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While everyone is experiencing FOMO over the AI bandwagon, many investors are trying to balance their portfolios by adding reliable dividend stocks. In January, Josh Duitz, deputy head of global equities at Abrdn, predicted that dividend stocks would play a key role this year. Speaking to CNBC, the analyst said dividend stocks have accounted for about 36% of total market returns since 1936. He believed that dividends would outperform even in a recession.
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But which dividend stocks should you buy for sustainable long-term income? Let’s get ideas from a success story.
About three years ago, an investor shared his detailed earnings report on r/Dividends, a vibrant Reddit community of 600,000 members. The investor, who said he was 42, said his total investment portfolio was worth about $500,000, including his Roth and taxable accounts.
“This doesn’t include 401(k), which is about $1 million, all in Vanguard index funds,” he added.
The investor also shared his plans and goals for his investment journey and asked for feedback from fellow investors:
“For now I’m letting everything grow/drip. I hope that in about ten years I can start using dividends from everyone but ROTH as additional supplemental income, depending on the market of course. At some point I’ll also start shifting VTSAX to a higher yield, but I thought if I had about ten years, maybe I could let it sit and grow for a while.”
He also said he had about $300,000 in cash as a safety net because he was a “scared cat.” Many urged investors to put this money to work and avoid having so much cash on hand. Some curious Redditors also asked him what he did for a living.
‘Worked in the financial world. Now semi-retired and working part-time as a consultant. Husband works,” he replied.
The investor also explained part of the reason why he had so much cash:
“Married. One child – young teen going to private school. Live in Chicago, so quite expensive cost of living. Stupidly expensive actually, but that’s our fault. That’s part of why I have so much money – school/housing is quite high.”
See also: This multi-billion dollar fund has invested in the next big real estate boom, Here’s how you can participate for $10.
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The investor was generous enough to share his stock ownership and tell everyone how much he earned annually in dividends from each share. Let’s take a look at some of the top stocks and funds in his portfolio.
Vanguard Total Stock Market Index Fund Admiral Shares
Vanguard Total Stock Market Index Fund Admiral Shares (MUTF: VTSAX) offers investors exposure to the entire U.S. stock market, including small-, mid- and large-cap stocks. The portfolio consists of more than 3,600 shares. The fund pays quarterly dividends and yields approximately 1.2%.
VTSAX was responsible for the majority of dividend income for the Redditor, raking in about $3,615 annually, according to details the investor shared publicly. During the discussion of his report, the investor said more than once that he has invested more than half of his money in the fund.
“I try to have about $25,000 to $30,000 in each stock. VTSAX is different – almost half of all the money is in it. That’s the main reason my returns are lower,” he said.
Coca-cola
Coca-Cola Co (NYSE:KO) was among Redditor’s top dividend stocks, earning about $1,000 per month in dividends. He said KO shares produced about $672 in annual dividend income. Coca-Cola has increased its dividends for 62 years in a row. Oracle of Omaha Warren Buffett has a $25.5 billion stake in the beverage giant as of the end of June.
Bristol Myers Squibb
Pharmaceutical company Bristol-Myers Squibb Co (NYSE:BMY) has a dividend yield of about 4.5% and has increased its payouts for 15 years in a row. The investor who earned $1,000 monthly in dividend income said he received about $625 annually from BMY.
Suncor Energy
Canadian energy company Suncor Energy Inc (NYSE:SU) accounted for about $683 in annual dividend income for the investor who shared its detailed earnings report. The stock has a dividend yield of approximately 4%.
Citi Group
With a dividend yield of around 3.5%, Citigroup Inc (NYSE:C) is a notable bank dividend stock in the investor’s portfolio, returning around $12,000 per year. Earlier this month, Citigroup posted strong third-quarter results. Earnings per share for the quarter came in at $1.51, beating expectations by $0.20. Revenue of $20.32 billion also exceeded Wall Street estimates by about $500 million.
The Redditor said he received approximately $714 in dividend income from his investment in Citigroup.
Verizon Communications
According to details he shared in his earnings report, Verizon Communications Inc. (NYSE:VZ) brings in about $1,224 per year in dividend income for the Redditor. Verizon has a dividend yield of about 6.5%.
Visa
With a dividend yield of less than 1%, Visa Inc (NYSE:V) offers investors a good place to enjoy both dividend income and capital gains via share price appreciation. The payments giant’s shares have grown about 60% over the past five years. The company has increased its dividend payments for fifteen years in a row. Visa accounted for just $166 of the investor’s $12,000 annual dividend income.
Speaking about Visa, the investor said:
“Visa (V) has a very low dividend (less than 1%), but is growing at 20% every year. And I think V has more growth potential than some other high doc stocks.”
Real estate income
Realty Income Corp (NYSE:O) is one of the most favorite real estate dividend stocks by retail investors on Reddit. One investor who makes $12,000 a year in dividends said Realty Income was part of his Roth IRA account and generated about $814 in annual income. Realty Income has a dividend yield of over 5% and pays out monthly dividends. The stock is up about 30% in the past year.
Business development and investment company Ares Capital Corporation (NASDAQ:ARCC) is a high-yield dividend stock in the investor’s portfolio, generating approximately $12,000 in annual dividend income. He made about $2,697, part of his Roth IRA account, from the stock. During the discussion, the Redditor asked for advice from fellow investors:
“I have ARCC and O in Roth because of unqualified dividends, so I would prefer to keep them that way, but I’m not sure that’s the right approach.”
ARCC has a dividend yield of approximately 8.8%.
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This article 42-Year-Old Investor Earns $12,000 in Dividends on $500,000 Invested, Reveals Portfolio: Top 9 Stocks originally appeared on Benzinga.com
