So, just how to calculate a dividend payout ?

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Topic Author
Kumsajack
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Joined: Fri Jul 28, 2017 1:05 pm

So, just how to calculate a dividend payout ?

Post by Kumsajack »

We're moving in full retirement, and I'm likely going to have to put some after-tax money into investments. I've been eyeing Vanguard Dividend Growth Fund (VDIGX). It's a Morningstar recommendation (https://www.morningstar.com/articles/10 ... tock-funds), so that seems a good place to start. However, I'm not sure how to calculate exactly how much cash would be generated from the fund. Up to know, our assets have been in IRAs and 401(k)s where dividends are reinvested. As I move money out of the tax-deferred state into taxable funds, I'm no longer reinvesting dividends.

If I punch in the numbers for VDIGX with a dividend calculator (https://www.omnicalculator.com/finance/dividend) for, say, a $100,000, the dividend profit is $115. That can't be right. Or, maybe it is, but it seems awfully small.
jebmke
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Re: So, just how to calculate a dividend payout ?

Post by jebmke »

I would take the number of shares and multiply by the dividend payout per share. This is what I do when I prepare my pro-forma tax return for the upcoming year. I adjust the current year up or down depending on conditions - usually up just a bit.

edit - didn't go to the link but that number is probably the average monthly payout (even though the fund probably pays quarterly).
When you discover that you are riding a dead horse, the best strategy is to dismount.
mega317
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Re: So, just how to calculate a dividend payout ?

Post by mega317 »

Seems right to me if you input monthly in your calculator. Yield is 1.52% x $100,000 / 12months = $126 on my calculator. Pretty close.

What exactly are you trying to do with your portfolio as a whole? You may have a much bigger issue (meaning, more to consider, not that there is actually a problem) than you think.
Last edited by mega317 on Thu May 12, 2022 1:27 pm, edited 1 time in total.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
brad.clarkston
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Re: So, just how to calculate a dividend payout ?

Post by brad.clarkston »

VDIGX has a dividend yield of 0.24% and a ER of 0.26%. So not something I would personally look at.
I tend to not look at anything Morningstar recommends.
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retired@50
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Re: So, just how to calculate a dividend payout ?

Post by retired@50 »

Kumsajack wrote: Thu May 12, 2022 1:12 pm We're moving in full retirement, and I'm likely going to have to put some after-tax money into investments. I've been eyeing Vanguard Dividend Growth Fund (VDIGX). It's a Morningstar recommendation (https://www.morningstar.com/articles/10 ... tock-funds), so that seems a good place to start. However, I'm not sure how to calculate exactly how much cash would be generated from the fund. Up to know, our assets have been in IRAs and 401(k)s where dividends are reinvested. As I move money out of the tax-deferred state into taxable funds, I'm no longer reinvesting dividends.

If I punch in the numbers for VDIGX with a dividend calculator (https://www.omnicalculator.com/finance/dividend) for, say, a $100,000, the dividend profit is $115. That can't be right. Or, maybe it is, but it seems awfully small.
I'd look at the current dividend yield for VDIGX (Curently 1.52%), as well as past ST & LT capital gains distributions from the fund in question to see how it behaves. This kind of analysis makes the assumption that the fund will continue to behave (roughly) as it has in the past.

You can pretend you owned $100,000 worth of the fund on Jan. 4, 2021 then using the Vanguard webpage that shows all distributions for the fund, you can see how much in dividends and capital gains distributions income that would have created.

Example:
Jan. 4, 2021 fund share price was $32.69, so if you invested $100,000 on that day you would have owned 3,059.039 shares. With no reinvestment or additional money added to the fund...

Take each distribution for 2021 shown in the linked page below and multiply it by 3,059 and you'll have your annual income (for 2021) from this fund. Some of it from dividends, and some of it from capital gains distributions.

https://investor.vanguard.com/mutual-fu ... ions/vdigx

Regards,
This is one person's opinion. Nothing more.
Topic Author
Kumsajack
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Joined: Fri Jul 28, 2017 1:05 pm

Re: So, just how to calculate a dividend payout ?

Post by Kumsajack »

Thanks all, this is very helpful. All the normal caveats apply, which I understand. I'm simply trying to think through the benefits of dividends, which I've never given a thought before now. It was never planned to be a significant portion of my retirement income.
Morik
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Re: So, just how to calculate a dividend payout ?

Post by Morik »

Kumsajack wrote: Thu May 12, 2022 3:30 pm Thanks all, this is very helpful. All the normal caveats apply, which I understand. I'm simply trying to think through the benefits of dividends, which I've never given a thought before now. It was never planned to be a significant portion of my retirement income.
If you haven't seen this thread, give it a read: viewtopic.php?t=46454 (it's linked from the wiki: https://www.bogleheads.org/wiki/Dividend).
delamer
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Re: So, just how to calculate a dividend payout ?

Post by delamer »

Kumsajack wrote: Thu May 12, 2022 3:30 pm Thanks all, this is very helpful. All the normal caveats apply, which I understand. I'm simply trying to think through the benefits of dividends, which I've never given a thought before now. It was never planned to be a significant portion of my retirement income.
Remember that you’ll pay taxes on any dividends thrown off by your investments, even if you don’t actually need the dividends to cover your expenses.

Whereas if you put money into investments that are tax efficient and throw off minimal income, you’ll only pay taxes when you decide to sell shares to cover expenses.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
CuriousTacos
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Re: So, just how to calculate a dividend payout ?

Post by CuriousTacos »

delamer wrote: Thu May 12, 2022 3:41 pm Whereas if you put money into investments that are tax efficient and throw off minimal income, you’ll only pay taxes when you decide to sell shares to cover expenses.
And you would only pay tax on the gain, not the total value of the shares sold. In other words, $1000 of dividends counts as $1000 of income. $1000 of stock sold would only be, for example, $250 of income if the stock had gone up 33%.

Although this may all be irrelevant to you if you are in a low tax bracket where qualified dividends and long term capital gains are taxed at 0% (and you aren't near any income cutoffs for tax breaks or benefits).
Topic Author
Kumsajack
Posts: 51
Joined: Fri Jul 28, 2017 1:05 pm

Re: So, just how to calculate a dividend payout ?

Post by Kumsajack »

I'm out for a few days, and these are such good comments that I will respond w/a bullet point listing.
dbr
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Re: So, just how to calculate a dividend payout ?

Post by dbr »

Kumsajack wrote: Thu May 12, 2022 3:30 pm Thanks all, this is very helpful. All the normal caveats apply, which I understand. I'm simply trying to think through the benefits of dividends, which I've never given a thought before now. It was never planned to be a significant portion of my retirement income.
The more useful reason to be able to estimate the dividend payment is if you are running into a problem with too much taxable income affecting a cutoff such as ACA insurance benefits or SS taxation.

As others are pointing out, there is no meaningful income benefit to dividends other than convenience.

It could be a better investment choice would be a total stock market ETF such as VTI.
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