Dividend related question....

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BV3273
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Dividend related question....

Post by BV3273 »

I have a stock holding I picked up last year that has been paying a monthly dividend. I made a one-time investment of $12K and have received all of my original investment back, plus. I have been getting around $1,000 per month from this investment, the dividends are non-qualified. I have been taking these dividends and ploughing them into VTI every month.

I originally made this investment for the cash flow. My income is choppy and based mainly on commissions which are paid out quarterly and a small salary which gets paid monthly, it was a wakeup call from my previous job where I received my salary every two weeks and my commissions monthly.

Is there any downside to my strategy? Besides having to pay taxes at the ordinary income rate?

Thanks in advance!
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Re: Dividend related question....

Post by retired@50 »

BV3273 wrote: Wed Oct 30, 2024 7:52 am I have a stock holding I picked up last year that has been paying a monthly dividend. I made a one-time investment of $12K and have received all of my original investment back, plus. I have been getting around $1,000 per month from this investment, the dividends are non-qualified. I have been taking these dividends and ploughing them into VTI every month.

I originally made this investment for the cash flow. My income is choppy and based mainly on commissions which are paid out quarterly and a small salary which gets paid monthly, it was a wakeup call from my previous job where I received my salary every two weeks and my commissions monthly.

Is there any downside to my strategy? Besides having to pay taxes at the ordinary income rate?

Thanks in advance!
I don't know what stock you're referring to, but it sounds as if it has an extremely high dividend payout rate. This is usually a sign of risk and/or trouble with the company's long term viability. Since you've already recouped your original investment, I think it's reasonable to continue holding and enjoy the monthly dividend. Based on the tax treatment of the non-qualified dividend, it's as if you purchased a part-time job that pays $1,000 per month.

Regards,
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Re: Dividend related question....

Post by BV3273 »

retired@50 wrote: Wed Oct 30, 2024 8:20 am
BV3273 wrote: Wed Oct 30, 2024 7:52 am I have a stock holding I picked up last year that has been paying a monthly dividend. I made a one-time investment of $12K and have received all of my original investment back, plus. I have been getting around $1,000 per month from this investment, the dividends are non-qualified. I have been taking these dividends and ploughing them into VTI every month.

I originally made this investment for the cash flow. My income is choppy and based mainly on commissions which are paid out quarterly and a small salary which gets paid monthly, it was a wakeup call from my previous job where I received my salary every two weeks and my commissions monthly.

Is there any downside to my strategy? Besides having to pay taxes at the ordinary income rate?

Thanks in advance!
I don't know what stock you're referring to, but it sounds as if it has an extremely high dividend payout rate. This is usually a sign of risk and/or trouble with the company's long term viability. Since you've already recouped your original investment, I think it's reasonable to continue holding and enjoy the monthly dividend. Based on the tax treatment of the non-qualified dividend, it's as if you purchased a part-time job that pays $1,000 per month.

Regards,
Thank you! That is what I am thinking as well.
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Re: Dividend related question....

Post by livesoft »

You may be receiving "Return of Capital" and not solely income from a dividend. That will complicate your tax return I think if this holding is held in a taxable account.

While an investment in VMFXX is not what you described I will state that if one put $12K in VMFXX a year ago, then one could get $1,000 a month from it over the 12 months.
Last edited by livesoft on Wed Oct 30, 2024 8:34 am, edited 1 time in total.
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Re: Dividend related question....

Post by goblue100 »

Care to share the ticker symbol? You may get more specific advice and information on why the payout is so high.
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Re: Dividend related question....

Post by tesuzuki2002 »

downside is typically higher risk with a high dividend stock... But I expanded my holdings into dividend stocks a few years ago and I am realizing about $35K per year in dividend... I'm not sure I really wanted to go this route since it is in taxable... But here I am.. and I'm living with it for now..

I plan to scale back on work and this may also be the part of the equation that helps with that...
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Re: Dividend related question....

Post by ResearchMed »

livesoft wrote: Wed Oct 30, 2024 8:32 am You may be receiving "Return of Capital" and not solely income from a dividend. That will complicate your tax return I think if this holding is held in a taxable account.

