By my math, the annual dividend of VTSAX is about 1.8%.
Based on that math, of correct, each monthly $4,000 investment would add about $72 per year to my dividend income.
This would be reinvested as I'm 40 and still adding $ for a while.
1) Is anything off in my understanding here?
2) long term, should I assume a 1.8% dividend in this vehicle could be sustained?
Dividend impact of investing $4,000 / month in VTSAX?
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Re: Dividend impact of investing $4,000 / month in VTSAX?
Your math is correct.
Will it be 1.8% long term? Nobody knows. Dividends yields used to be higher but dropped in the 90s and have stayed at this relatively low level since. http://www.multpl.com/s-p-500-dividend-yield/
The bigger question is: why do you care? There have been about 100 threads on here that have discussed whether dividend yield matters. There's a vocal contingent of Boglehead dividend enthusiasts, but many (most?) people here believe in "Total Return Investing" where the dividend yield is irrelevant. A google search on the forum will pull many of these threads up for you and you can decide for yourself.
Will it be 1.8% long term? Nobody knows. Dividends yields used to be higher but dropped in the 90s and have stayed at this relatively low level since. http://www.multpl.com/s-p-500-dividend-yield/
The bigger question is: why do you care? There have been about 100 threads on here that have discussed whether dividend yield matters. There's a vocal contingent of Boglehead dividend enthusiasts, but many (most?) people here believe in "Total Return Investing" where the dividend yield is irrelevant. A google search on the forum will pull many of these threads up for you and you can decide for yourself.
Re: Dividend impact of investing $4,000 / month in VTSAX?
The one practical interest in estimating dividend income I can think of is anticipating one's tax costs.
Re: Dividend impact of investing $4,000 / month in VTSAX?
Exactly. If you can estimate the expected dividend income, you can also estimate how much you need to set aside in cash each year (or additional amount you need withheld from your wages) to pay the income taxes on the dividends if you're in a high enough bracket for it to matter (which, given the $4k per month into VTSAX hypothetical, the OP almost surely is in a high enough bracket).
Re: Dividend impact of investing $4,000 / month in VTSAX?
As long as dividends are paid per share, the dividend yield will fluctuate with share price. If the stock market drops by 50%, all else being equal, your dividend yield will increase by a factor of two.BaylorBears wrote: ↑Tue Sep 12, 2017 8:09 am 2) long term, should I assume a 1.8% dividend in this vehicle could be sustained?
Re: Dividend impact of investing $4,000 / month in VTSAX?
Probably the thinking is more about the dividend payout which will be more or less constant in the short run. It is really a confusion or just sloppiness of terminology.rkhusky wrote: ↑Tue Sep 12, 2017 1:08 pmAs long as dividends are paid per share, the dividend yield will fluctuate with share price. If the stock market drops by 50%, all else being equal, your dividend yield will increase by a factor of two.BaylorBears wrote: ↑Tue Sep 12, 2017 8:09 am 2) long term, should I assume a 1.8% dividend in this vehicle could be sustained?
One thing ignored here if tax costs are the issue is the possibility of capital gains distributions. Those are not so easy to forecast.