How to calculate cash dividends from holding stock index funds

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VartAndelay
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How to calculate cash dividends from holding stock index funds

Post by VartAndelay »

I am confused about how exactly dividends from stock index funds work. If someone is holding a stock index fund in a taxable brokerage account and it returns dividends, this means he will receive USD cash each quarter in his brokerage account, right? And is this cash amount fixed, or does it go up and down as the stock fund goes up and down in price?

To give a more concrete example, I am specifically wondering how to calculate the annual dividends someone would receive if he is holding on January 1, 2022 in his brokerage account:

$600,000 worth of VTSAX
$400,000 worth of VTIAX

How much would he receive in dividends then for the year of 2022? Is such a thing even possible to predict or project? Would it vary, for example, depending on whether the stock market went up 50% or went down 50% for the year? If so, is there at least a way to calculate how the dividend returns would be affected based on how the funds performed?
Mike Scott
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Re: How to calculate cash dividends from holding stock index funds

Post by Mike Scott »

I don't think you can predict them exactly. You can look up YTD dividends and the previous year(s) totals and probably get pretty close.
venkman
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Re: How to calculate cash dividends from holding stock index funds

Post by venkman »

[SEC yield of the fund on Jan. 1] times [total cash invested in the fund]

should give you a reasonable guesstimate of what to expect in terms of actual dividend distributions for the year. Swings in the price of the fund shouldn't significantly affect the actual per-share dividend amount, but an economic downturn could result in companies cutting dividends, as happened in 2020.
jebmke
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Re: How to calculate cash dividends from holding stock index funds

Post by jebmke »

The dividend of the fund will depend on the collective decisions by the Boards of Directors of the underlying companies in the index. For most companies, these decisions are made quarterly. So, for the S&P 500 there will be something approaching 2,000 decisions that affect the 2022 payout of the fund.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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CyclingDuo
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Re: How to calculate cash dividends from holding stock index funds

Post by CyclingDuo »

VartAndelay wrote: Sun Nov 28, 2021 8:42 pm I am confused about how exactly dividends from stock index funds work. If someone is holding a stock index fund in a taxable brokerage account and it returns dividends, this means he will receive USD cash each quarter in his brokerage account, right? And is this cash amount fixed, or does it go up and down as the stock fund goes up and down in price?

To give a more concrete example, I am specifically wondering how to calculate the annual dividends someone would receive if he is holding on January 1, 2022 in his brokerage account:

$600,000 worth of VTSAX
$400,000 worth of VTIAX

How much would he receive in dividends then for the year of 2022? Is such a thing even possible to predict or project? Would it vary, for example, depending on whether the stock market went up 50% or went down 50% for the year? If so, is there at least a way to calculate how the dividend returns would be affected based on how the funds performed?
You can use the most recent historical dividend distributions to get an idea. Your number of shares owned X the quarterly dividend payout. Add the 4 quarters together for your annual estimate.

https://investor.vanguard.com/mutual-fu ... ions/vtsax
https://investor.vanguard.com/mutual-fu ... ions/vtiax
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
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CyclingDuo
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Re: How to calculate cash dividends from holding stock index funds

Post by CyclingDuo »

venkman wrote: Sun Nov 28, 2021 10:34 pm [SEC yield of the fund on Jan. 1] times [total cash invested in the fund]

should give you a reasonable guesstimate of what to expect in terms of actual dividend distributions for the year. Swings in the price of the fund shouldn't significantly affect the actual per-share dividend amount, but an economic downturn could result in companies cutting dividends, as happened in 2020.
S&P 500 dividends ended up for 2020 by .7% compared to 2019:

https://www.barrons.com/articles/s-p-50 ... 1609357661

Despite headwinds caused by the coronavirus pandemic and subsequent lockdowns, companies in the S&P 500 paid out $58.28 per share in dividends in 2020, inching past last year’s record of $58.24 by 0.7% and setting the ninth consecutive annual record, data from S&P Global show.

Not related to the TSM and International Index funds for the OP, but just pointing out that the largest US companies weathered the storm quite well in aggregate.
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
jebmke
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Re: How to calculate cash dividends from holding stock index funds

Post by jebmke »

CyclingDuo wrote: Mon Nov 29, 2021 7:00 am S&P 500 dividends ended up for 2020 by .7% compared to 2019:
VG S&P 500 Index Fund dividends declined 5% in 2020 vs. 2019. $5.311 vs. $5.581 for Admiral shares.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
dbr
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Re: How to calculate cash dividends from holding stock index funds

Post by dbr »

Do you want to combine this thread with your other thread as part of what your plan is going to be for your jobless situation?