While an investment in VMFXX is not what you described I will state that if one put $12K in VMFXX a year ago, then one could get $1,000 a month from it over the 12 months.

And just about no risk!

"Such a deal!"

:D

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Re: Dividend related question....

Post by BV3273 »

livesoft wrote: Wed Oct 30, 2024 8:32 am You may be receiving "Return of Capital" and not solely income from a dividend. That will complicate your tax return I think if this holding is held in a taxable account.

While an investment in VMFXX is not what you described I will state that if one put $12K in VMFXX a year ago, then one could get $1,000 a month from it over the 12 months.
Woulda, Coulda, Shoulda LOL

The ticker is irrelevant. It is a fairly complex investment, but again the cash-flow was appealing to me at the time.

Think I will just leave the investment as is at this point and plough the dividends into VTI.
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Re: Dividend related question....

Post by breakfastinbed »

BV3273 wrote: Wed Oct 30, 2024 7:52 am I have a stock holding I picked up last year that has been paying a monthly dividend. I made a one-time investment of $12K and have received all of my original investment back, plus. I have been getting around $1,000 per month from this investment, the dividends are non-qualified. I have been taking these dividends and ploughing them into VTI every month.
I am also very interested in learning the ticker for this stock with a dividend yield of 100%...

If it is as you describe, you should actually be heavily investing in this stock (likely selling other assets to put into this stock) because depending on the return and also on the duration/stability of this return, this investment is actually less risky than it looks (because of the rapid rate of return). So, for example, selling ALL of your assets and doing a one-time lump sum investment, and not reinvesting the dividends, would likely get you a very high expected net return.

You're probably not going to do this, though, which is fine. What you are doing is also fine. There's no downside - it's tax-inefficient, but even after taxes the stock you are describing is smoking VTI.

livesoft wrote: Wed Oct 30, 2024 8:32 am While an investment in VMFXX is not what you described I will state that if one put $12K in VMFXX a year ago, then one could get $1,000 a month from it over the 12 months.
Might want to double check this.
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Re: Dividend related question....

Post by Silverado »

My advice is to take any money you can spare and put it in this investment, maybe even take a 401k loan to increase the holding as much as possible. For sure start reinvesting dividends in it.
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Re: Dividend related question....

Post by mhadden1 »

livesoft wrote: Wed Oct 30, 2024 8:32 am You may be receiving "Return of Capital" and not solely income from a dividend. That will complicate your tax return I think if this holding is held in a taxable account.
I would expect this to blow up at some point? I wonder if the SEC is taking special interest in this one ....
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Re: Dividend related question....

Post by rogue_economist »

mhadden1 wrote: Wed Oct 30, 2024 9:46 am
livesoft wrote: Wed Oct 30, 2024 8:32 am You may be receiving "Return of Capital" and not solely income from a dividend. That will complicate your tax return I think if this holding is held in a taxable account.
I would expect this to blow up at some point? I wonder if the SEC is taking special interest in this one ....
I'm guessing the ticker is PYRMID :D

No legitimate enterprise is paying 100% annual dividend.
The highest dividend in the S&p 500 is Walgreens Boots Alliance Inc. at 9.6%.
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Re: Dividend related question....

Post by muffins14 »

What is the stock?
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Re: Dividend related question....

Post by Tramper Al »

I kind of thought we turned firmly to "total return", years ago, as to what really matters.

I don't know what "cash flow" means, when it's clearly just some portion of the initial investment being sent back to the investor - who is taxed for the privilege. It's like when someone says I think it's OK, since I only spend the dividends/distributions, I leave the principal alone. And then they go out and find the highest distributing entity to put that principal into!

Really, I think when we tolerate (and favor) investments that are literally structured to give out more cash flow - at the cost of our investment itself - we are asking to have the wool pulled over our eyes and/or fooling ourselves.

If I know I need/want to remove 5%, 10%, whatever portion of an investment for "cash flow", I just do that.
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Re: Dividend related question....

