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Staying invested in the stock market is one of the most efficient ways to grow your wealth. But it’s easier said than done. Market fluctuations, volatility and the constant pressure of daily news can overwhelm investors, causing them to sell their positions on a whim. According to a report by Lord Abbett, dividend stocks offer a way to avoid this emotional decision-making. The report states that high-quality companies that initiate and increase their dividends have delivered higher returns and lower volatility than the equal-weighted index for 50 years through September 2023.
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Earlier in December, a dividend investor shared his income report and some portfolio holdings on r/Dividends, an income investing community with more than 625,000 members.
The investor’s portfolio screenshots showed that his portfolio generated $29,920 in annual dividend income, or about $2,490 per month. When asked how much his portfolio was worth, the investor said it was $152,000. This amounts to a dividend yield of 20%.
“It’s going to work, it’s a slow process… but it’s going to cost almost 30,000 a year and it’s going to keep going up,” he said.
The investor’s portfolio consisted of high-risk, high-return dividend ETFs. Several Redditors warned him about the potential risks of investing in high-yield covered ETFs. Sounding confident and aware of the risks, he said he’s happy to invest in “whatever pays the bills.”
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“I’m at greater risk if I get a moat. I build a ‘safe’ income stream and then pour dividends into higher yields,” he said.
The investor was asked whether this income was enough to pay his bills or whether he still experiences money anxiety. He replied:
“Right now it covers my fines and expenses each month, and I save $400 a month without a job.”
He urged others in the discussion to start saving to invest in the stock market and live below their means if necessary. He said he still doesn’t have a car.
“Paying dividends is nirvana,” he said.
During the discussion, the investor shared his top three investments and said he had invested about $20,000 in each. Let’s take a look at these dividend ETFs.
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Rex Fang & Innovation Equity Premium Income ETF
Rex Fang & Innovation Equity Premium Income ETF (FEPI) offers investors exposure to technology and innovation stocks. The fund aims to achieve capital growth and generate income by selling call options. The covered call strategy protects investors from the downside risks associated with technology stocks. Some of the fund’s largest holdings include Micron, Tesla, AMD, Intel, Apple, Salesforce and Nvidia.
FEPI has a payout percentage of approximately 25% and pays monthly. The investor, who earned $2,490 a month with just $152,000 invested, said he allocated about $20,000 to FEPI.
FEPI is down about 5% this year, while the S&P 500 (SPY) is up 27% over the same period.
The Simplify Volatility Premium ETF
The Simplify Volatility Premium ETF (NYSE:SVOL) generates income by shorting the CBOE Volatility Index (VIX) and betting that volatility will remain stable. Because the broader market tends to move higher in the long term, investing in this ETF is suitable for those looking for stable income checks.
The investor who earned $2,490 monthly in dividends had a $20,000 position in SVOL. During the discussion about his post, he said that SVOL was one of his favorite funds.
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SVOL is down about 4.3% so far this year. It yields about 17% and pays monthly dividends.
In the third quarter, the Simplify Volatility Premium ETF returned 1.95%. The short positions in VIX futures had a negative impact of 2.36%. The fund noted in its quarterly report that fixed income and options overlays are expected to drive portfolio returns slightly below historical levels amid the FOMC’s 0.5% rate cut in September.
The investor who earned $2,490 a month in dividends said Roundhill Innov-100 0DTE Covered Call ETF (QDTE) was among his top three holdings with a $20,000 position. QDTE generates income through a zero-day-to-expiration (0DTE) options strategy on the Roundhill Innovate Index. This strategy involves selling call options that expire the same day. The fund has a distribution percentage of 26% and pays out weekly.
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This article An Investor Who Earns $2,490 a Month in Dividends with Just $152,000 in Investment Stocks His Top 3 ETFs – Says ‘Paying Dividends is Nirvana’ originally appeared on Benzinga.com
