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Tuesday, September 6, 2011

Create a Dividend Table (Part 2)

Yesterday we took step 1 in creating a dividend table for a simple portfolio of 5 exchange traded funds.  The goal is to understand when payments will be received, approximately how much they will be, and the overall yield on the individual securities as well as the portfolio.

We went to Yahoo! Finance and found the payout record of SCHX.  It pays quarterly in September, December (actually right before Christmas!), March, and June.  On the basis of the most recent payment, the amount is approximately $560.  This information will eventually go into a table with the issues listed down the left hand side and the months across the top.

Using the approach described yesterday, we can go to Yahoo! Finance, put in the ticker symbol for each security, click "Historical Prices" and then "Dividends Only" and find the following:

SCHA (Schwab small cap ETF) pays quarterly--Sept., Dec., March, and June.  It is paying approximately $.10/share/quarter and will pay approximately $97.50 each quarter on the 975 shares held. Its yield is 1.11% as reported by Yahoo! Finance.

BSV (Vanguard short term bond ETF) pays monthly.  It is paying $.128/share/month and will pay approximately $82 each month on the 646 shares held.  Its yield is 2.05% as reported by Yahoo! Finance.

BND (Vanguard total bond market ETF) pays monthly.  It is paying $.213/share/month and will pay approximately $ 109 each month on the 513 shares held.  Its yield is 3.25% as reported by Yahoo! Finance.

VCSH (Vanguard short term corporate bond ETF) pays monthly.  It is paying $.147/share/month and will pay approximately $ 105 each month on the 716 shares held. I ts yield is 2.31% as reported by Yahoo! Finance.

CLICK TABLE TO ENLARGE  Here is a simple table created in Excel showing the weighted yield of the portfolio as well as the yield of each issue.  Notice the overall yield is 2.05%.

As stated in yesterday's post, an investor in the so-called decumulation stage would want a portfolio having a yield of at least 2.4% (60% of the annual 4% payout of the portfolio) in order to feed the cash account during a market downturn.  With the table set out here, it is easy to see how this would be accomplished by reducing SCHA, for example, and increasing VCSH.

It is important to note also that there are ETFs that index the dividend paying part of the market.  DVY is one example that yields 3.51%.  DVY, or a similar issue, would go a long way towards bolstering the yield of the portfolio.  Finally it is worth noting that dividend yields and interest payouts change and should be updated as necessary.  I would expect, given recent market developments, that dividend yields will increase over time and yields on bond ETFs will decrease.  Again, they need to be monitored to avoid unpleasant surprises.  Investors who buy individual stocks will see the value of issues like VZ, INTC, et al. in raising portfolio yield.

Disclosure:  The information here is for educational purposes only.  No recommendations are intended.  I hold some of the securities mentioned.  Individuals should do their own research and/or consult professional advice before making investment decisions.

1 comment:

  1. "Again, they need to be monitored to avoid unpleasant surprises."

    Can't stress that enough! Retirees in US and UK who depended on BP learn't this the hard way!

    Another win for indexing.