Post by FoolMeOnce »

BV3273 wrote: Wed Oct 30, 2024 9:00 am The ticker is irrelevant. It is a fairly complex investment, but again the cash-flow was appealing to me at the time.
It is not irrelevant to those of us who might want to invest in it!
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Re: Dividend related question....

Post by Django Ii »

Return Of Capital is not taxed.
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Re: Dividend related question....

Post by sycamore »

breakfastinbed wrote: Wed Oct 30, 2024 9:03 am
livesoft wrote: Wed Oct 30, 2024 8:32 am While an investment in VMFXX is not what you described I will state that if one put $12K in VMFXX a year ago, then one could get $1,000 a month from it over the 12 months.
Might want to double check this.
Double check your double check :)

Livesoft used ambiguous phrasing -- "get" could mean a number of things.
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Re: Dividend related question....

Post by Hacksawdave »

BV3273 wrote: Wed Oct 30, 2024 7:52 am Is there any downside to my strategy?
Well, is it a stock or not? First it was deemed a stock, but then it is called “a fairly complex investment” and that “The ticker is irrelevant.” That one would receive 100% of their initial investment and additional income in twelve months puts up too many red flags.

For the actionable part of if there is any downside, I would say yes. From what information is provided, it violates rule number one of my IPS. ““Only registered securities that trade on a major exchange or tradable in good delivery order tangibles are allowed into the portfolio. There are no private ventures, joint businesses, limited partnerships, loans, promissory notes, joint real estate, etc.”

The worst that could happen is if you decide to invest an even larger chunk to go all in. The bad thing that could happen is down the road you lose your initial $12K. The ugly thing that could happen is if it is a Ponzi scheme you find government agencies disgorging the previous distributions as a later settlement.
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Re: Dividend related question....

Post by breakfastinbed »

sycamore wrote: Wed Oct 30, 2024 10:22 am
breakfastinbed wrote: Wed Oct 30, 2024 9:03 am

Might want to double check this.
Double check your double check :)

Livesoft used ambiguous phrasing -- "get" could mean a number of things.
Fair enough, I agree with this interpretation :)

rogue_economist wrote: Wed Oct 30, 2024 9:50 am
mhadden1 wrote: Wed Oct 30, 2024 9:46 am I would expect this to blow up at some point? I wonder if the SEC is taking special interest in this one ....
I'm guessing the ticker is PYRMID :D

No legitimate enterprise is paying 100% annual dividend.
The highest dividend in the S&p 500 is Walgreens Boots Alliance Inc. at 9.6%.
You can get way higher dividend yields if you willing to take (potentially significant) risk.

My ticker guess is NVDY (74% yield) or another ETF that operates exclusively by trading options on a single high-performing stock. There are funds like this that don't pay as high dividends that have insane short-term performances, like NVDL (416% return YTD) because it leverages Nvidia and only Nvidia. Not exactly a standard Boglehead holding.
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Re: Dividend related question....

Post by BV3273 »

It's TSLY
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Re: Dividend related question....

Post by White Coat Investor »

BV3273 wrote: Wed Oct 30, 2024 7:52 am I have a stock holding I picked up last year that has been paying a monthly dividend. I made a one-time investment of $12K and have received all of my original investment back, plus. I have been getting around $1,000 per month from this investment, the dividends are non-qualified. I have been taking these dividends and ploughing them into VTI every month.

I originally made this investment for the cash flow. My income is choppy and based mainly on commissions which are paid out quarterly and a small salary which gets paid monthly, it was a wakeup call from my previous job where I received my salary every two weeks and my commissions monthly.

Is there any downside to my strategy? Besides having to pay taxes at the ordinary income rate?

Thanks in advance!
The big one is single stock risk. A more minor one is if you're not spending this income it's not a very tax-efficient way to grow your assets when so much of the return is paid out as income.
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Re: Dividend related question....

Post by sycamore »

BV3273 wrote: Wed Oct 30, 2024 11:55 amIt's TSLY
For anyone who's interested, this was previously discussed in other threads:

Yield MAX TSLY too good to be true
What do you think about YieldMax™ Option Income Strategy ETFs?
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Re: Dividend related question....

