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Dividend investing is back in the spotlight as investors turn to attractive income-producing stocks following the Federal Reserve’s first rate cut. Financial services firm First Trust estimates that dividend-focused ETFs saw inflows worth as much as $4.5 billion in July and August. The company says in a report:
“If we had to pick a group that would ultimately benefit the most from multiple rate cuts, we would suggest dividend-paying companies. In a market in thrall to expensive momentum stocks, quality, cheap dividend stocks are hiding in plain sight.”
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But which quality, cheap dividend stocks should you choose to grow your wealth? Inspiration and ideas come from those who do it well. Let’s look at an interesting success story.
About two years ago, a Redditor shared his detailed income report and portfolio screenshots on r/Dividends (a community with over 590,000 members on Reddit), saying he earned about $110,666 annually or $9,222 per month in dividend income.
The investor, 60 years old and from Canada, said he planned to retire in two years. When asked why two years, since his dividend income was enough to retire immediately, the investor replied:
“It takes time to close a practice (MD) and my youngest is still in college, so that is one last major expense.”
Someone asked him for advice or tips. This is what he said:
“Basically just 15% of income every month. I didn’t really start making more than 150,000 a year until I was 34 years old. So almost all of this has accumulated over the last 25 years. I should have switched to dividends sooner because many of my non-dividend tech stocks have crashed hard.”
The investor said he made about $200,000 after taxes. Answering a question about how many years he had spent accumulating wealth, he said:
“30. I paid off my house, vacation home and three cars.”
Let’s take a look at some of the largest holdings in the portfolio.
Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY.TO)
Vanguard FTSE Canadian High Dividend Yield Index ETF exposes investors to some of the best Canadian high-yield dividend stocks. It tracks the FTSE Canada High Dividend Yield Index. Royal Bank of Canada (RY), Enbridge (ENB) and Toronto-Dominion Bank (TD) are among the fund’s top holdings. This was the Redditor’s largest holding, earning over $9,000 per month in dividends, making up about 8.5% of the total portfolio.
Enbridge
With a dividend yield of 6.6%, Canadian energy infrastructure company Enbridge Inc. (ENB.TO) was the Redditor’s second-largest holding and earned about $9,000 per month in dividends. The shares accounted for about 6.7% of the $3.6 million portfolio. The company has consistently increased its dividends for about thirty years now.
Brookfield Asset Management
Brookfield Asset Management Ltd. (BAM.TO) is a Canadian alternative investment management firm focused on real estate, renewable energy, infrastructure, credit and private equity. About 5.8% of the Redditor’s total portfolio earning $9,000 per month in dividends was allocated to this company. BAM.TO has a dividend yield of approximately 3.3%.
Canadian natural resources
Canadian Natural Resources Limited (CNQ.TO) was Redditor’s fourth largest holding, earning $9,000 in dividends per month. The stock offers a dividend yield of over 4% and the company has consistently increased dividends for 24 years in a row. About 5.1% of the Redditor’s $3.6 million portfolio was allocated to CNQ.
Bank of Montreal (BMO.TO)
Bank of Montreal (BMO.TO) is another top high-yield dividend stock in investors’ portfolios, bringing in more than $9,000 per month in dividends. The portfolio screenshots shared publicly by the Redditor showed that BMO accounted for 4.5% of the total portfolio. The stock is up 14% in the past year.
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Schwab US Dividend Equity ETF
The Canadian investor who earned more than $9,000 monthly had about 4.1% of his total $3.6 million portfolio invested in Schwab US Dividend Equity ETF (NYSE:SCHD). The ETF tracks the Dow Jones US Dividend 100 Index and gives you exposure to some of the best dividend stocks trading in the US, including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi and AbbVie, among others. 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.
However, the investor noted a caveat to investing in SCHD for Canadian investors during the discussion:
“But the real problem with JEPI SCHD and the like is that if you hold them in Canada, you get 15% less dividend and are taxed differently on non-Canadian dividend products. If you live in the US, it’s a no-brainer. when you retire.”
Tourmaline Oil Corp.
Canadian natural gas company Tourmaline Oil Corp. (TOU.TO) was one of the top 10 Redditors, earning $9,000 per month in dividends. When asked which stocks he thought were best for his income portfolio, the investor said TOU stood out because of its special dividends.
Microsoft
About 3.4% of the Redditor’s portfolio was invested in Microsoft Corp (NASDAQ:MSFT). The company recently increased its quarterly dividend by 10%. It provides a sweet spot between dividend income and capital gains via share price appreciation. The MSFT is up 30% over the past twelve months.
Broadcom
Broadcom Inc (NASDAQ:AVGO) usually gets attention for its AI chips rather than dividends. However, the company has a strong track record of dividend growth and has increased its annual dividend for thirteen years in a row. AVGO has a dividend yield of 1.2%.
Wondering if your investments could earn you a $5,000,000 nest egg? Talk to a financial advisor today. SmartAsset’s free tool matches you with up to three vetted financial advisors serving your region, and you can interview your advisors for free to decide which one is right for you.
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This article 60-Year-Old Canadian Earns $9,000 in Dividends a Month and Shares His Top 9 Stock Holdings originally on Benzinga.com
