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Months Elapsed: 6
Total Growth: 4.67%
Annualized Growth Rate: 9.56%
Distribution Yield (TTM): 3.02%
Received a distribution of $1.0140 per share this month which was reinvested at $139.29.
On the one hand, it was a bit disappointing. The distribution was down from $1.2578 in June of 2020.
On the other hand, VPU distributions were extremely volatile in 2020. Last year's abnormally high distribution (as seen here) made for a very difficult comparison this year. In theory, this September's upcoming distribution should have a much easier year over year comparison.
In any event, overall performance is more than safisfactory so far. As a long-term Treasury bond substitute, I have no complaints. At least not yet.
Firmly HODLING with cast-iron hands. They are strong hands, but they're also brittle and prone to rusting. ;)
13 comments:
One of the things I don’t like about Vanguard ETFs and mutual funds is that their distributions can vary based on what the fund manager(s) decides to do. I prefer holding a large basket of US. dividend growth stocks so that my income doesn’t fall if one or two stocks has distribution issues such as a freeze or a cut. And of course, I stay away from European dividend-paying stocks since they decrease dividend distributions at the drop of a hat.
Would XLU have been more stable in its distributions then VPU?
One of the things I don’t like about Vanguard ETFs and mutual funds is that their distributions can vary based on what the fund manager(s) decides to do. I prefer holding a large basket of US. dividend growth stocks so that my income doesn’t fall if one or two stocks has distribution issues such as a freeze or a cut. And of course, I stay away from European dividend-paying stocks since they decrease dividend distributions at the drop of a hat.
Would XLU have been more stable in its distributions then VPU?
Would XLU have been more stable in its distributions then VPU?
Yes. XLU’s distributions in 2020 were much more stable. It’s the first thing I looked at when deciding how much I needed to be concerned. As a side note, I watch XLU more than VPU, if only because XLU is in the news more.
https://screener.fidelity.com/ftgw/etf/goto/snapshot/distributions.jhtml?symbols=XLU
I chose VPU due to the lower fees and more diversified holdings. What I lost was XLU’s better liquidity and distribution stability.
They both track their NAVs very closely though, so the markets figure it all out. And since I am not relying on the distributions to fund my current income, it’s not a main concern for me one way or another.
As for holding the stocks individually, that is what I have normally done (even as recently as 2020 when I loaded up on individual consumer staples stocks briefly. (Too briefly. Would have done well continuing to hold them.) I would have done that with utilities too, but instead I chose the lazy autopilot route. Constantly rebalancing on my own was more work than I wished to do. Further, it was easy holding individual consumer stocks that I personally use. Wasn’t as motivated constantly tracking individual utility stocks that I don’t personally use.
That said, I would have probably done better picking them on my own. NextEra is a very large chunk of both VPU and XLU. Hasn’t been a good year for it. I would have weighted it lower for improved diversification (VPU weighted it lower than XLU). On the other hand, when NextEra was doing great earlier this year, it was a different story. Will be interesting to see how that company does going forward. If NextEra continues to perform relatively poorly, I will clearly wish that I had bought individual utility stocks instead.
After further investigation, XLU had an especially brutal distribution in March of 2020. Perhaps it is no more stable than VPU.
I would also add that there is a reason I charted annual distributions of VPU instead of quarterly distributions. It was to remove a lot of quarterly volatility noise from the underlying signal.
http://illusionofprosperity.blogspot.com/2021/04/vpu-distribution-history.html?m=1
I spent the last 40 minutes reading old Duke Energy news.
https://simplywall.st/stocks/us/utilities/nyse-duk/duke-energy/news/tread-with-caution-around-duke-energy-corporations-nyseduk-4
Scary.
https://news.duke-energy.com/releases/duke-energy-responds-to-elliott-managements-letter
Less scary.
I wish I could just go back to reading stable inflation protected Treasury news, but the 30-year TIPS currently yields -0.18%. If held 30 years to maturity, the reward is a -5.3% real yield nothingburger. Sigh.
I should also mention that you get to pay taxes on all the inflationary gains for that 30-year TIPS too, so it’s the -5.3% nothingburger gift that just keeps on giving, lol. Sigh.
Thanks for your thoughts on XLU versus VPU.
I’ll admit that I am getting too intellectually lazy (or is it challenged) to do such a comparison now.
One of my unpaid side jobs is managing a tiny family cemetery maintenance fund. It has a small amount of money that was collected over the years through family member donations to maintain the family cemetery. There was just enough CD Interest generated until recently to get it mowed a few times over the summer months. Now, thanks to the Federal Reserve, the account only generates $10 interest annually. I am being forced to move out the risk curve from CDs to some sort of stock fund, and I’d been considering XLU. Of course I didn’t fall off the turnip truck yesterday, so I’ll only move about 1/10 of the fund annually into the market. That way I don’t risk the market dropping 50% right after I move it.
I should add that I do like the greater diversification of VPU especially given that it’d be holding it for a non-profit in this case and that it can withstand some annual variation in dividends.
They say that bull markets make geniuses out of everyone. I strongly suspect that everyone will feel like they fell out of a turnip truck someday, hopefully after I have passed away (and not because I died early *cringe*).
I believe that long-term interest rates will continue to fall over the long-term and that it will become harder and harder to make money off of money. That’s why I embraced utilities. Unfortunately, even if I am right about that, it doesn’t mean that utilities can’t struggle for other reasons.
Nothing is as easy as it once was, when one could just buy safe savings bonds that yielded 3.4% over inflation. Utilities might perform similarly going forward, but the risks are so much greater. I do not envy your unpaid side job of managing a family fund in this environment.
Long live Stagflationary Mark! :-)
I wish I could go back to picking high quality AAs for reasonable yield, but I am now a dividend growth investor. Riskier and requires more work. Only minimal diversification so even more risk.
Tesla vs VPU
The "Stagflationary Mark Ratio"
https://stockcharts.com/h-sc/ui?s=TSLA%3AVPU&p=D&yr=5&mn=0&dy=0&id=p77150352796
CP,
Hindsight is definitely being kind to me so far. The ride on Mount Ridiculous started at the very end of 2020, very near the ratio’s peak.
While possible, I doubt very much that a new mountain range will appear anytime soon. Gravity appears to be doing its thing.
Reminds me of a joke.
Customer buys a used car based on the salesman’s recommendation. Car won’t start. Can’t drive it off the lot. Goes back to the salesman and complains.
Customer: “You said this car runs fine on the level!”
Salesman: “It has no engine. It has no brakes. It only runs fine on the level. It’s level here. Just need to push.”
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