Can you live entirely on dividends? This question piques the interest of millions of young Americans who are thinking about early retirement and letting go of their 9-to-5 jobs.
A few days ago, someone on r/Dividends – a Reddit discussion board about dividend investing – asked if anyone on the forum lives off dividends.
‘I have yet to hear testimonials from anyone who has actually reached the point where they are living off their dividends. If you are there, can you share your story? What is it like to be free? How long have you invested? the message said.
The question received a flood of responses, with many investors sharing their personal stories and advice. One response stood out and caught our attention.
One investor, who said he was 58 and retired, told the questioner that he had been living off dividends for about three years.
“I started investing about 37 years ago. Retiring on dividends is nice, but not really any different than living on another source of income, like Social Security. I have saved and invested quite well over the years “I never focused on dividends until the end. I don’t advise young people to do that either,” he said.
The investor shared how he was able to grow his wealth through investing, which led to his retirement:
“My big break in early 2020 was mostly cash, because I felt the market had become too expensive. That was mostly luck, but it worked out great. March 2020 was a lot of fun. I made between $1 and 2 in about 30 days million in shares and the resulting market rise thereafter secured my retirement.”
The investor reiterated that young investors should focus on total returns rather than solely on dividend income.
‘I am neither a boglehead nor anti-dividend. I’m simply saying that you should focus on total returns until you get closer and need income to live on. But don’t just interpret that as growth. Dividends are fine, you just don’t do that.’ I don’t have to do them until later,” he added.
The investor was asked to share his portfolio details. He shared many stock and ETF names “off the top of his head” and said his portfolio return is about 8%.
AbVie
According to the portfolio data he shared, AbbVie Inc (NYSE:ABBV) was one of the stocks in the 58-year-old investor’s portfolio that lived off dividends. AbbVie has a 3% dividend yield and approximately 50 years of consecutive dividend increases. The stock is up about 42% in the past year.
Altria
Altria Group Inc (NYSE:MO) has a dividend yield of around 8% with over 50 years of consecutive dividend increases. Altria Group Inc (NYSE:MO) recently jumped after the company reported third-quarter results that beat Wall Street expectations.
Real estate income
With roughly 30 consecutive years of dividend increases and a 5% yield, Realty Income Corp (NYSE:O) is one of the most popular monthly dividend stocks among income investors on Reddit. The 58-year-old retiree who lived off dividends said the REIT was part of his portfolio.
Check it out:
While Realty Income is undoubtedly a solid choice for investors looking for consistent monthly dividend income, it’s important to remember that publicly traded stocks are subject to market volatility. For those looking to diversify their income streams and potentially reduce exposure to market fluctuations, real estate investing through platforms like Arrivald is worth considering.
Arrivald allows individuals to invest in rental property shares for as little as $100, providing the opportunity for monthly rental income and long-term appreciation without the hassle of a landlord. With more than $1 million in dividends paid last quarter and a growing portfolio of properties across markets, Arrivald offers an attractive alternative for investors looking to build a diversified real estate portfolio.
BlackRock
Investment giant BlackRock Inc. (NYSE:BLK) was also part of the portfolio of a retired investor who lived off dividends. BlackRock’s dividend has grown 9.5% annually over the past five years. As of 2023, the company has increased its payouts for 14 consecutive years.
PepsiCo
PepsiCo Inc. (NASDAQ:PEP) is among the safest and most reliable dividend stocks trading on the market, with more than 50 consecutive years of payout increases. PepsiCo Inc. (NASDAQ:PEP), however, recently reported mixed third-quarter results and lowered its 2024 organic sales growth outlook.
Goal
Yet another dividend king on the list, Target Corp (NYSE:TGT) has been increasing its payouts without interruption for more than 50 years, delivering a 3% yield. It was a notable stock in the portfolio of the 58-year-old retiree who lived off dividends.
Procter & Gamble
Procter & Gamble Co (NYSE:PG) has increased its dividends for 68 years in a row and has a yield of 2.42%. The stock is up about 10% in the past year.
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Energy transfer
With a dividend yield of around 8%, Energy Transfer LP (NYSE:ET) is a popular dividend stock on Reddit. The company is relatively insulated from the volatile commodity market because its revenues come from fee-based contracts. It was part of the portfolio of an investor who lived off dividends.
Schwab US Dividend Equity ETF
The 58-year-old retired dividend investor said he had about 3,500 shares of Schwab US Dividend Equity ETF (NYSE:SCHD) in his portfolio. The ETF tracks the Dow Jones US Dividend 100 Index and exposes investors to some of the best dividend stocks traded in the US, including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi and AbbVie. Because SCHD’s investments tend to be conservative dividend payers, it is suitable for investors who are close to retirement and looking for consistent dividend income.
JPMorgan Nasdaq Equity Premium Income ETF
The 58-year-old investor who lived off dividends said he had 8,500 JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) shares in his portfolio. JEPQ is a high-yield covered call ETF that pays monthly dividend income. The ETF invests in Nasdaq companies and generates additional income by selling call options. It yields about 9%.
The Virtus InfraCap US Preferred Stock ETF
The Virtus InfraCap US Preferred Stock ETF (NYSE:PFFA) focuses on generating income and capital growth by investing in US stocks with a market capitalization of more than $100 million. The fund uses leverage of approximately 20% to 30% to increase income potential. PFFA has a dividend yield of approximately 8.8%. The investor said he owned about 2,000 shares of the fund.
Hercules capital
Hercules Capital Inc. (NYSE:HTGC) is a business development company with a dividend yield of over 9%. The investor who lived off dividends had 2,000 company shares in his portfolio. Hercules Capital has had consistent dividend growth for over ten years. Since 2019, the company has paid 16 special dividends. The company provides high-yield venture capital loans to early-stage biotech and software companies. Historically, Hercules’ business selection has been solid, with a very low default rate.
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This article 58-Year-Old Retiree Lives Off Dividends Shares His Portfolio: Top 12 Stocks, ETFs originally appeared on Benzinga.com
