As the title says I'm mostly focused on growth (80/20 portfolio) with equities represented by index funds (SP500, Small Cap, DJIA, International). Just out of curiosity I downloaded all dividend/interest paid during the year and it was about 3.4%. That doesn't seem insignificant and I was surprised it was that high considering where I am invested. Does this seem about right?
3.4% dividend yield on my growth-oriented 401K and brokerage account?
byu/VetalDuquette ininvesting
Posted by VetalDuquette
4 Comments
Depending on the funds that you are invested in what are are thinking are dividends might be capital gains distributions that the fund realized over the year and are required to pass along to fund holders.
Hopefully this was in your 401k account and not in your brokerage to account to avoid taxation. This isn’t free money as the NAV price of the fund would have dropped by the same amount as the distribution. With reinvestment you are buying shares at the lower price resulting in the same total value but with a higher number of shares
An additional 3.4% above how much DJIA and S&P went up over the past year (13.5% and 15.7%, respectively) is pretty good. Check whether your index funds matched or beat actuals.
It’s likely because your DJIA component and Small Cap funds are pulling more weight. Perhaps your 20% allocation in fixed income/bonds is yielding significantly more in the current interest rate environment. It’s a solid “hidden” return to have.
What are you invested in specifically? Every fund posts their expected dividend rate, this shouldn’t have been much of a surprise. If they had capital gain distributions it could be higher than stated dividends.