Post by BV3273 »

sycamore wrote: Wed Oct 30, 2024 12:28 pm
BV3273 wrote: Wed Oct 30, 2024 11:55 amIt's TSLY
For anyone who's interested, this was previously discussed in other threads:

Yield MAX TSLY too good to be true
What do you think about YieldMax™ Option Income Strategy ETFs?
Thanks for sharing.

As I stated this is not the main part of my portfolio. I am all Total Stock and some bonds in all my accounts.
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Re: Dividend related question....

Post by retired@50 »

BV3273 wrote: Wed Oct 30, 2024 12:42 pm
sycamore wrote: Wed Oct 30, 2024 12:28 pm

For anyone who's interested, this was previously discussed in other threads:

Yield MAX TSLY too good to be true
What do you think about YieldMax™ Option Income Strategy ETFs?
Thanks for sharing.

As I stated this is not the main part of my portfolio. I am all Total Stock and some bonds in all my accounts.
I noticed that upon reviewing TSLY on Morningstar that the price per share is steadily falling. Is that to be expected with an investment like this...??? Will it go to zero at some point?

Regards,
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Re: Dividend related question....

Post by FactualFran »

Django Ii wrote: Wed Oct 30, 2024 10:17 am Return Of Capital is not taxed.
Return of capital dividends reduce the basis of the investment and are taxed at the long-term capital gain rate once the basis has been reduced to zero. When the investment is sold, the capital gain will be higher than it would have been without the reduction to the basis.
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Re: Dividend related question....

Post by Xexanoth »

BV3273 wrote: Wed Oct 30, 2024 11:55 amIt's TSLY
For those curious, since inception in late 2022, it's had a CAGR of about 1.4%, vs about 19.7% for TSLA stock and about 23% for VOO for that period - source.

Since a cherry-picked more-favorable start date at its lowest price point since inception (which was a little over a month after its inception), it's had a CAGR of about 26.7%, vs about 60.2% for TSLA stock and about 27.6% for VOO for that period - source. Its volatility over that period was over 3x that of VOO's.

After-tax returns in a taxable account would compare even less favorably, given the majority of returns are non-qualified dividend distributions of option income.
Last edited by Xexanoth on Wed Oct 30, 2024 12:59 pm, edited 1 time in total.
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Re: Dividend related question....

Post by Solaris909 »

BV3273 wrote: Wed Oct 30, 2024 7:52 am II made a one-time investment of $12K and have received all of my original investment back, plus
What do you mean exactly by "received all my original investment back, plus"?

And would you like to share this investment ? Lol
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Re: Dividend related question....

Post by Solaris909 »

livesoft wrote: Wed Oct 30, 2024 8:32 am You may be receiving "Return of Capital" and not solely income from a dividend. That will complicate your tax return I think if this holding is held in a taxable account.

While an investment in VMFXX is not what you described I will state that if one put $12K in VMFXX a year ago, then one could get $1,000 a month from it over the 12 months.
What is "VMFXX"? This is not a ticker symbol that is coming up with anything.
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Re: Dividend related question....

Post by Solaris909 »

tesuzuki2002 wrote: Wed Oct 30, 2024 8:45 am downside is typically higher risk with a high dividend stock... But I expanded my holdings into dividend stocks a few years ago and I am realizing about $35K per year in dividend... I'm not sure I really wanted to go this route since it is in taxable... But here I am.. and I'm living with it for now..

I plan to scale back on work and this may also be the part of the equation that helps with that...
It is taxable but isn't it essentially free money? Even if you're keeping 60, 70, 80% of it (whatever your tax rate is), I don't see an obvious downside to free money.
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Re: Dividend related question....

Post by BV3273 »

Solaris909 wrote: Wed Oct 30, 2024 12:57 pm
BV3273 wrote: Wed Oct 30, 2024 7:52 am II made a one-time investment of $12K and have received all of my original investment back, plus
What do you mean exactly by "received all my original investment back, plus"?

And would you like to share this investment ? Lol
I invested $12k last year. I received that original $12K back in the form of dividends after paying the taxes, plus a few more months of dividends. I have not added to the position at all.
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Re: Dividend related question....

