Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

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White Coat Investor
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Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by White Coat Investor »

I was floored to see such a high percentage of my dividends not qualified this year. Minimal if any turnover of funds in 2024 (i.e. it's the funds doing this, not my behavior). I don't think I even tax loss harvested once in 2024. Here are some examples:

VTI: 3% of dividends were non-qualified. So far so good.
ITOT: (the VTI TLHing partner): 8% Bummer that is so much higher

VXUS: 39% What the heck?
IXUS: (TLHing partner): 29% Maybe I have the wrong one as the "partner"

AVUV: 0%
DFSV: 0%

AVDV: 32% (wow)

VSS: (legacy holding) 47% (whoa)

VIOV: (legacy holding) 18% (way higher than the Avantis/DFA ETFs, just like VBR was when I owned that)

Looking back at last year's 1099, it was 0% for VTI, AVUV, DFSV and lower than this year for most of the others. Anyone have any idea why a higher percentage of dividends this year were not qualified?

Another thing this demonstrates to me is that the additional tax efficiency of the Avantis/DFA SV ETFs more than makes up for the slightly higher ER.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Geologist »

It would help if you gave the fund names and not just the tickers, because most on this board have not memorized tickers especially for non-Vanguard funds.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Geologist »

From Wikipedia
To be taxed at the qualified dividend rate, the dividend must:
• be paid by a U.S. corporation, by a corporation incorporated in a U.S. possession, by a foreign corporation located in a country that is eligible for benefits under a U.S. tax treaty that meets certain criteria, or on a foreign corporation’s stock that can be readily traded on an established U.S. stock market (e.g., an American Depositary Receipt or ADR)

Consequently, international or world stock funds will have lower proportions of qualified dividends.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Mayacallie »

Nothing new. If you pay strict attention to the tax consequences of international holdings, it is apparent that they are not as tax efficient as say an S&P. They always pay out more dividends in the form of non qualified. ( At least any that I’ve followed).I forgot my own lessons a few years ago and purchased some VEA- Vanguard Developed Markets. I sold after my first 1099.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Geologist »

The question is whether you can generalize from your limited sample about small cap value or small cap funds. I own Vanguard Tax-Managed Small Cap. In 2023, it had about 0.7% non-qualified dividends and in 2024, it had 0%. Thus, there was no increase last year.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by iceport »

White Coat Investor wrote: Sun Feb 02, 2025 9:56 am VTI: 3% of dividends were non-qualified. So far so good.
Are you sure about that one? Vanguard says VTI kicked off 90.92% qualified dividends, so 9.08% must be non-qualified, right?

https://investor.vanguard.com/investor- ... &year=2024
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by White Coat Investor »

iceport wrote: Sun Feb 02, 2025 10:20 am
White Coat Investor wrote: Sun Feb 02, 2025 9:56 am VTI: 3% of dividends were non-qualified. So far so good.
Are you sure about that one? Vanguard says VTI kicked off 90.92% qualified dividends, so 9.08% must be non-qualified, right?

https://investor.vanguard.com/investor- ... &year=2024
The data on my 1099 calculates out to 3%. I'm sure. No, I can't explain the discrepancy.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by iceport »

White Coat Investor wrote: Sun Feb 02, 2025 10:22 am
iceport wrote: Sun Feb 02, 2025 10:20 am

Are you sure about that one? Vanguard says VTI kicked off 90.92% qualified dividends, so 9.08% must be non-qualified, right?

https://investor.vanguard.com/investor- ... &year=2024
The data on my 1099 calculates out to 3%. I'm sure. No, I can't explain the discrepancy.
Are you sure the Section 199A dividends are qualified?
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by White Coat Investor »

Geologist wrote: Sun Feb 02, 2025 9:57 am It would help if you gave the fund names and not just the tickers, because most on this board have not memorized tickers especially for non-Vanguard funds.
True, but the actual funds aren't particularly relevant to the discussion. These are common funds owned on this board. I also don't memorize tickers, but I think most Bogleheads at least know VTI and VXUS at a minimum, no?
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by White Coat Investor »

iceport wrote: Sun Feb 02, 2025 10:23 am
White Coat Investor wrote: Sun Feb 02, 2025 10:22 am

The data on my 1099 calculates out to 3%. I'm sure. No, I can't explain the discrepancy.
Are you sure the Section 199A dividends are qualified?
I ignored them in my quick calculations. That's probably the difference. Doesn't matter. I was consistent. The point is NQ dividends are higher this year and I'm curious why.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by WillRetire »

I don't have my 1099-DIVs yet. Was expecting the usual 70% or higher ODI on most of my funds.

