatorships, oligarchies, religious fanatics, etc etc which describes enough of the countries whose stock this fund holds to make me pass. I have no interest in owning banks not regulated by the FDIC.

The last issue: these Vanguard international funds are tiny compared to their US equivalents. That means you could buy in and wake up one morning and find that Vanguard has changed their investment strategy and instead of high dividend it is international Financial or something else or they have merged it into another fund. If you are in a taxable account and don't like that strategy, it can cost you to get out. They have changed the mission of three funds I have owned so I stay away from underperforming funds with relatively small assets.
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Re: Starved & Searching for Yield???

Post by hudson »

rockstar wrote: Fri Nov 06, 2020 10:04 pm
7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm
rockstar wrote: Thu Nov 05, 2020 10:22 pm I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)
If I want preferred exposure, I buy preferred, not a fund. I find the actual preferred stock to be less volatile, and I can better time how long I will end up holding by the first call date. I can also target buying under par when available.
Larry Swedroe discussed preferred stocks in his book The Good, the Flawed, the Bad, and the Ugly https://www.amazon.com/Only-Guide-Alter ... B003NE61GC
Here's a quick summary...
viewtopic.php?p=23364#p23364
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Re: Starved & Searching for Yield???

Post by midareff »

If you are starved and searching for yield it seems to imply:

1. You are contemplating retirement without adequate assets.

2. If starving you need food... the name of food in this environment is total return. LT capital gains and qualified dividends are taxed the same when distributed from a taxable account or the same as normal income from an tIRA.

3. Have you dissected your AA and thought through the price you pay for reduction or elimination of volatility? As an example, VBTLX, the Vanguard Total Bond Market Admiral has an SEC of 1.17%. VFIAX, the S&P 500 Admiral has an SEC of 1.71%. FWIW, VICSX, the Corporate Bond Index has an SEC of 1.72%. Now, apply proper deductions for the CPI-U and your tax rate and rethink dividend focus vs. total return vs. volatility.

4. Use the charting and comparison features at Morningstar to see what you really accomplish when you move away from a total market total return strategy by moving into sectors, and yes, dividend focus or value focus is a sector. Chart the long term performance vs. the total market or S&P and ask yourself why dividends would be more important than total return.

5. The Intermediate Term Treasury Fund Admiral, VFIUX, has an SEC yield of .60% ... the same as an Ally Bank Savings account. If you are having a discussion of safe money which is really safer? .... and with a rolling 12 month CPI-U of 1.44%, or a month over month CPI-U of 1.37%, how much of this can you stand to own before consideration of your individual tax rate?

6. Those are just some thoughts before you go back and reread # 1.
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Re: Starved & Searching for Yield???

Post by Dave55 »

Tony what are your thoughts about using Rick Ferri's Core-4 Income Seeker funds?

Dave
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Re: Starved & Searching for Yield???

Post by rockstar »

hudson wrote: Sat Nov 07, 2020 9:02 am
rockstar wrote: Fri Nov 06, 2020 10:04 pm
7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm
rockstar wrote: Thu Nov 05, 2020 10:22 pm I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)
If I want preferred exposure, I buy preferred, not a fund. I find the actual preferred stock to be less volatile, and I can better time how long I will end up holding by the first call date. I can also target buying under par when available.
Larry Swedroe discussed preferred stocks in his book The Good, the Flawed, the Bad, and the Ugly https://www.amazon.com/Only-Guide-Alter ... B003NE61GC
Here's a quick summary...
viewtopic.php?p=23364#p23364
I don't see anything wrong with preferred stock. I bought all of my positions under par. I'll earn the yield plus if I sell, I'll capture a capital gain on top. My WFC/PRX preferred I bought as low $21 and as high as $25. When I sell these positions off next April, I'll come out better than the S&P 500.
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Re: Starved & Searching for Yield???

Post by BogleFan510 »

rockstar wrote: Sat Nov 07, 2020 1:12 pm
hudson wrote: Sat Nov 07, 2020 9:02 am
rockstar wrote: Fri Nov 06, 2020 10:04 pm
7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm

I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)
If I want preferred exposure, I buy preferred, not a fund. I find the actual preferred stock to be less volatile, and I can better time how long I will end up holding by the first call date. I can also target buying under par when available.
Larry Swedroe discussed preferred stocks in his book The Good, the Flawed, the Bad, and the Ugly https://www.amazon.com/Only-Guide-Alter ... B003NE61GC
Here's a quick summary...
viewtopic.php?p=23364#p23364
I don't see anything wrong with preferred stock. I bought all of my positions under par. I'll earn the yield plus if I sell, I'll capture a capital gain on top. My WFC/PRX preferred I bought as low $21 and as high as $25. When I sell these positions off next April, I'll come out better than the S&P 500.
Years ago I made a killing on Ford Motor Credit Preferred. They dropped to $5 a share before being called at par post bailout. Granted, those,who bought F might have done better, but a 5x return was fine. That said, distressed credit is compensated risk, not comparable to a bond fund on risk. Less exciting at par.
Last edited by BogleFan510 on Sat Nov 07, 2020 2:12 pm, edited 1 time in total.
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Re: Starved & Searching for Yield???

Post by abuss368 »

bikechuck wrote: Fri Nov 06, 2020 9:17 pm If I were evaluating high dividend stock funds vs REITS I would go with the high dividend stock fund.

I think that commercial real estate is going to suffer for a long time to come. You can get selective and begin picking individual REIT funds that might do better than others but I am not smart enough to do that.
There are structural shifts that were in overdrive as a result of the pandemic in terms of retail and office. The question is are those shifts temporary or permanent.

