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Major tech stocks like Meta Platforms and Microsoft fell after their latest earnings results as Wall Street was spooked by rising costs and AI spending. With election-related uncertainties and the need for portfolio diversification, dividend stocks remain the focus. Data shows that dividend growth stocks have outperformed inflation for the past 23 years. However, choosing the right dividend stocks and ETFs in today’s market remains an important question for novice investors.
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About a year ago, a dividend investor shared his detailed income report and story on r/Dividends – a discussion board for income investors with more than 600,000 members. The investor said his investment account was started with $60,000, which he had saved in his 403(b) retirement plan while working at his first job for eight years. He then rolled this money into an IRA.
The investor said that $60,000 grew to $1.2 million in 27 years from 1996 “without putting any new money into it.”
“During that time, I have experienced massive market booms and busts such as the dotcom bubble/burst, the housing bubble/burst, the Great Recession, and the recent Covid-19 crash and recovery. During all that time, my focus has been on growing My core holdings have always been SPY and QQQ, about 50-70%, and occasionally some speculative stocks, about 20-30%,” said the investor.
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He emphasized that he continued to invest in the market through all these ups and downs. The investor said he is now retired and shifted his focus to dividend investing in 2022.
“My only regret is that I should have switched to dividends a little earlier when I had $1.5 million, but I guess that’s life. The expected dividend yield is ~9%, but I’ll be happy with ~8% dividend yield. “
The investor clarified that most of his portfolio gains came from his time focusing on growth.
“The only dividend I received during my accumulation phase was from SPY & QQQ. I focused heavily on growth,” he said.
The investor’s portfolio screenshots showed his monthly dividend income of approximately $9,495 or $113,949 per year. Most of his investments were dividend ETFs. Let’s take a look at the portfolio.
JPMorgan Equity Premium Income ETF (NYSE:JEPI) was the largest holding in the investor’s portfolio, earning $9,495 per month in dividend income. The portfolio screenshots showed that he owned 5,323 shares of JEPI, worth approximately $288,187 at the time. The investor raked in approximately $32,933 in annual dividend income from the ETF.
JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) was the Redditor’s second-largest position, earning $9,495 per month in dividends, while his position in the covered call ETF was valued at around $268,275. JEPQ pays monthly dividends, invests in Nasdaq companies and generates additional income through the sale of call options. The ETF yields approximately 9.2%.
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The Invesco QQQ Trust Series 1
The Invesco QQQ Trust, Series 1 (NASDAQ:QQQ) is one of the best ways to enjoy dividend income and capital gains through share price appreciation, as the ETF highlights some of the best technology stocks in the NASDAQ-100 index. The fund pays quarterly dividends and yields approximately 0.6%. The investor owned 544 shares of the fund, according to the screenshots he shared publicly on Reddit.
During the discussion on his post, the investor commented on his belief in the QQQ:
“Being much younger than Buffett, I also have confidence in QQQ. I have confidence in American entrepreneurship and technological creativity. So my core interests are always SPY and QQQ.”
The SPDR S&P 500 ETF Trust
One of the main benefits of investing in the SPDR S&P 500 ETF Trust (NYSE:SPY) is that it allows you to watch your capital grow and receive quarterly dividend payments. The fund has a dividend yield of approximately 1.2%. The Redditor who earned $9,495 a month in dividends had 433 SPY shares in his portfolio, worth about $181,868. The investment earned the investor $2,792 in annual dividend income.
Ares Capital
Ares Capital Corporation (NASDAQ:ARCC) is a business development company with a dividend yield of approximately 9%. The investor had 5,820 shares of Ares Capital in his portfolio, worth approximately $109,532 at the time. The investment generated approximately $11,174 in revenue.
Global X Russell 2000 Covered Call ETF
The investor who earned $9,495 monthly dividends had an $82,000 position in Global X Russell 2000 Covered Call ETF (NYSE:RYLD). The fund generates income by selling call options on the small-cap-heavy Russell 2000 Index. The ETF yields approximately 12%. Because it is a covered call ETF, RYLD can experience losses during bear markets.
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iShares iBoxx $ High Yield Corporate Bond ETF
The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) offers investors exposure to U.S. dollar-denominated high-yield corporate bonds. It tracks the Markit iBoxx USD Liquid High Yield Index, which includes a wide range of sub-investment grade bonds. The fund has a dividend yield of approximately 6%.
YieldMax TSLA Options Income Strategy ETF
YieldMax TSLA Option Income Strategy ETF (NYSE:TSLY) is a popular YieldMax dividend ETF for high-yield seekers. With a distribution rate of over 60%, TSLY generates income by selling call options on Tesla stock. Over the past year, TSLY is down about 42%, while Tesla is up 28%.
Guggenheim Strategic Opportunity Fund
Guggenheim Strategic Opportunities Fund (NYSE:GOF) exposes investors to fixed income and other debt securities. It invests in various credit instruments, including corporate bonds, asset-backed securities, mortgage-backed securities and other high-yield debt. However, it is a risky investment because it invests in unrated bonds, also known as junk bonds.
The investor, who earned $9,495 per month, had 776 GOF shares in his portfolio. This investment generated $1,695 in annual income.
iShares 20+ Year Government Bond BuyWrite Strat ETF
iShares 20+ Year Treasury Bond BuyWrite Strat ETF (BATS:TLTW) invests in US government bonds with a term of 20 years or more. It also generates revenue by selling call options on the US Immigration and Customs Enforcement 20+ Year US Treasury Index.
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This article Dividend Investor Making $9,495 a Month Regrets Not Focusing on Dividends Earlier, Shares His 10 Stocks ETF Picks originally appeared on Benzinga.com