VXUS is Vanguard Total International Stock Index fund.

BTW, Vanguard's web site states VXUS 2024 year-end ODI% for dividend income is 61.16%, 0% for short-term CG distributions.
https://advisors.vanguard.com/tax-cente ... end-income

Might the bulk of the fund's income be from STCG distributions as opposed to dividends?
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Billy C »

I’m a big fan of the Vanguard Tax-Managed Capital Appreciation Fund. 100% qualified dividends year after year, plus a slightly lower dividend yield. It’s about as tax efficient as you can get while still maintaining broad diversification.

Over an investment lifetime of 60 years that’s a massive tailwind.

Foreign stocks are notoriously tax-inefficient.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Uniballer »

Yes. My main taxable holding is VV (Vanguard Large Cap ETF). Last year it was 100% qualified, this year 94.65%
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Geologist »

White Coat Investor wrote: Sun Feb 02, 2025 10:23 am
Geologist wrote: Sun Feb 02, 2025 9:57 am It would help if you gave the fund names and not just the tickers, because most on this board have not memorized tickers especially for non-Vanguard funds.
True, but the actual funds aren't particularly relevant to the discussion. These are common funds owned on this board. I also don't memorize tickers, but I think most Bogleheads at least know VTI and VXUS at a minimum, no?
VTI, yes. VXUS, no. Further, if actual funds "aren't particularly relevant", why did you use them?
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Epsilon Delta »

Somebody who is more interested than me would dig into the annual reports. ...

One thing to look for. IIRC if the fund has short term capital gains these are reported as dividends, unless there are offsetting losses. Perhaps the funds have used up all of their carry over losses.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by paof2 »

I am definitely surprised by the percentage of non-qualified dividends. Also, I thought if a fund had at least 95% qualified dividends, that could be rounded up to 100%. Am I losing my mind, or was that a "thing" in the past?
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Billy C »

Geologist wrote: Sun Feb 02, 2025 10:16 am I own Vanguard Tax-Managed Small Cap. In 2023, it had about 0.7% non-qualified dividends and in 2024, it had 0%. Thus, there was no increase last year.
I’ve owned the Vanguard Tax-Managed Small Cap Fund since its inception in March, 1999. Terrific fund!

I’m surprised that Vanguard’s tax-managed funds aren’t more popular. They are ideal holdings for taxable accounts, and John Bogle was a big fan of them.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Bmac »

My Vanguard funds seem pretty stable year over year:
VEMAX (Emerging Market Index Admiral) 31 % QDI 2024, 21% 2023
VFIAX (500 index Admiral) 95% 2024, 96.4% 2023
VTMSX (Tax Managed Small Cap) 82% 2024, 80.5% 2023
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Thesaints »

Geologist wrote: Sun Feb 02, 2025 10:35 am
White Coat Investor wrote: Sun Feb 02, 2025 10:23 am

True, but the actual funds aren't particularly relevant to the discussion. These are common funds owned on this board. I also don't memorize tickers, but I think most Bogleheads at least know VTI and VXUS at a minimum, no?
VTI, yes. VXUS, no. Further, if actual funds "aren't particularly relevant", why did you use them?
VXUS: vanguard (stock fund) ex-us. So, no, not surprised a bit a foreign stocks fund may have larger non-qualified dividends
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by afan »

Another thing this demonstrates to me is that the additional tax efficiency of the Avantis/DFA SV ETFs more than makes up for the slightly higher ER.
Is that consistently true over the years, or is this based only on 2024?
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by goodenyou »

I have been waiting for tax documents from Vanguard and Schwab for 2024. However, I have been doing some tax projecting estimations without them, and I was assuming the QD and NQD dividend percentage would be about the same as last year.

