2021 Was Another Profitable Year With The DGI10 And TR7 Outpacing The 4% Rule

seekingalpha2022-06-10

trekandshoot/iStock via Getty ImagesYear six of this venture saw the markets roar for a more than 28% gain of the S&P 500 (VOO), in the face of year two of a global pandemic. The income of both ...

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The income of both ...</p>\n\n<a href=\"https://seekingalpha.com/article/4517631-2021-another-profitable-year-dgi10-tr7-outpacing-4-percent-rule\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>2021 Was Another Profitable Year With The DGI10 And TR7 Outpacing The 4% Rule</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n2021 Was Another Profitable Year With The DGI10 And TR7 Outpacing The 4% Rule\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-06-10 15:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4517631-2021-another-profitable-year-dgi10-tr7-outpacing-4-percent-rule><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>trekandshoot/iStock via Getty ImagesYear six of this venture saw the markets roar for a more than 28% gain of the S&P 500 (VOO), in the face of year two of a global pandemic. The income of both ...</p>\n\n<a href=\"https://seekingalpha.com/article/4517631-2021-another-profitable-year-dgi10-tr7-outpacing-4-percent-rule\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4534","symbol_name":"瑞士信贷持仓","start_time":0,"source_url":"https://seekingalpha.com/article/4517631-2021-another-profitable-year-dgi10-tr7-outpacing-4-percent-rule","article_id":"2242341312","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2242341312","pubTimestamp":1654844424,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"trekandshoot/iStock via Getty ImagesYear six of this venture saw the markets roar for a more than 28","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4534":"瑞士信贷持仓","BK4559":"巴菲特持仓","BK4581":"高盛持仓","VOO":"Vanguard标普500ETF","QYLD":"纳斯达克100 Covered Call ETF-Global X"},"translate_title":"2021年是又一个盈利的年份，DGI10和TR7超过了4%的规则","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"QYLD":1,"VOO":1},"content_text":"trekandshoot/iStock via Getty ImagesYear six of this venture saw the markets roar for a more than 28% gain of the S&P 500 (VOO), in the face of year two of a global pandemic. The income of both portfolios was set in January of 2021. Last year’s income was determined as described in my article from January of 2021. The calculation for this year’s income will be shown below and is based on the December 31st ending totals of 2021. My wish is to point out that both approaches, income and total return, can work when combined with a structured variable withdrawal program. Background In a previous article, which you can find here, I laid out the starting positions of my two portfolios. One is a dividend income portfolio I call the DGI10 (10 dividend stocks) and the other is a total return portfolio which I call the TR7 (7 Pacer Swan SOS Fund of Funds ETF|ETFs where shares are sold to fund the income). Both of these started at the end of 2015 with about $100,000 each. The income drawn from both will be based on the 2019 IRS Required Minimum Distribution table III, from IRS publication 590b, appendix B, starting at age 73 in the table. This approach has the potential to provide more retirement income from the fact that the income drawn each year is based on the portfolio’s last year ending value divided by the current year IRS table distribution factor. Its purpose is also to slowly draw more and more from your IRA each year as you get older so as to maximize your spendable income and keep up with inflation. An added bonus of this method is after years where your account totals were down such as in 2018, and 2020 for the DGI10, the next year’s withdrawals were trimmed based on the RMD formula, allowing the account to rebuild. Some other background information can be found here that relates to why these methods might be useful to you and how taxes may affect you during this journey. So far prior to this year, I had sold seven stocks, over the first 5 years. However, 2021 was a transition year where a couple of stocks - T and PM - were replaced with the ETFs QYLD and PTY. These transactions used up some of the positive cash balance which has now been trimmed to $2353. My plan in 2022 will be to increase cash flow by using the excess cash to increase dividends where appropriate. The first new addition, Global X Nasdaq 100 Covered Call ETF (QYLD) has been profiled by a number of Seeking Alpha authors, and in my case, there are two particular characteristics of this ETF that interest me. The first one was a decent total return over the last 5 years of better than 11% and over the last 3 years of 14%. The second characteristic is its large dividend in the 10-11% area. As I have mentioned on other occasions if your goal is to not sell shares then you want your investment to pay out most of its gains in the form of dividends or capital gains with at least a fairly stable price that doesn’t decline. That would mean that the total return of the investment is at least as big as the dividend. 