Post by retired@50 »

Solaris909 wrote: Wed Oct 30, 2024 1:00 pm
What is "VMFXX"? This is not a ticker symbol that is coming up with anything.
It's a Federal money market mutual fund at Vanguard. It's typically used as the default settlement fund for cash.

https://investor.vanguard.com/investmen ... file/vmfxx

Regards,
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Re: Dividend related question....

Post by sycamore »

BV3273 wrote: Wed Oct 30, 2024 7:52 am I have a stock holding I picked up last year that has been paying a monthly dividend. I made a one-time investment of $12K and have received all of my original investment back, plus. I have been getting around $1,000 per month from this investment, the dividends are non-qualified. I have been taking these dividends and ploughing them into VTI every month.

I originally made this investment for the cash flow. My income is choppy and based mainly on commissions which are paid out quarterly and a small salary which gets paid monthly, it was a wakeup call from my previous job where I received my salary every two weeks and my commissions monthly.

Is there any downside to my strategy? Besides having to pay taxes at the ordinary income rate?

Thanks in advance!
It sounds like your specific goal was (some) higher income, and the strategy for achieving that goal was to use ETFs that use covered calls to produce some income.

The main downside I can think of is that TSLY's tactics may not continue to provide the same level of cash flow. It's inherently volatile.

There are other "income oriented" ETFs and mutual funds that would also achieve your goal. Bond funds are the conventional choice for more income. There are obviously trade offs. I'd ask why bond funds didn't suffice?

Bogleheads philosophy suggests buying investment products that you understand. Only you can say if you understand how covered calls work and how the ETF uses them. Only you can say if having that understanding is necessary for owning things like TSLY. Personally I think there's too much risk in using the covered call approach; I don't understand how those things really work or appreciate what the downsides are.

I know you have other investments in your portfolio, presumably with a "bigger" goal in mind (like "provide for spending in retirement over a period of X years"). If you feel that having a specific sub-goal of higher cash flow fits with your other portfolio goals, and you accept the TSLY downsides, and don't mind the extra complexity (taxes? one more thing to keep track of?) then stick with it.
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Re: Dividend related question....

Post by ResearchMed »

Solaris909 wrote: Wed Oct 30, 2024 1:00 pm
livesoft wrote: Wed Oct 30, 2024 8:32 am You may be receiving "Return of Capital" and not solely income from a dividend. That will complicate your tax return I think if this holding is held in a taxable account.

While an investment in VMFXX is not what you described I will state that if one put $12K in VMFXX a year ago, then one could get $1,000 a month from it over the 12 months.
What is "VMFXX"? This is not a ticker symbol that is coming up with anything.

When I put VMFXX into a Google search, this is what came back first, at the very top of the list on that page:

And what I copied and pasted shows up as:

"
Search Results

VMFXX-Vanguard Federal Money Market Fund

Vanguard
https://investor.vanguard.com › mutual-funds › profile
Vanguard Federal Money Market Fund's investment objective is to seek to provide current income while maintaining liquidity and a stable share price of $1.
"

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Re: Dividend related question....

Post by rossington »

sycamore wrote: Wed Oct 30, 2024 10:22 am
breakfastinbed wrote: Wed Oct 30, 2024 9:03 am

Might want to double check this.
Double check your double check :)

Livesoft used ambiguous phrasing -- "get" could mean a number of things.
Maybe if there was already 240k in VMFXX. :twisted:
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Re: Dividend related question....

Post by plats »

rossington wrote: Wed Oct 30, 2024 2:04 pm
sycamore wrote: Wed Oct 30, 2024 10:22 am
Double check your double check :)

Livesoft used ambiguous phrasing -- "get" could mean a number of things.
Maybe if there was already 240k in VMFXX. :twisted:
I did the math and livesoft was right. You can withdraw $1,000 a month for 12 months if you invest $12,000 in VMFXX.
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Re: Dividend related question....

Post by arcticpineapplecorp. »

BV3273 wrote: Wed Oct 30, 2024 1:06 pm
Solaris909 wrote: Wed Oct 30, 2024 12:57 pm

What do you mean exactly by "received all my original investment back, plus"?