I assume the turnover rate was higher in some index funds that decreased qualified dividends?? Forced turnover?
Last edited by goodenyou on Sun Feb 02, 2025 3:28 pm, edited 1 time in total.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by sycamore »

100% QDI again for VIG / Vanguard Dividend Appreciation Index Fund, yay.

I don't know yet what SPTM / SPDR Port S&P 1500 Composite Stock Market ETF will report. TBD. I'll set low expectations based on the VTI & ITOT numbers.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Hacksawdave »

Only my STAR fund came in higher than expected on non-qualified dividends. I was expecting around 40% and got 32% instead. No biggie as I keep than one manageable through forecasting and allow some overage. Eventually it will just stay at the same share count once I turn CG reinvestment off for that fund and then all distributions will be taken in cash and placed into the cashflow process.

Foreign holdings have different mechanisms when making distributions, with some based upon political changes. As an FYI to others, balanced funds that are held in taxable had higher FI per share distribution rates and will do so for some time, so this should not be a surprise. Index funds did 'as usual' for me.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Chocolatebar »

I highly recommend considering the Dimensional World ex US Core Equity 2 ETF (DFAX) as a tax-efficient alternative to VXUS in taxable accounts. While I haven't seen the QDI for 2024 yet, for 2023 it was an impressive 80.15%. DFA has a strong track record of managing tax efficiency.

In addition to its tax benefits, DFAX also incorporates factor tilts, which I view as an added bonus.

For further insight into tax costs across various ETFs, Grabiner does an excellent job of analyzing and sharing this data each year. You can check it out here: viewtopic.php?t=426104
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by sodastream »

White Coat Investor wrote: Sun Feb 02, 2025 9:56 am I was floored to see such a high percentage of my dividends not qualified this year. Minimal if any turnover of funds in 2024 (i.e. it's the funds doing this, not my behavior). I don't think I even tax loss harvested once in 2024. Here are some examples:

ITOT: (the VTI TLHing partner): 8% Bummer that is so much higher
AVDV: 32% (wow)
YIKES! I haven't received my Schwab statement yet, but these 2 ETFs are in my taxable account. Bummed to hear about this and especially eye-opening about ITOT. I just sold a chunk of AVDV this month and plan to sell more during our bridge to SS; this may hasten it. I would sell more now, but I need to control realized gains for ACA purposes.

I wonder what % the S&P 500 ETFs will report?
AVUV: 0%
Ironically, I have this in my Roth so there's no advantage to the 0% non-qualified. Not unhappy with the returns, though.
Another thing this demonstrates to me is that the additional tax efficiency of the Avantis/DFA SV ETFs more than makes up for the slightly higher ER.
Good point. I wish I had AVUV in taxable!
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by rkhusky »

White Coat Investor wrote: Sun Feb 02, 2025 10:24 am
iceport wrote: Sun Feb 02, 2025 10:23 am

Are you sure the Section 199A dividends are qualified?
I ignored them in my quick calculations. That's probably the difference. Doesn't matter. I was consistent. The point is NQ dividends are higher this year and I'm curious why.
My 1099 has 90.9% QD and 6.2% 199A. VTI is usually 95% QD with 2-3% 199A. QD is better than 199A for me.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by grabiner »

White Coat Investor wrote: Sun Feb 02, 2025 9:56 am I was floored to see such a high percentage of my dividends not qualified this year. Minimal if any turnover of funds in 2024 (i.e. it's the funds doing this, not my behavior). I don't think I even tax loss harvested once in 2024. Here are some examples:

VTI: 3% of dividends were non-qualified. So far so good.
ITOT: (the VTI TLHing partner): 8% Bummer that is so much higher

VXUS: 39% What the heck?
IXUS: (TLHing partner): 29% Maybe I have the wrong one as the "partner"

AVUV: 0%
DFSV: 0%

AVDV: 32% (wow)