On the flip side, storage, apartments, warehouse, industrial, cell towers, and data storage are doing very well.

Will the headlines of office and retail impact REIT index funds over the long term? No one knows.
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Re: Starved & Searching for Yield???

Post by abuss368 »

Scooter57 wrote: Sat Nov 07, 2020 9:00 am
I haven't looked at the International REIT fund, but I have looked int the international High Dividend Fund. It has a VERY high percentage of banks, a lot of insurance companies, and raw materials/extractive industry stuff like oil and mining.

The median market cap of the International High Dividend Funds' holdings is much, much smaller than the corresponding US high dividend fund (VYM). The return on investment much poorer and the rate of growth slower.

So for a very similar dividend to a lot of US funds, with potentially poorer value, you end up owning companies that operate under the accounting standards and regulation of dictatorships, oligarchies, religious fanatics, etc etc which describes enough of the countries whose stock this fund holds to make me pass. I have no interest in owning banks not regulated by the FDIC.

The last issue: these Vanguard international funds are tiny compared to their US equivalents. That means you could buy in and wake up one morning and find that Vanguard has changed their investment strategy and instead of high dividend it is international Financial or something else or they have merged it into another fund. If you are in a taxable account and don't like that strategy, it can cost you to get out. They have changed the mission of three funds I have owned so I stay away from underperforming funds with relatively small assets.
Excellent post and a lot of good quality points when looking at things from a different angle. I especially like your last and final point. Very true as many of the international funds are A LOT smaller than US and can be merged. International High Dividend Yield is only $1 billion. US High Dividend Yield is $35 billion. US REIT is $55 billion. International REIT/RE/REOC is $5 billion (after the fund is in existence for 10 YEARS). Wow. Did not consider that but you are correct in that these are small funds.
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Re: Starved & Searching for Yield???

Post by abuss368 »

Dave55 wrote: Sat Nov 07, 2020 9:50 am Tony what are your thoughts about using Rick Ferri's Core-4 Income Seeker funds?

Dave
I am not so sure I would invest with that strategy but I understand it, and Rick designed it for the income focused investor in mind. I would think high income (value tilt) would potentially be less grow. Not sure I would want investment grade and preferred securities for my safe assets.
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Re: Starved & Searching for Yield???

Post by Tib »

I'd prefer option 2, preferably in a tax-advantaged account, since REITs are reputed to fare better than high-dividend stocks during high inflation, which I'm worried about. Presumably, the difficulties for commercial real estate are reflected in the prices of REITs. However, a recent Vanguard report seems to indicate that REITs actually haven't been good inflation hedges. (It doesn't compare their performance to that of broad high-dividend stock funds.) On reading it, I sold my position in VNQI and put the proceeds into VT.

https://personal.vanguard.com/pdf/ISGCTIPS.pdf
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Re: Starved & Searching for Yield???

Post by abuss368 »

Tib wrote: Sat Nov 07, 2020 3:32 pm I'd prefer option 2, preferably in a tax-advantaged account, since REITs are reputed to fare better than high-dividend stocks during high inflation, which I'm worried about. Presumably, the difficulties for commercial real estate are reflected in the prices of REITs. However, a recent Vanguard report seems to indicate that REITs actually haven't been good inflation hedges. (It doesn't compare their performance to that of broad high-dividend stock funds.) On reading it, I sold my position in VNQI and put the proceeds into VT.

https://personal.vanguard.com/pdf/ISGCTIPS.pdf
That is interesting and somewhat counter to everything we read about US REITs! Interesting.

You sold the Vanguard International Real Estate fund? I invested in that fund for a long time (since inception) and became impatient with it. I sold it a year ago. During the pandemic, international real estate was one of the worst performing asset classes. One thing I learned was the international real estate fund is not anything like a US REIT legal and tax structure.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Starved & Searching for Yield???

Post by rockstar »

BogleFan510 wrote: Sat Nov 07, 2020 2:10 pm
rockstar wrote: Sat Nov 07, 2020 1:12 pm
hudson wrote: Sat Nov 07, 2020 9:02 am
rockstar wrote: Fri Nov 06, 2020 10:04 pm
7eight9 wrote: Fri Nov 06, 2020 12:39 am

F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)
If I want preferred exposure, I buy preferred, not a fund. I find the actual preferred stock to be less volatile, and I can better time how long I will end up holding by the first call date. I can also target buying under par when available.
Larry Swedroe discussed preferred stocks in his book The Good, the Flawed, the Bad, and the Ugly https://www.amazon.com/Only-Guide-Alter ... B003NE61GC
Here's a quick summary...
viewtopic.php?p=23364#p23364
I don't see anything wrong with preferred stock. I bought all of my positions under par. I'll earn the yield plus if I sell, I'll capture a capital gain on top. My WFC/PRX preferred I bought as low $21 and as high as $25. When I sell these positions off next April, I'll come out better than the S&P 500.
Years ago I made a killing on Ford Motor Credit Preferred. They dropped to $5 a share before being called at par post bailout. Granted, those,who bought F might have done better, but a 5x return was fine. That said, distressed credit is compensated risk, not comparable to a bond fund on risk. Less exciting at par.
Much better if you can get it below par. I also find them much easier to trade than corporate bonds.
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Re: Starved & Searching for Yield???

Post by RyeBourbon »

David Jay wrote: Fri Nov 06, 2020 9:36 am Chevron dividend yield is 7%.
Ugh
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Re: Starved & Searching for Yield???

Post by William Million »

This is of course a departure from Boglehead orthodoxy, but you could buy Vanguard's utilities ETF, VPU. Pays 3% or so. I've had it for about 10 years. It doesn't grow as well as the broad market but dividends are somewhat reliable.
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