2021 - Recap – DGI10 Below is a table showing where these investments have gone after 6 years.   What can be seen from the above table is an initial starting dividend run rate at the end of 2020 of $5464, which increased by the end of 2021 to $5961 for an increase of 9%. It should also be noted that of the six unchanged positions only OHI did not increase its dividend. Also of important note is that the DGI10 now has $2353 built up in cash reserve, which becomes important to not sell any shares for as long as possible as the income continues to be driven by last year’s balance and the IRS RMD tables. Next year’s income will be driven by the age 79 divisor in the table. As many may know who follow me I have a number of years to go to age 79, but that is what makes this method adaptable to anyone, as long as you take whatever minimum distributions are required from the sum total of your necessary tax-deferred accounts. It could in fact even be used on a taxable account or Roth account to manage the cash flow in an efficient manner. 2021 - Recap – TR7 Below is a table showing where these investments have gone after 6 years.    2021 was a good year for the TR7 portfolio. By withdrawing cash on a quarterly basis and rebalancing, this portfolio grew at a 20% pace even after withdrawing $6715 in cash. As can be seen from the above tables the DGI10 portfolio balance increased 22% while the TR7 increased by 20%. Though not as important for the TR7 portfolio it also had internal dividends of $2823 that were reinvested during the year. Tracking the Total Results To make it easier to follow along on a year-by-year basis here are the combined results of these two portfolios.      In the above table 4, column four shows what would have been your income totals had you decided to use the 4% rule [explained here]. In simple terms, the 4% rule starts in year 1 by withdrawing 4% of the previous year’s balance and from then on increases the withdrawal amount by the consumer price index. In my example above I use the more common CPI-U data obtained from the Bureau of Labor Statistics. One obvious conclusion from the above is that both the DGI10 and the TR7 have provided me with more spendable income over using just the 4% rule. In fact, over the 6 years ending in 2021, the DGI10 has provided an extra $2157, while the TR7 provided an extra $4,531 for a total extra income of $6688 from the combination. In 2022 this excess will continue to climb based on the new RMD income levels described below. The Year Going Forward Currently, as I mentioned above OHI is on my watch list and could be sold in 2022. These sell triggers can be reviewed here. Another of these triggers looks for stocks underperforming the S&P 500 by more than 10% for both the 3-year and 5-year time frames. As of this writing in mid-2022 I am giving a little leeway to MAC and CIM, which both fail this test. If you don’t understand how important total return is to your income generation long term then read this article titled “Is There Magic in Dividends?” So far in 2022, the DGI10 has had 2 of the 10 positions increase the dividend and I have purchased more shares of QYLD, MAC, & OHI to increase their dividend payouts as well, using up some of the cash in the DGI10 portfolio. Summary Unlike some income portfolios which rely totally on the corporate board actions of companies to continue their dividends, these two RMD rule-based portfolios have their income defined for the full year from the previous year-end totals and that will not change during the year. For these portfolios, the total income I will receive in 2022 is $5,971.98 for the DGI10, plus $8,401.98 for the TR7, which will be $14,373.96 or $3593.49 withdrawn per quarter. This is up 26% from last year, and up 77% from the start of 2016. Conclusion What this journey offers is a real-life comparison of a concentrated dividend growth portfolio earning greater than 4% income to an ETF portfolio with a similar value slant to it and its dividends reinvested. As time goes forward my hope is that you can compare and contrast these two portfolios and take away what is appropriate for your own situation. Once again as I pointed out in the article, I certainly would not want to imply that someone who wants to do DGI for retirement do it with 10 stocks invested in 100% of their retirement savings. As I have mentioned many times, I have other buckets that I can draw from and these two accounts are not my only source of income. This study is only as good as the data presented from the sources mentioned in the article, my own calculations, and my ability to apply them. While I have checked the results multiple times, I make no further claims and apologize to all if I have misrepresented any of the facts or made any calculation errors. You also must realize that past performance is no guarantee of the future, and in that regard, all the information presented here is past performance up to this point. The information provided here is for educational purposes only. 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