Stock mutual funds with dividends?

[dualstow]

Why?

[dualstow]

Why a dividend/mutual fund.

Now that you've answered, I can blather on for a while. I will say that dividend stocks dominate my vp. That's because that's what I was into pre-pp and pre-bogleheads. They are individually held. Now I hold broad index funds, but have never held a dividend fund.

My rationalization for not dissolving this vp: I get a steady annual income supplement from these stock dividends + pp notes & bonds. Once in a while, I sell a stock that has gone bad, but nearly all of  these holdings tend to raise their dividends. (I should note that this year is very different from all that came before it, because so many oil stocks are faltering. Conoco even slashed its dividend from 74 cents to 25 cents, and this is the first time in 25 years it has cut its dividend. Nothing is safe).

If I could magically convert all these to a Vanguard dividend fund with no tax consequences, I still wouldn't. That's because I like owning little to no bank stocks. I'm sure I have enough of them in my broad index funds. Once upon a time, I used Vanguard's analysis tool, and it kept telling me that I didn't own any financials. So I loaded up on them just in time for 2008.  Darn.

Bogleheads usually say that anything under 5% of your portfolio doesn't really count, and I have to wonder why 2% makes a difference to you. If it's just 2%, why not buy some risky tech stock?

Finally, I think that Larry Swedroe makes a pretty compelling case for dividends not winning in the long run. It's not enough to convince me to dissolve my Vp, which doesn't generate enough income to incur taxes. But, it's enough to get me to balance what I already own with things like a small-cap index fund.

I don't know if any of that helps or hurts you, but you should think about your specific reason for wanting to further complicate your holdings. If it's just for fun, obviously 2% won't kill you.

[Dieter]

I'm considering putting some (after-tax) money in a mutual fund that invests in dividend paying stocks.  I'm with Vanguard, so I'm looking at:

Vanguard Dividend Growth Fund (VDIGX), 0.32% fees
Vanguard High Dividend Yield Index Fund (VHDYX), 0.16% fees
Vanguard Dividend Appreciation Index Fund (VDAIX), 0.20% fees

The first is an actively managed fund, whereas the other two simply track an index (hence the lower fees).

Any recommendations / comments?

Vanguard Dividend Growth -- Very Focused (45 companies; although top 10 make up lowest % of portfolio of the three....); Managed by Wellington (thems that bring us Wellington and Wellesley -- doesn't seem to have the same top 10 companies as Wellesley though.

Vanguard Dividend Appreciation Index Fund -- lowest fees. Highest buy-in ($10k). Newest the bunch (2013.) Lowest allocation to financials of the bunch (focused on Consumer Defensive & Industrials.) Worst performance last year of the bunch. Best YTD.

Vanguard High Dividend Yield Index Fund -- highest SEC yield of the three (only one listed as 'Value' vs Blend.) Most diversified of the three (433 stocks), Largest MKT cap. Lowest turnover.

What caught my attention looking at them on VG's site....

[sophie]

I yielded to the dividend bug too!  Dualstow, interested to hear you're thinking of giving up on it.

I thought about a dividend yield fund for my (tiny) VP, but those fees are too high.  Also, dividends are not a good deal in taxable, for me.  I decided to buy some individual stocks in my Roth IRA, and set the dividends to reinvest.  Expense-wise this is a win over the dividend fund if you hold for more than a couple years, and in my case I plan to hang on to them indefinitely.

I used the S&P Dividend Achievers list to pick stocks, and try to distribute choices across the different sectors.  The only issue for me is that I have to avoid the health care sector because of the Stark Law.

[barrett]

In a PP, as opposed to a VP, Harry Browne recommended (in Fail-Safe Investing) steering clear of dividend stocks as they tend not to be as volatile as growth stocks.

I think one of the appeals of holding them now is that the PP currently has so little yield as a package (2.7% or so on bonds, about 2.2% on the S&P, nearly nothing on cash and zero on gold). For those of us who like to check our investments more than once a year, there's a natural desire to see them doing something. Jack Bogle's advice of "Don't do something: just stand there!" is great in theory. In real life it's hard to just let an entire portfolio completely alone.

The VP idea is great because it let's us nibble around the edges without destroying (much) wealth.

[dualstow]

I yielded to the dividend bug too!  Dualstow, interested to hear you're thinking of giving up on it.

Yielded to, heh heh.
Well, let's put it this way: I'm freezing it, like IAU is doing with its # of shares. 

Enough wise people at bogleheads don't believe in the strategy, so as much as I love dividends, I am influenced by their advice. I realize that I'm being selective here. They also don't believe in gold, which is now 26% of my pp and maybe 10% of everything.

I remember a boglehead (CyberBob maybe?) who quietly mentioned that while for decades he went by the book, Fama & French, etc, he now appreciates the comfort of receiving dividend payments in or near retirement. I think this comfort goes a long way. You don't have to make comfort food 100% of your diet -- it'll kill you -- but you can make it a part of your diet. I think I can do better than 100% dividend stocks, so I buy index funds. And other pp components. And munis. But not only will it not kill me to receive thousands of dollars in cash every year for sitting on my duff, it feels great.

If I ever got to the point where these divs pushed me into a higher tax bracket, I would not hesitate to trim the shares. As it stands, there is little to no tax to be paid on them. Also, no fees to hold these individual shares, and no surprise trading like one sometimes experiences with mutual funds.

[Ad Orientem]

I'm considering putting some (after-tax) money in a mutual fund that invests in dividend paying stocks.  I'm with Vanguard, so I'm looking at:

Vanguard Dividend Growth Fund (VDIGX), 0.32% fees
Vanguard High Dividend Yield Index Fund (VHDYX), 0.16% fees
Vanguard Dividend Appreciation Index Fund (VDAIX), 0.20% fees

The first is an actively managed fund, whereas the other two simply track an index (hence the lower fees).

Any recommendations / comments?

Take a look at VIG with an ER of .10%