VSS: (legacy holding) 47% (whoa)

VIOV: (legacy holding) 18% (way higher than the Avantis/DFA ETFs, just like VBR was when I owned that)

Looking back at last year's 1099, it was 0% for VTI, AVUV, DFSV and lower than this year for most of the others. Anyone have any idea why a higher percentage of dividends this year were not qualified?
I don't see much of a difference. 2023 tax costs for value ETFs shows 5% for VTI last year, 41% for VXUS, 0% for AVUV, 0% for DFSV, 32% for AVDV, 41% for VSS, and 32% for VIOV (the linked article has 26% for VBR)
Another thing this demonstrates to me is that the additional tax efficiency of the Avantis/DFA SV ETFs more than makes up for the slightly higher ER.
This is much more the case for DFA for international small value. DISV had 100% qualified dividends in its 2023 and 2024 annual reports (which cover data through October; I couldn't find calendar-year qualified dividends on the DFA website). I have switched from AVDV to DISV to take advantage of this.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by boomer_techie »

goodenyou wrote: Sun Feb 02, 2025 2:00 pm I have been waiting for tax documents from Vanguard and Schwab for 2024. However, I have been doing some tax projecting estimations without them, and I was assuming the QD and NQD dividend percentage would be about the same as last year.
The initial Vanguard "ICI Primary Layout" (and Secondary too!) has been released. You may have to look in the Vanguard "advisors" tax documents section. In about two weeks, the revised (which include REITs) versions will be published.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Mayacallie »

White Coat Investor wrote: Sun Feb 02, 2025 9:56 am I was floored to see such a high percentage of my dividends not qualified this year. Minimal if any turnover of funds in 2024 (i.e. it's the funds doing this, not my behavior). I don't think I even tax loss harvested once in 2024. Here are some examples:

VTI: 3% of dividends were non-qualified. So far so good.
ITOT: (the VTI TLHing partner): 8% Bummer that is so much higher

VXUS: 39% What the heck?
IXUS: (TLHing partner): 29% Maybe I have the wrong one as the "partner"

AVUV: 0%
DFSV: 0%

AVDV: 32% (wow)

VSS: (legacy holding) 47% (whoa)

VIOV: (legacy holding) 18% (way higher than the Avantis/DFA ETFs, just like VBR was when I owned that)

Looking back at last year's 1099, it was 0% for VTI, AVUV, DFSV and lower than this year for most of the others. Anyone have any idea why a higher percentage of dividends this year were not qualified?

Another thing this demonstrates to me is that the additional tax efficiency of the Avantis/DFA SV ETFs more than makes up for the slightly higher ER.
As only a probable partial mirror into your portfolio, I’m a bit surprised by the complexity.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Chucklehead »

Vanguard Tax-Managed Capital Appreciation Fund-

It looks interesting for a taxable account; kind of like the rationale a lot of us have in holding Berkshire Hathaway; a giant that "probably won't go broke" but is unlikely to surpass the market over the next ten years- the absence of dividends in a taxable account can be welcome.

However- just looked it up on Vanguard- the top ten holdings which dwarf other holdings are:
Apple
Nvidia
Microsoft
Amazon
Facebook
Tesla
Google (A)
Broadcom
Google C
Berkshire

So this list will look familiar to all of us- 35% of the assets are in tech. Tax managed, sure- but totally not diversifying most of our portfolios; especially if you hold a lot of VTI (total stock market).
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Hyperchicken »

White Coat Investor wrote: Sun Feb 02, 2025 10:22 am The data on my 1099 calculates out to 3%. I'm sure. No, I can't explain the discrepancy.
No need to guess, primary layout spreadsheet has been available for a while.

https://advisors.vanguard.com/content/d ... ayout.xlsx

VTI total - column 17: $3.674300
VTI qualified - column 21: $3.340673 (90.9% of total)
VTO 199A - column 36: $0.228174 (6.2% of total)
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Hot Sauce »

White Coat Investor wrote: Sun Feb 02, 2025 10:22 am
iceport wrote: Sun Feb 02, 2025 10:20 am

