Right here’s my 2025 Q3 earnings replace as a companion put up to my 2025 Q3 asset allocation & efficiency replace. Although I don’t concentrate on high-dividend shares or covered-call earnings methods – I nonetheless observe the earnings from my portfolio instead metric to cost efficiency. The full earnings goes up far more regularly and persistently 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 concerning 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 might undergo some short-term drops, however over the long term they’ve grown quicker than inflation.
Right here is the historic progress of the S&P 500 complete dividend, which tracks roughly the biggest 500 shares within the US, up to date as of 2025 Q3 (by way of Yardeni Analysis):
Monitoring the earnings from my portfolio. Three of the first earnings “bushes” that produce earnings “fruit” in my portfolio are Vanguard Whole US Inventory ETF (VTI), Vanguard Whole 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 steady and solely go up. Thus the beginning yield is decrease, however grows extra steadily with smaller cuts throughout onerous occasions. Corporations 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 during the last 15 years paid by the Vanguard Whole US Inventory ETF (VTI) by way of WallStNumbers.com.
European company tradition tends to encourage paying out the next (generally even mounted) proportion of earnings as dividends, however that additionally means the dividends transfer up and down with earnings. The beginning yield is at present greater however might not develop as reliably. Right here is an up to date chart of the trailing 12-month (ttm) dividend per share during the last 15 years paid by the Vanguard Whole Worldwide Inventory ETF (VXUS).
Within the case of Actual Property Funding Trusts (REITs), they’re legally required to distribute at the very least 90 % of their taxable earnings to shareholders as dividends. Traditionally, about half of the whole return from REITs is from this dividend earnings. Right here is an up to date chart of the trailing 12-month (ttm) dividend per share during the last 15 years paid by the Vanguard Actual Property Index ETF (VNQ).
The dividend yield (dividends divided by value) 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 earnings 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 actual charges on TIPS, and the present fee of inflation.
Dividend and curiosity earnings yield. To estimate the earnings from my portfolio, I exploit the weighted “TTM” or “12-Month Yield” from Morningstar (checked 10/6/24), which is the sum of the trailing 12 months of curiosity and dividend funds divided by the final month’s ending share value (NAV) plus any capital positive factors distributed (often zero for index funds) over the identical interval. My TTM portfolio yield is now roughly 2.53%.
In dividend investing circles, there’s a metric known as yield on value, which is calculated by dividing the present dividend by the authentic buy value. In different phrases, whereas my portfolio yield in the present day is 2.53%, that’s as a result of the present market value can be lots greater. My yield primarily based on my portfolio worth from 10 years in the past (October 2015) is over 5%.
What concerning the 4% rule? For giant-picture functions, I assist the easy 4% or 3% rule of thumb, which equates to a goal of accumulating roughly 25 to 33 occasions your annual bills. I might lean in the direction of a 3% withdrawal fee if you wish to retire younger (nearer to age 50) and a 4% withdrawal fee if retiring at a extra conventional age (nearer to 65). I don’t get pleasure from debating this quantity. It’s only a fast and soiled goal to get you began, not a quantity despatched down from the heavens!
Throughout the accumulation stage, your time is best spent specializing in incomes potential by way of higher profession strikes, enhancing your skillset, networking, and/or in search of asymmetrical (limitless upside, restricted draw back) entrepreneurial alternatives the place you’ve gotten an possession curiosity.
Our dividends and curiosity earnings usually are not 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 possibly can use this cash to chop again working hours, pursue a unique 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 completely different due to this philosophy. FIRE is Life!