Presumably the point is to start pinning down your tax costs.
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jeffyscott
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Re: How to calculate cash dividends from holding stock index funds

Post by jeffyscott »

jebmke wrote: Mon Nov 29, 2021 7:43 am
CyclingDuo wrote: Mon Nov 29, 2021 7:00 am S&P 500 dividends ended up for 2020 by .7% compared to 2019:
VG S&P 500 Index Fund dividends declined 5% in 2020 vs. 2019. $5.311 vs. $5.581 for Admiral shares.
The article refers to dividends per share, so maybe that means what you would get by owning one share of each of the 500 companies? This would be different from a market weighted index fund and even an equal weight fund, since equal weight means equal dollar value not equal number of shares.
jebmke
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Re: How to calculate cash dividends from holding stock index funds

Post by jebmke »

jeffyscott wrote: Mon Nov 29, 2021 9:06 am
jebmke wrote: Mon Nov 29, 2021 7:43 am
CyclingDuo wrote: Mon Nov 29, 2021 7:00 am S&P 500 dividends ended up for 2020 by .7% compared to 2019:
VG S&P 500 Index Fund dividends declined 5% in 2020 vs. 2019. $5.311 vs. $5.581 for Admiral shares.
The article refers to dividends per share, so maybe that means what you would get by owning one share of each of the 500 companies? This would be different from a market weighted index fund and even an equal weight fund, since equal weight means equal dollar value not equal number of shares.
Most likely, yes; most people would be affected by how the index pays so from a practical standpoint, the decline was real. Helped keep me under one of the IRMAA thresholds for 2022. Unfortunately they will probably jump back up for 2021 again.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
MrJedi
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Re: How to calculate cash dividends from holding stock index funds

Post by MrJedi »

I would look up the fund you are interested in and look up on the dividends per share in the past year to get an idea. It is not exact by any means since companies can cut/add dividends at any time, but with a diversified fund it should get you in the ballpark.
tibbitts
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Re: How to calculate cash dividends from holding stock index funds

Post by tibbitts »

MrJedi wrote: Mon Nov 29, 2021 9:27 am I would look up the fund you are interested in and look up on the dividends per share in the past year to get an idea. It is not exact by any means since companies can cut/add dividends at any time, but with a diversified fund it should get you in the ballpark.
I can't remember for sure but seem to recall something about ex-US dividends being less persistent/consistent that US equity dividends...? If so that would make using last year's numbers less effective for those funds. I'm sure someone knows and will confirm or deny.
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cchrissyy
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Re: How to calculate cash dividends from holding stock index funds

Post by cchrissyy »

I am specifically wondering how to calculate the annual dividends someone would receive if he is holding on January 1, 2022 in his brokerage account:
is this person you?

what brokerage do you use?

i have schwab and there is a page in the account view called "investment income" which shows my history by month of receiving interest and dividends and a forecast of the next 12 months which is their estimate based on my current holdings.
60-20-20 us-intl-bond
jebmke
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Re: How to calculate cash dividends from holding stock index funds

Post by jebmke »

tibbitts wrote: Mon Nov 29, 2021 9:42 am
MrJedi wrote: Mon Nov 29, 2021 9:27 am I would look up the fund you are interested in and look up on the dividends per share in the past year to get an idea. It is not exact by any means since companies can cut/add dividends at any time, but with a diversified fund it should get you in the ballpark.
I can't remember for sure but seem to recall something about ex-US dividends being less persistent/consistent that US equity dividends...? If so that would make using last year's numbers less effective for those funds. I'm sure someone knows and will confirm or deny.
yes; my Europe fund dividend is up 57% through three quarters this year.

Even my US small cap value fund is up significantly.

US Total Stock Market dividend is only up 4% YTD - but in all cases, 4th quarter can swing things a lot.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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TierArtz
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Re: How to calculate cash dividends from holding stock index funds

Post by TierArtz »

The website Seeking Alpha shows historical dividends for prior years.
VTSAX, as an example: https://seekingalpha.com/symbol/VTSAX/dividends/history

Plugging in the last 20 quarters (5 years) into Excel revealed a quarterly average of 0.325 for VTSAX and 0.205 for VTIAX; multiplying each by 4 for a yearly historical average suggests 1.30% for VTSAX and 0.82% for VTIAX.

The 60/40 ratio of those in OPs example would be 1.11%

Thus, a reasonable yearly dividend estimate for $1M using that mix of funds is $11,000.
delamer
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Re: How to calculate cash dividends from holding stock index funds

Post by delamer »

There was a substantial decrease in dividends (from their peak) paid by the S&P 500 for a few years during the Great Recession.

But as far as I know, there is no formula that correlates dividend payouts with changes in share prices.

As others have said, the best predictor of future dividends is past dividends.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
JnyVuko
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Re: How to calculate cash dividends from holding stock index funds

Post by JnyVuko »

VartAndelay wrote: Sun Nov 28, 2021 8:42 pm I am confused about how exactly dividends from stock index funds work. If someone is holding a stock index fund in a taxable brokerage account and it returns dividends, this means he will receive USD cash each quarter in his brokerage account, right? And is this cash amount fixed, or does it go up and down as the stock fund goes up and down in price?

To give a more concrete example, I am specifically wondering how to calculate the annual dividends someone would receive if he is holding on January 1, 2022 in his brokerage account:

$600,000 worth of VTSAX
$400,000 worth of VTIAX

How much would he receive in dividends then for the year of 2022? Is such a thing even possible to predict or project? Would it vary, for example, depending on whether the stock market went up 50% or went down 50% for the year? If so, is there at least a way to calculate how the dividend returns would be affected based on how the funds performed?
I use the prior year amount; for forecasting purposes only. I forecast everything (dividends, value, etc.) for the upcoming year and then track actuals and compare at the end of the year. Rinse. Repeat next year.
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