VYM dividend related question

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frotec
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VYM dividend related question

Post by frotec » Wed Sep 11, 2019 2:32 pm

I have a quick question. Say I have a portfolio of VYM that generates 3% dividend and I use all the dividend to meet living expense. Will the portfolio support me for say next 40 years if I need to take out dividend at 3% now and growing at inflation rate??

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oldcomputerguy
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Re: VYM dividend related question

Post by oldcomputerguy » Wed Sep 11, 2019 2:32 pm

Impossible to say, we don't know how much is in your portfolio nor how much your expenses are.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

FactualFran
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Re: VYM dividend related question

Post by FactualFran » Wed Sep 11, 2019 3:04 pm

The question comes down to whether the annual distribution amounts will keep up with inflation. That is likely not known.

Since inception, the distribution amounts of the Vanguard High Dividend yield fund has generally increased by more than inflation. However, there have been times when the annual distribution amount has decreased.

Using the data for the investor class shares of the fund, the distribution amount taken in cash during 2007, the first full year of the fund, would have been 2.5% of the end of 2006 balance. The distribution amount for 2010 adjusted for inflation would have been 1.9% of the end of 2006 balance. The distribution amount for 2018 adjusted for inflation would have been 4.1% of the end of 2006 balance.

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Svensk Anga
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Re: VYM dividend related question

Post by Svensk Anga » Wed Sep 11, 2019 4:26 pm

One problem with planning retirement this way is that you become vulnerable to changes in dividend policy. If share buybacks grow at the expense of cash dividends, as has been the fashion for a decade or two, your income may not keep up. The buybacks are likely to inflate your shares’ NAV, but you might be hesitant to sell.

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patrick013
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Re: VYM dividend related question

Post by patrick013 » Wed Sep 11, 2019 7:14 pm

viewtopic.php?f=1&t=289734&p=4735318&hilit=img#p4735318

Dividends have increased over the years. Utilities are pretty stable with some cap gain.
Very low beta. So for one example not a bad choice. It probably won't beat LC growth
for total return and probably will yield more than bonds. VYM has similar return to TSM I
would think, all good companies, etc.. Ticker SPYD is my fav long term but not as stable as
utilities. Not a bad tilt either from the factor people.

Have a good one.
age in bonds, buy-and-hold, 10 year business cycle

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JoMoney
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Re: VYM dividend related question

Post by JoMoney » Wed Sep 11, 2019 8:06 pm

There are no promises when it comes to stock returns.
Cutting a regular dividend is usually a bad sign, so most companies try to avoid it, but it happens...
VYM's annual dividend was below it's 2008 dividend in 2009, 2010, and 2011.

Mutual funds and various esoteric indices come and go all the time. While I'd like to think a Vanguard fund would be a bit better, and a dividend fund would likely be popular, there's no saying VYM will continue to exist or won't change to some other style of holdings or track a different index.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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