Wellington Admiral shares (Vwenx) is a large holding for us. Dividends this quarter were 17.7% lower than the same quarter last year. I assume this reduction was due to the Coronavirus and dividend cuts in the funds holdings. Interest rates are down, but curiously Wellesley Income Admiral (Vwiax) was actually a little higher this quarter compared to last year and they both hold investment grade bonds, so I assume it’s too early in the cycle for bonds to have an effect. That leaves me wondering why Wellesley’s equity holdings avoided big dividend cuts and Wellington didn’t.
I know I can see Wellington’s equity holdings, but is there any way to see the current dividend rate for each holding without looking them up one by one?
Does Wellington's mandate require the managers to divest the equity holdings that fail to meet a dividend threshhold?
Wellington’s portfolio shift from value to blend could be partly responsible. I’d expect the stock portfolio yield to drop slightly.
Unlike Wellesley, Wellington does not have a mandate to hold only equities whose dividend is above average. And, they've moved a bit to a blend style, as Chang pointed out.
On digging deeper, I'm not sure there is a trend towards a lower dividend. Here are the dividend distributions for the last two years. The 6/18 decrease could be a one-off, but if it is repeated in September, it might warrant more concern.
|Date||Div Per share||Share price|
We hold Wellington and the reduction in the dividend was quite a disappointment. Our primary investment objective is income. We also hold VWIAX. I expected with yields so low and it being majority bonds that VWIAX would be the laggard. As noted earlier, it actually exceeded the June ‘19 payout.
I’m going to stay with Wellington until I see what September dividends look like. If things disappoint again we’ll look at alternatives.
Just remember the math folks.
As underlying bonds mature, the funds have to buy new bonds with the proceeds. In a declining rate environment, this means many bonds will have a lower coupon rate (Yield) than the old bond. Consider how low rates generally are today.
Thus, future fund dividend decreases may occur with this rollover to new bonds. It is not easy to avoid. Like, a ten year Treasury at 0.6%...ugh.
Bond repurchase seems it would effect Wellesley more than Wellington. The equity side holds less high dividend stock now that vwenx as more growth stocks and now is more a blend fund.