And would you like to share this investment ? Lol
I invested $12k last year. I received that original $12K back in the form of dividends after paying the taxes, plus a few more months of dividends. I have not added to the position at all.
you didn't say exactly when you made your $12,000 investment last year. Most people usually aren't big on the details, which matter. So all we can do is work with "last year" and look at how you'd have done since 2023 to now vs investing in VTI:

Image

Source

This was with dividends reinvested, I'll get to without in second. You can see you would have done better with VTI than with TSLY and with FAR LESS RISK. The worst drawdown with TSLY since 2023 was -45.63% but with VTI was only -10.72% and sharpe ratio (risk adjusted return was way better with VTI than TSLY). So you took risk which WASN'T rewarded.

Now if we do the same without dividends reinvested we see this:

Image

Source

Now if you say you got $12,000 in dividends and you turned your $12,000 investment into $5755 then it seems to me you earned $17,755 (cumulative with dividends received and what's left of your holdings) when you could have received $18,596 from VTI. ($504 in dividends and $18,092 in final value if dividends were not reinvested).

How do you feel about your investment in TSLY now?
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Re: Dividend related question....

Post by BV3273 »

arcticpineapplecorp. wrote: Wed Oct 30, 2024 2:58 pm
BV3273 wrote: Wed Oct 30, 2024 1:06 pm

I invested $12k last year. I received that original $12K back in the form of dividends after paying the taxes, plus a few more months of dividends. I have not added to the position at all.
you didn't say exactly when you made your $12,000 investment last year. Most people usually aren't big on the details, which matter. So all we can do is work with "last year" and look at how you'd have done since 2023 to now vs investing in VTI:

Image

Source

This was with dividends reinvested, I'll get to without in second. You can see you would have done better with VTI than with TSLY and with FAR LESS RISK. The worst drawdown with TSLY since 2023 was -45.63% but with VTI was only -10.72% and sharpe ratio (risk adjusted return was way better with VTI than TSLY). So you took risk which WASN'T rewarded.

Now if we do the same without dividends reinvested we see this:

Image

Source

Now if you say you got $12,000 in dividends and you turned your $12,000 investment into $5755 then it seems to me you earned $17,755 (cumulative with dividends received and what's left of your holdings) when you could have received $18,596 from VTI. ($504 in dividends and $18,092 in final value if dividends were not reinvested).

How do you feel about your investment in TSLY now?
Thanks for the charts. Like I mentioned in my original post, I did it for cash-flow, NOT total return.
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Re: Dividend related question....

Post by arcticpineapplecorp. »

BV3273 wrote: Wed Oct 30, 2024 3:05 pm Thanks for the charts. Like I mentioned in my original post, I did it for cash-flow, NOT total return.
you're welcome. Then it would be unwise to invest in a volatile strategy to get cash flow. And it's a myth that you're getting cash flow, mostly you're getting your investment handed back to you so you'd do better (less risk) just putting money into high yield savings account and drawing from that as needed. But I think you want some kind of investment that's providing high income and there is no free lunch. If you find something else that pays a high yield there are usually higher risks that go along with that. Return of your principal sounds more important than return on principal. So I wouldn't take great risk with this money if you need to draw on it monthly.
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rossington
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Re: Dividend related question....

Post by rossington »

BV3273 wrote: Wed Oct 30, 2024 7:52 am
Is there any downside to my strategy? Besides having to pay taxes at the ordinary income rate?

Thanks in advance!
OP,
I think you got lucky. If you really need this income I would pull the plug, count your blessings and get into something less risky.
Is an additional job doable?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
tesuzuki2002
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Re: Dividend related question....

Post by tesuzuki2002 »

Solaris909 wrote: Wed Oct 30, 2024 1:03 pm
tesuzuki2002 wrote: Wed Oct 30, 2024 8:45 am downside is typically higher risk with a high dividend stock... But I expanded my holdings into dividend stocks a few years ago and I am realizing about $35K per year in dividend... I'm not sure I really wanted to go this route since it is in taxable... But here I am.. and I'm living with it for now..