Are you sure about that one? Vanguard says VTI kicked off 90.92% qualified dividends, so 9.08% must be non-qualified, right?

https://investor.vanguard.com/investor- ... &year=2024
The data on my 1099 calculates out to 3%. I'm sure. No, I can't explain the discrepancy.
I just looked at my 1099 and sure enough, only 90.9% of VTI dividends were qualified. About 6% of ordinary dividends were Section 199A, for which there is a QBI deduction.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by grabiner »

Chucklehead wrote: Sun Feb 02, 2025 10:08 pm Vanguard Tax-Managed Capital Appreciation Fund-

It looks interesting for a taxable account; kind of like the rationale a lot of us have in holding Berkshire Hathaway; a giant that "probably won't go broke" but is unlikely to surpass the market over the next ten years- the absence of dividends in a taxable account can be welcome.
This fund tracks the Russell 1000, a large-and-mid-cap index, but deviates slightly from the index to reduce dividends. While Vanguard does have an ETF tracking the Russell 1000, a less expensive but still quite comparable alternative is Large-Cap Index.

At today's yields, with a 0.19% difference, in dividend yields, TM Capital Appreciation and Large-Cap Index are break-even if you pay the top federal 23.8% tax on qualified dividends; the difference in expenses is 0.04%, and the difference in taxes could round to either 0.04% or 0.05% depending on the rounding of the 0.19%.
Last edited by grabiner on Sun Feb 02, 2025 11:41 pm, edited 1 time in total.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Billy C »

Chucklehead wrote: Sun Feb 02, 2025 10:08 pm Vanguard Tax-Managed Capital Appreciation Fund-

It looks interesting for a taxable account; kind of like the rationale a lot of us have in holding Berkshire Hathaway; a giant that "probably won't go broke" but is unlikely to surpass the market over the next ten years- the absence of dividends in a taxable account can be welcome.

However- just looked it up on Vanguard- the top ten holdings which dwarf other holdings are:
Apple
Nvidia
Microsoft
Amazon
Facebook
Tesla
Google (A)
Broadcom
Google C
Berkshire

So this list will look familiar to all of us- 35% of the assets are in tech. Tax managed, sure- but totally not diversifying most of our portfolios; especially if you hold a lot of VTI (total stock market).
Yes, the Vanguard Tax-Managed Capital Appreciation Fund tracks the Russell 1000 Index. As you correctly point out it won’t beat the market, but it should mimic it. It’s minimally more tax efficient than the S&P 500 and Total Market given its slightly lower dividend yield and 100% qualified dividends.

I’m a zealot when it comes to trying to squeeze out the last little bit of cost/tax savings from my portfolio and this was the best I could come up with. It pairs well with the Vanguard Tax-Managed Small Cap Fund.

Edit: Grabiner beat me to it. The Vanguard Tax-Managed Funds also have Institutional class shares which are 3 bp cheaper than the Admiral shares (6 bp vs. 9).

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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by beyou »

The data for prior years is all there on Vanguard site.
Total International is close to same as prior year, if anything slightly better in 2024 than 2023, but not meaningfully better.

I use IDEV for international, a developed markets index, similar to VEA.
It is a bit worse than last year, but not by much.
Still much better than total international, which is one reason I use Developed over Total International.
The emerging markets component of Total International is a big part of the source of non-qualified dividends.
For tax location, one might consider Emerging markets in IRA vs Developed in taxable.
Personally I just left out emerging markets last few years, both to reduce risk and believing China was way overvalued a few years ago.
Market timing, maybe so but I was correct, and tax location has made separating the two parts of international a persistent advantage due to the qualified vs non-qualified percentages being persistently worse for emerging markets stocks.
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by jeffyscott »

grabiner wrote: Sun Feb 02, 2025 11:05 pm
Chucklehead wrote: Sun Feb 02, 2025 10:08 pm Vanguard Tax-Managed Capital Appreciation Fund-

It looks interesting for a taxable account; kind of like the rationale a lot of us have in holding Berkshire Hathaway; a giant that "probably won't go broke" but is unlikely to surpass the market over the next ten years- the absence of dividends in a taxable account can be welcome.
This fund tracks the Russell 1000, a large-and-mid-cap index, but deviates slightly from the index to reduce dividends. While Vanguard does have an ETF tracking the Russell 1000, a less expensive but still quite comparable alternative is Large-Cap Index.

