High dividend funds

[plauto]

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Here is my current dilemma...just started residency, cost of living is fairly low where I am...maxed out my Roth IRA for the year and have about $10,000 extra in addition to emergency funds etc. I'd like to invest. I had good luck with Vanguard Dividend funds in the past, despite what happened to the market. I see that now Vanguard offers several options (Dividend Appreciation ETF (VIG) with a yield of 2.13, Dividend Appreciation Index (VDAIX) with a yield of 2.01, Dividend Growth (VDIGX) with a yield of 2.07.
I am also looking at iShares S&P US Preferred Stock Index (PFF) with a yield of 5.89%.
Can anyone think of reasons for going with Vanguard again instead of investing into the higher yield of iShares?

Not sure whether I want to go long term or not with this...I guess the main goal of the fund is trying to help pay student loans. My credit union gives me a little over 2% interest only checking account so I'd like to try to beat that.

 

[joeDO2]

Comparing VIG to PFF..... vanguards expense ratio is lower at 0.13% compared to 0.48%. also the overall tax-adjusted return is a few % below the vanguard fund. I think either fund would be a solid dividend fund. If you may need the money short term however you might want to consider something safer than those funds. check out municipal bond funds as an option. I have MITFX. the 1-year return is 9.16% and 10 year 4.86%. the big advantage there is you are generating a good income flow of NON-TAXABLE money and its a safer way to protect your principal should you end up needing it in the short term.

 

[MT Headed]

How much federal income tax is a resident really going to be paying though? Especially one who maxes a roth and has student loans.

Tax free income is largely a gimmick at the sub-100K level.

 

[plauto]

Yes, taxable does not really matter now..I have so many deductions at the moment...do you guys know if the yield on those funds I mentioned is what the dividend ends up being? Or is there something else I am not understanding?! In that case, iShares is no doubt the winner.

 

[redtomate]

In case you aren't aware, PFF is not fully equity, they are preferred shares. That means if we do get a large equity rally you will only partially participate. If you go with VIG (or maybe even the Admiral class mutual fund version of that, I think it may be lower fees if you do it straight through vanguard.com), you retain the ability for larger capital gains.

Edit: I also noticed you said the main goal was to pay off student loans. In that case, just pay them off. That's a guaranteed 7% return. Unless of course you are making a political bet that something like the student loan forgiveness act will be passed. In that case you want to hold on to your loans as long as possible. But if you are a Ron Paul supporter then don't be a hypocrite, smile, and pay.

 

[touchadream]

Here is my current dilemma...just started residency, cost of living is fairly low where I am...maxed out my Roth IRA for the year and have about $10,000 extra in addition to emergency funds etc. I'd like to invest. I had good luck with Vanguard Dividend funds in the past, despite what happened to the market. I see that now Vanguard offers several options (Dividend Appreciation ETF (VIG) with a yield of 2.13, Dividend Appreciation Index (VDAIX) with a yield of 2.01, Dividend Growth (VDIGX) with a yield of 2.07.
I am also looking at iShares S&P US Preferred Stock Index (PFF) with a yield of 5.89%.
Can anyone think of reasons for going with Vanguard again instead of investing into the higher yield of iShares?

Not sure whether I want to go long term or not with this...I guess the main goal of the fund is trying to help pay student loans. My credit union gives me a little over 2% interest only checking account so I'd like to try to beat that.

A few thoughts for you to ponder:: net return is your goal, so expenses are deceptive, your bottom line means more than expenses; next look for an "increasing dividend fund" these tend to be going to a peak and may do better over time because increasing divs mean good growth in a company too, so may be better than high income which eveyone is on board with and hard to sustain year after year (the champion has everyone gunning for them and its hard to stay on top once there theory); finally, past is not a predictor of future. Do try to recall this. Look at performance charts with a jaded eye and buy low. That is the key. "Buy low". Good luck. On postive side, you will be getting stocks that can likely weather well the naysayers that are predicting another recession at beginning of 2013. US is going to be stronger than more profligate and less tight accounting counrtries going forward.
Gold is down now and dollar is relatively strong, so that argues for your strategy. I might just tweak it to increasing divs rather than high, if you can find a fund which does that..

 

[freaker]

Keep an eye on the fact that the President has voiced an interest in allowing the Bush tax cuts to expire. That will push dividend income from 15% or 0% to ordinary tax rates. That obviously hurts attendings and other high income earners more than you (their rates are set to go from 15% to 43.4% for some).

 

[deleted126335]

High dividend or dividend growth strategies are an attempt to capture the value premium which is supposed to be the greater risk adjusted return of value stocks. Dividend strategies tend to be less efficient at capturing this premium.