I plan to scale back on work and this may also be the part of the equation that helps with that...
It is taxable but isn't it essentially free money? Even if you're keeping 60, 70, 80% of it (whatever your tax rate is), I don't see an obvious downside to free money.
Yes it seems free... But so is capital appreciation with lower taxes.... I have a desire to work less in the future.. Retire early so to speak.. and I started working in this direction to establish a stream of reoccurring income that could be used before tapping retirement accounts. There is no such thing as free money... LOL.
Last edited by tesuzuki2002 on Wed Oct 30, 2024 4:18 pm, edited 1 time in total.
Tramper Al
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Re: Dividend related question....

Post by Tramper Al »

BV3273 wrote: Wed Oct 30, 2024 3:05 pm Like I mentioned in my original post, I did it for cash-flow, NOT total return.
Again, though, what the heck is "cash flow" in this context, if not some fraction of total return? And if it is even desirable somehow (I am skeptical), does getting your own money sent back to you periodically qualify as this elusive cash flow?
Last edited by Tramper Al on Wed Oct 30, 2024 4:33 pm, edited 1 time in total.
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Hacksawdave
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Re: Dividend related question....

Post by Hacksawdave »

BV3273 wrote: Wed Oct 30, 2024 1:06 pm I invested $12k last year. I received that original $12K back in the form of dividends after paying the taxes, plus a few more months of dividends. I have not added to the position at all.
Thanks for the update and ticker. Since this holding has a specific purpose for you by routing distributions to VTI, then I would just let it ride until it plays out. The additions help the compounding and growth for your VTI.

I do not fully understand how the $1,000 in dividends per month occurs as I took the share price as of a year ago and applied the monthly ex-div income prices to come with $4,809 based upon $12K bought a year ago at $27.50 a share. This gives 436.364 shares that received $11.02 in dividends in the last 12 months. It does sound like something else is being returned, probably capital.
exodusNH
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Re: Dividend related question....

Post by exodusNH »

Django Ii wrote: Wed Oct 30, 2024 10:17 am Return Of Capital is not taxed.
But it does lower your basis. Once your basis hits zero, you will have taxes due.
breakfastinbed
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Re: Dividend related question....

Post by breakfastinbed »

Hacksawdave wrote: Wed Oct 30, 2024 4:33 pm
BV3273 wrote: Wed Oct 30, 2024 1:06 pm I invested $12k last year. I received that original $12K back in the form of dividends after paying the taxes, plus a few more months of dividends. I have not added to the position at all.
I do not fully understand how the $1,000 in dividends per month occurs as I took the share price as of a year ago and applied the monthly ex-div income prices to come with $4,809 based upon $12K bought a year ago at $27.50 a share. This gives 436.364 shares that received $11.02 in dividends in the last 12 months. It does sound like something else is being returned, probably capital.

Respectfully, I think OP may be slightly exaggerating, as TSLY has not returned close to 100% yield over a 12 month period. If it has paid a return of capital, it isn't listed on Morningstar or nasdaq.com.

Had you bought $12K of TSLY in May 2023 (or earlier), you would have earned ~$8100 in dividends, and your original investment would be worth $5550, for a total return of 114%.

Had you instead bought it in October 2023 (in time to get the October distribution), you would have earned $5380 in dividends and your original investment would be worth $5430, for a total loss of about 10%.

Regardless, this thread demonstrates the risk of dividend stocks (or dividend traps), as TSLY's actual stock value has dropped 55% over the past 13 months.
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Hacksawdave
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Re: Dividend related question....

Post by Hacksawdave »

breakfastinbed wrote: Wed Oct 30, 2024 5:39 pm
Hacksawdave wrote: Wed Oct 30, 2024 4:33 pm

I do not fully understand how the $1,000 in dividends per month occurs as I took the share price as of a year ago and applied the monthly ex-div income prices to come with $4,809 based upon $12K bought a year ago at $27.50 a share. This gives 436.364 shares that received $11.02 in dividends in the last 12 months. It does sound like something else is being returned, probably capital.

