Advice on Tax Free Bond Fund vs. Dividend Yield for Passive Income?

[fund4tomorrow]

Hi Everyone,

I'm looking into adding some passive income into my portfolio and want to do it in the most tax friendly way I can.

I'm fortunate enough to be in a high tax bracket where a Tax Exempt fund makes sense, however I'm trying to compare the returns of a bond fund vs. the returns of a high dividend yield fund in terms of yield. 

The two funds I am looking at is the Vanguard California Intermediate-Term Tax-Exempt Fund Investor Shares (VCAIX) and the Vanguard High Dividend Yield Index Fund Investor Shares (VHDYX)

Is it reasonable to try and perform this comparison?  Vanguard only lists an SEC yield for these two funds and my knowledge is that this is just a 30 day representation.  When I log into my brokerage account I can see the TTM for both. 

 California Intermediate-Term Tax-Exempt Fund SEC Yield: 1.94%
 California Intermediate-Term Tax-Exempt Fund TTM: 2.63% (Via brokerage)
 Vanguard High Dividend Yield Index Fund Investor SEC Yield: 2.93%
 Vanguard High Dividend Yield Index Fund Investor TTM: 2.85% (Via brokerage)

I understand these are different classes of investments, that past performance is not indicative of future performance, but I'm trying to use them for the same purpose.  The investments in these funds are to help balance the rest of my portfolio which is mostly invested in S&P 500, Total Stock Market and Total International Stock Market funds. 

If you were looking to build passive income while trying to keep taxes minimized would you rather invest in a Tax Exempt Bond Fund returning these figures or a High Dividend Yield Fund (even say at the highest tax bracket)?

Any advice would greatly be appreciated. 

Thanks all

Matt

[moustache79]

I use VWALX as well. 3.35% SEC yield which is equivalent to 4.65% taxable yield at 28% tax bracket
Obviously a challenging time for muni's and bons with rates increasing and uncertainty around tax reform.  This fund has a duration of between 7-8 which means a 1% increase in rates (all else equal) expect a 7-8% drop in valur of the principal.