Right here’s my 2025 12 months-Finish revenue replace as a companion put up to my 2025 12 months-Finish asset allocation & efficiency replace. Although I don’t deal with high-dividend shares or covered-call methods – I nonetheless observe the revenue from my portfolio as a substitute metric to cost efficiency. The full revenue goes up far more steadily and constantly than the quantity proven on brokerage statements, which helps encourage constant investing. Right here’s a associated quote from Jack Bogle (supply):
The true investor will do higher if he forgets in regards to the inventory market and pays consideration to his dividend returns and to the working outcomes of his firms. – Jack Bogle
Inventory dividends are a portion of earnings that companies have determined to distribute on to shareholders, versus reinvesting into their enterprise, paying again debt, or shopping for again shares. They’ve explicitly determined that they don’t want this cash to enhance their enterprise, and that it will be higher to distribute it to shareholders. The dividends could undergo some short-term drops, however over the long term they’ve grown sooner than inflation.
Right here is the historic development of the S&P 500 complete dividend, which tracks roughly the biggest 500 shares within the US, up to date as of 2025 This fall (by way of Yardeni Analysis):
Monitoring the revenue from my portfolio. Three of the first revenue “bushes” that produce revenue “fruit” in my portfolio are Vanguard Complete US Inventory ETF (VTI), Vanguard Complete Worldwide Inventory ETF (VXUS), and Vanguard Actual Property Index ETF (VNQ).
Within the US, the dividend tradition is considerably conservative in that shareholders count on dividends to be secure and solely go up. Thus the beginning yield is decrease, however grows extra steadily with smaller cuts throughout laborious instances. Firms do buybacks as nicely, actually because they’re simpler to discontinue. Right here is an up to date chart of the trailing 12-month (ttm) dividend per share over the past 15 years paid by the Vanguard Complete US Inventory ETF (VTI) by way of WallStNumbers.com.
European company tradition tends to encourage paying out the next (generally even fastened) proportion of earnings as dividends, however that additionally means the dividends transfer up and down with earnings. The beginning yield is at the moment larger however could not develop as reliably. Right here is an up to date chart of the trailing 12-month (ttm) dividend per share over the past 15 years paid by the Vanguard Complete Worldwide Inventory ETF (VXUS).
Within the case of Actual Property Funding Trusts (REITs), they’re legally required to distribute at the least 90 % of their taxable revenue to shareholders as dividends. Traditionally, about half of the full return from REITs is from this dividend revenue. Right here is an up to date chart of the trailing 12-month (ttm) dividend per share over the past 15 years paid by the Vanguard Actual Property Index ETF (VNQ).
The dividend yield (dividends divided by worth) additionally function a tough valuation metric. When inventory costs drop, this proportion metric often goes up – which makes me really feel higher in a bear market. When inventory costs go up, this proportion metric often goes down, which retains me from getting too euphoric throughout a bull market.
Lastly, the final revenue part of my portfolio comes from curiosity from bonds and money. Vanguard Quick-Time period Treasury ETF (VGSH) and Schwab US TIPS ETF (SCHP) are instance holdings, with the precise quantity various with the prevailing rates of interest, the true charges on TIPS, and the present charge of inflation.
Dividend and curiosity revenue yield. To estimate the revenue from my portfolio, I take advantage of the weighted “TTM” or “12-Month Yield” from Morningstar (checked 1/4/26), which is the sum of the trailing 12 months of curiosity and dividend funds divided by the final month’s ending share worth (NAV) plus any capital beneficial properties distributed (often zero for index funds) over the identical interval. My TTM portfolio yield is now roughly 2.66%.
In dividend investing circles, there’s a metric referred to as yield on value, which is calculated by dividing the present dividend by the authentic buy worth. In different phrases, whereas my portfolio yield at present is 2.53%, that’s as a result of the present market worth can also be so much larger. Resulting from growing dividends on common over time, my yield-on-cost based mostly on my portfolio worth from 10 years in the past is over 5%.
What in regards to the 4% rule? For giant-picture functions, I help the easy 4% or 3% rule of thumb, which equates to a goal of accumulating roughly 25 to 33 instances your annual bills. I might lean in the direction of a 3% withdrawal charge if you wish to retire younger (nearer to age 50) and a 4% withdrawal charge if retiring at a extra conventional age (nearer to 65). It’s only a fast and soiled goal to get you began, not a quantity despatched down from the heavens!
In the course of the accumulation stage, your time is best spent specializing in incomes potential by way of higher profession strikes, bettering your skillset, networking, and/or in search of asymmetrical (limitless upside, restricted draw back) entrepreneurial alternatives the place you may have an possession curiosity.
Our dividends and curiosity revenue will not be mechanically reinvested. They’re merely one other “paycheck”. As with our different variable paychecks, we will select to both spend it or make investments it once more to compound issues extra rapidly. You may use this cash to chop again working hours, pursue a distinct profession path, begin a brand new enterprise, take a sabbatical, carry out charity or volunteer work, and so forth. You don’t have to attend till you hit a magic quantity. Our life path has been very totally different due to this philosophy. FIRE is Life!