At today's yields, with a 0.19% difference, in dividend yields, TM Capital Appreciation and Large-Cap Index are break-even if you pay the top federal 23.8% tax on qualified dividends; the difference in expenses is 0.04%, and the difference in taxes could round to either 0.04% or 0.05% depending on the rounding of the 0.19%.
VTCLX has beaten the Russell 1000 index fund over the, relatively short, lifetime of the latter. But perhaps this is only because the dividend avoidance tilts it a little more toward growth and it has benefited from the current large cap growth bubble?

Image

(VRNIX is the institutional share class of the Russell 1000 ETF, used it in this chart since it's returns have been a bit higher than the ETF's)
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bikefish
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by bikefish »

Billy C wrote: Sun Feb 02, 2025 10:50 am
Geologist wrote: Sun Feb 02, 2025 10:16 am I own Vanguard Tax-Managed Small Cap. In 2023, it had about 0.7% non-qualified dividends and in 2024, it had 0%. Thus, there was no increase last year.
I’ve owned the Vanguard Tax-Managed Small Cap Fund since its inception in March, 1999. Terrific fund!

I’m surprised that Vanguard’s tax-managed funds aren’t more popular. They are ideal holdings for taxable accounts, and John Bogle was a big fan of them.
Vanguard Tax managed Capital Appreciation was 100 percent qualified this year. I like the fund as well.

Edit > I expect the knock again the tax managed fund is the fee.
barberakb
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by barberakb »

Geologist wrote: Sun Feb 02, 2025 10:02 am From Wikipedia
To be taxed at the qualified dividend rate, the dividend must:
• be paid by a U.S. corporation, by a corporation incorporated in a U.S. possession, by a foreign corporation located in a country that is eligible for benefits under a U.S. tax treaty that meets certain criteria, or on a foreign corporation’s stock that can be readily traded on an established U.S. stock market (e.g., an American Depositary Receipt or ADR)

Consequently, international or world stock funds will have lower proportions of qualified dividends.
But most of those funds will have foreign taxes paid right?
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White Coat Investor
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by White Coat Investor »

Mayacallie wrote: Sun Feb 02, 2025 8:14 pm
As only a probable partial mirror into your portfolio, I’m a bit surprised by the complexity.
Really? Because you're looking at the simple part. What part of that looks complex to you. I have four stock asset classes:

US
International
US small value
International small value

Of course, since I'm a taxable investor, I have to have two funds for each asset class. And I've got some legacy holdings that are slowly going to charity in place of cash.

But if you think that looks complicated, wait until you get to the bonds and real estate.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Mayacallie
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Mayacallie »

I’m only S&P and treasury ladder, so I’m somewhat of a biased minimalist. Succesful one albeit.
nyejos11
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by nyejos11 »

Hold less international funds? Lol
rockstar
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by rockstar »

Mayacallie wrote: Mon Feb 03, 2025 12:48 pm I’m only S&P and treasury ladder, so I’m somewhat of a biased minimalist. Succesful one albeit.
I prefer a simple portfolio with mostly VOO. But I do have BRK.B and QQQ. Neither makes taxable worse off tax wise. And I’ve given up on REITS, which are basically perpetual bonds. They take forever to get tax documents, so then I ended up paying more for tax prep. And they react almost as badly to rate moves as longer duration treasuries. If I want bond like, I’ll buy individual preferred.
Mayacallie
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by Mayacallie »

rockstar wrote: Mon Feb 03, 2025 5:43 pm
Mayacallie wrote: Mon Feb 03, 2025 12:48 pm I’m only S&P and treasury ladder, so I’m somewhat of a biased minimalist. Succesful one albeit.
I prefer a simple portfolio with mostly VOO. But I do have BRK.B and QQQ. Neither makes taxable worse off tax wise. And I’ve given up on REITS, which are basically perpetual bonds. They take forever to get tax documents, so then I ended up paying more for tax prep. And they react almost as badly to rate moves as longer duration treasuries. If I want bond like, I’ll buy individual preferred.
Perhaps you can name it the Rockstar 4 minus one and start writing books and start your own blog!
MikeG62
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by MikeG62 »

Is this data off your 1099? If so, have you contacted the fund company to ask if there might be an error?