Respectfully, I think OP may be slightly exaggerating, as TSLY has not returned close to 100% yield over a 12 month period. If it has paid a return of capital, it isn't listed on Morningstar or nasdaq.com.

Had you bought $12K of TSLY in May 2023 (or earlier), you would have earned ~$8100 in dividends, and your original investment would be worth $5550, for a total return of 114%.

Had you instead bought it in October 2023 (in time to get the October distribution), you would have earned $5380 in dividends and your original investment would be worth $5430, for a total loss of about 10%.

Regardless, this thread demonstrates the risk of dividend stocks (or dividend traps), as TSLY's actual stock value has dropped 55% over the past 13 months.
Yes, and there was a reverse split in February at a 1 for 2. This is why I do not monkey with things like this. I just simply take what the index funds generate and the two balanced funds STAR and Wellington. Monthly income comes from fixed income type of investments like MMFs, bond funds, and a SVF.

Some in my circle love chasing yields. It does not matter how many times one can explain the yield trap and why individual stocks with high yields are not a good thing.
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arcticpineapplecorp.
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Re: Dividend related question....

Post by arcticpineapplecorp. »

Hacksawdave wrote: Wed Oct 30, 2024 6:07 pm Some in my circle love chasing yields. It does not matter how many times one can explain the yield trap and why individual stocks with high yields are not a good thing.
it's called Innumeracy.

many people are not financially literate.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
breakfastinbed
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Re: Dividend related question....

Post by breakfastinbed »

arcticpineapplecorp. wrote: Wed Oct 30, 2024 6:48 pm
Hacksawdave wrote: Wed Oct 30, 2024 6:07 pm Some in my circle love chasing yields. It does not matter how many times one can explain the yield trap and why individual stocks with high yields are not a good thing.
it's called Innumeracy.

many people are not financially literate.
I think it's more an issue with the American (or worldwide?) issue that the average person does not understand how their taxes are calculated, and thus view their investing gains as completely separate from their taxes.

We just don't get this education unless we seek it out. Including medical training I completed 15 years of education after high school. I'm embarrassed to say how long it took me to realize, for example, that HYSA interest was taxed or how exactly my 401K worked. The dividend investing subreddit has 608,000 members and I'm going to assume that many of them don't understand capital gains, ordinary dividends, and that the individual high-yield stocks they are touting are, in some cases, actually losing them money.

Basic financial planning should be a class in high school.


The above doesn't necessarily apply to OP by any means, but given the ticker in question, my advice would be to keep the original investment untouched and continue reinvesting dividends elsewhere. I think the key in this particular investment is to wait for a noticeable up-tick in stock price, then sell.
Target2019
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Re: Dividend related question....

Post by Target2019 »

BV3273 wrote: Wed Oct 30, 2024 3:05 pm
arcticpineapplecorp. wrote: Wed Oct 30, 2024 2:58 pm
you didn't say exactly when you made your $12,000 investment last year. Most people usually aren't big on the details, which matter. So all we can do is work with "last year" and look at how you'd have done since 2023 to now vs investing in VTI:

Image

Source

This was with dividends reinvested, I'll get to without in second. You can see you would have done better with VTI than with TSLY and with FAR LESS RISK. The worst drawdown with TSLY since 2023 was -45.63% but with VTI was only -10.72% and sharpe ratio (risk adjusted return was way better with VTI than TSLY). So you took risk which WASN'T rewarded.

Now if we do the same without dividends reinvested we see this:

Image

Source

Now if you say you got $12,000 in dividends and you turned your $12,000 investment into $5755 then it seems to me you earned $17,755 (cumulative with dividends received and what's left of your holdings) when you could have received $18,596 from VTI. ($504 in dividends and $18,092 in final value if dividends were not reinvested).

How do you feel about your investment in TSLY now?
Thanks for the charts. Like I mentioned in my original post, I did it for cash-flow, NOT total return.
Your investment in TSLY is an experiment in cash flow. I'm wondering how it would work if started now, when TSLA is in a different market environment?

Anyways, congrats on reaching your goal.
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