Here we are. It’s 2023 and I experienced my first dividend cut just a meager 53 days into the year. Intel (INTC) cut their dividend recently and it had me thinking long and hard about my investing strategy over the last 13 years.
Everything has worked just fine 95% of the time. The other 5%, like dividend cuts or even mergers, are usually not overly material or significant, but they still are frustrating to a T. No, not AT&T – T, but to a “t”. A lesson is learned each time. This time it was about not falling for an iconic company and listening to a management statement.
investing thoughts
Now, I still am investing into individual dividend stocks, don’t think I’m not doing that! You know I love my Top 5 Foundation Dividend stocks for any portfolio, especially as I’ve been scooping up more Johnson & Johnson (JNJ).
However, as I am witnessing myself and others go through painful dividend cuts or lackluster dividend growth – think – 3M (MMM), Emerson (EMR), even T. Rowe (TROW, this year at least) to name a few – it begs me to think – is this how my income should grow? I am not talking about growth over the next 1, 2, 3 years – I am referring to the next 5, 10 and even 50 years (if I somehow am around that long).
Now, it’s all about quality. It could also be about diversification. What’s more important – your savings rate and putting it all into quality or savings rate and second guessing dividend stocks right now? I’ve had an inner battle the last week or so.
Given my savings rate has historically been OVER 60%+, some months even 70-80%, I have that part figured out (for now, though we do plan on purchasing a house in the near-term, as our family expands). Therefore, I want to grow my income, as fast and as smart, as possible.
I recently wrote about the Vanguard Trifecta, of their High Dividend Yield ETF (VYM), Dividend Appreciation (VIG) and the S&P 500 (VOO). If you recall, the 5 year average dividend growth rates for VYM and VOO were 6.00%-6.50%, with VIG coming in the highest over 9%.
I then implemented the strategies, starting in 2020 – buying VYM weekly, then in 2022 – buying VOO daily and recently in 2023 – buying VIG daily as well.
ETF Strategy – Current
To quickly go over my Vanguard ETF strategy, currently, it looks like this (through the last full week of February):
1.) $200/weekly into Vanguard’s High Dividend Yield (VYM) ETF in my portfolio, still 2 share sin my wife’s per week as well.
2.) $30/day into Vanguard’s Dividend Appreciation (VIG) ETF in my portfolio.
3.) $60/day into Vanguard’s S&P 500 (VOO) ETF in my portfolio.
That is $650 per week into ETFs, automatically on the SoFi investing app (which I argue has been an amazing platform!). The yield is around 2.15% overall with an ~7% Dividend growth rate for what’s automatically occurring on the investment side or in other words $14/week added that should grow at least 7% per year, not including dividend reinvestment.
Given we typically have more savings at the end of each month, as well as the side hustles our family does (i.e. selling items online, surveys, and other items), we could bring the automation up slightly.
Then, when we throw in a little uncertainty with inflation, the Fed more than likely still forced to continue the rate increase and this “weird” time period we are in (i.e. gig workers, mass layoffs in the tech industry, housing is out of wack, etc.), I think allocating more to ETFs slightly may be ideal. We want to stay invested and put more money to work, even if we can earn over 4% on idle cash – as we showcase on our page dedicated just to that.
Therefore, I think it’s time to re-vamp the automated ETF strategy…
ETF Strategy – Refresh
Here is my new refreshed strategy that I will deploy, full throttle, starting on 2/27/2023 (though I’ll start VIG earlier):
1.) $250/weekly into Vanguard’s High Dividend Yield (VYM) ETF in my portfolio, still 2 share sin my wife’s per week as well. +$50/week.
2.) $40/day into Vanguard’s Dividend Appreciation (VIG) ETF in my portfolio. +$50/week
3.) $60/day into Vanguard’s S&P 500 (VOO) ETF in my portfolio. No change.
This will increase the automated investments $100 per week, to $750 total. The yield will slightly increase to 2.18% and the dividend growth rate will also rise slightly to 7.20%. The ratios start to improve and I’ll be adding ~$16.35 for the time being in forward passive income each week.
Of course this is subject to change, as the first quarter dividend is only a few weeks ahead – though – it should be improving but I’m not guaranteeing that right now.
This pushes me to automatically invest more, no matter what, and reduces risk simply because of diversification for the time being. I am not sure where the stock market is going right now.
However, I still will be evaluating individual dividend stocks on a daily/weekly basis – like you’ve seen and buying stocks such as Johnson & Johnson (JNJ), United Parcel Service (UPS), Medtronic (MDT) – just to name a few stocks we’ve been acquiring this year.
conclusion on vanguard etf investing
Game plan is a GO. It’s happening and I’m committed to this strategy. Again, I will still be buying undervalued, HIGH QUALITY, dividend growth stocks, but am making sure I’m investing into ETFs to keep the passive income stream growing, if I do or don’t buy anything else!
I will check back in on this strategy every 3 months to re-evaluate. What do you think of investing into ETFs here in 2023? Are you finding yourself buying more individual stocks or buying more into ETFs in 2023, given the unknown and volatility? OR are you staying in cash to earn over 4.50-5.00%? Let me know your feedback.
As always, thank you for stopping by, keep investing and stay invested! Not professional advice here, definitely perform your own research, but best of luck and happy investing!
-Lanny