A number of years ago I had an error in qualified vs. non-qualified dividends (can't recall whether it was an ETF or MF). I contacted the fund manager and it turns out the data was incorrect. I subsequently got an amended 1099. That has not happened in quite a long time though.

I would call the fund managers in each case and ask for an explanation. Seems odd the mix would vary so dramatically from year to year (and that 2024 seems an outlier relative to prior years too).
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PinotGris
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by PinotGris »

White Coat Investor wrote: Sun Feb 02, 2025 9:56 am I was floored to see such a high percentage of my dividends not qualified this year. Minimal if any turnover of funds in 2024 (i.e. it's the funds doing this, not my behavior). I don't think I even tax loss harvested once in 2024. Here are some examples:

VTI: 3% of dividends were non-qualified. So far so good.
ITOT: (the VTI TLHing partner): 8% Bummer that is so much higher

VXUS: 39% What the heck?
IXUS: (TLHing partner): 29% Maybe I have the wrong one as the "partner"

AVUV: 0%
DFSV: 0%

AVDV: 32% (wow)

VSS: (legacy holding) 47% (whoa)

VIOV: (legacy holding) 18% (way higher than the Avantis/DFA ETFs, just like VBR was when I owned that)

Looking back at last year's 1099, it was 0% for VTI, AVUV, DFSV and lower than this year for most of the others. Anyone have any idea why a higher percentage of dividends this year were not qualified?

Another thing this demonstrates to me is that the additional tax efficiency of the Avantis/DFA SV ETFs more than makes up for the slightly higher ER.
I took a top level look of 1099DIV at page 1 of 16
89% of Vanguard Mutual funds we hold was qualified. About the norm.
We hold about 7 or 8 funds in the taxable assets. Total stk Mkt -VTSAX is 70% of the holdings. 500Index is 17%, and the rest are repetition of the two (Pre-Bogle mistakes) and very minimal effect.
delamer
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by delamer »

nyejos11 wrote: Mon Feb 03, 2025 5:29 pm Hold less international funds? Lol
I actually did end up selling some of my international holding in my taxable account, largely as a result of this thread. I needed to generate some cash anyway, so reducing tax inefficiency at the same time made sense.

I generally knew that the ETF (Vanguard Developed) was throwing off a lot of dividends. So I investigated at a more detailed level. I found out that while it was 1/3 of my the value of my account, it was responsible for 1/2 of the account’s earnings for the last few years.

For a couple reasons, taxable income is not my friend for the foreseeable future. So while I’m taking a tax hit this year due to the sale, it will help in reducing them in the future.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by lazynovice »

Fidelity has now broken out each dividend payment on their website between qualified, non-qualified and section 199A. It’s in the YTD tax info, select 2024 and then click on the ordinary dividends hyperlink.

Each dividend payment is different. That’s completely logical but of course, I was surprised. :oops:

If WhiteCoat Investor made large contributions to his account, I wonder if he picked up higher percentages of the non-qualified dividends - which is why his 1099 doesn’t agree to the published information from Vanguard?

Anecdotally, our qualified dividends were lower than 2023 but I recall 2023 being higher than my projections based on 2022.
izitgr8
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by izitgr8 »

Could someone clue me into what TLHing refers to? Thank you,
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Re: Anyone else surprised by how much non-qualified dividends their index funds paid out this year?

Post by ivgrivchuck »

izitgr8 wrote: Fri Feb 07, 2025 9:43 pm Could someone clue me into what TLHing refers to? Thank you,
tax-loss harvesting
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHP
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