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Should you invest in dividend stocks or pursue capital gains through growth stocks? That debate is likely to remain turbulent for decades to come. But many achieve their financial goals by investing wisely in safe and reliable dividend stocks and ETFs.
About a year ago, a dividend investor shared his success story on /Dividends, a Reddit community of income investors with 600,000 members. The investor said he was 34, had served in the Air Force for 12 years and worked as a defense contractor for four years.
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“I lost my flight status due to medical issues and hated the desk job they gave me. Since I had rental properties, I thought it was a good time to move on for the sake of my mental health. It worked out well because my defense The work of a contractor was great… but the withdrawal means we were all laid off this year.”
The investor, who called his post “day’s work,” said he had an 80% VA disability rating, owned several rental properties and decided to retire early.
According to a screenshot of the portfolio that the Redditor shared, the total dividend yield of his portfolio was approximately 4.52%. The investor said his total portfolio was worth $700,000, including stocks without dividends. He estimated the total value of his dividend portfolio at ‘600’ish’. If we calculate based on this dividend yield, the total value of the dividend portfolio is over $620,000.
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The investor was repeatedly asked how he achieved this important milestone at the age of 34. He explained that he owned several properties and lived frugally to save.
To another question about his performance, the investor replied:
“I feel very blessed. I lived very frugally to get here and was pretty lucky in terms of real estate timing,” he said.
During the discussion, the investor emphasized the importance of financial discipline:
“I came from poverty and only have a high school diploma. During my time in the service, my favorite thing to do was help other service members appreciate the beauty of financial independence, instead of buying expensive cars at a young age. Always putting numbers behind the advice seems to be the light bulb moment for people.”
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However, it is important to note that he will not be completely dependent on this $2,400 per month dividend income during his retirement. He said, “Most of my money” is in real estate.
“I already make 25,000 tax free due to VA disability and 83,000 before taxes on rental income,” he added.
Let’s take a deeper look at the investor’s biggest assets by examining the details of his dividend portfolio.
Vanguard Total Stock Market Index Fund ETF
Vanguard Total Stock Market Index Fund ETF (VTI) shares were among the investor’s top holdings. VTI tracks the overall stock market and exposes investors to small-, mid- and large-cap stocks. About 69% of the fund is allocated to large-cap stocks. The portfolio includes more than 3,600 stocks. The ETF’s top holdings include Apple, Microsoft, Nvidia, Meta Platforms and Amazon. In the comments section of the discussion, someone asked the Redditor for advice. This is what he said:
“Depending on your age. You can’t go wrong if you just do VTI honestly.”
Vanguard S&P 500 ETF
Vanguard S&P 500 ETF (NYSE:VOO) is another broader market ETF that was part of the investor’s portfolio and earned $2,400 monthly. However, the investor said his cash-secured put (CSP) option on VOO “did not go as planned”.
That likely means the investor sold PUT options on VOO, hoping the fund’s share price would remain above the strike price until the option expired. However, the stock price may have fallen below the strike price before the option expired.
VOO tracks the S&P 500 index and yields approximately 1.2%. It pays quarterly dividends.
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Schwab US Dividend Equity ETF
Someone asked the Redditor who earned $2,400 a month in dividends on his largest positions. He named SCHD one of his top picks. Schwab US Dividend Equity ETF (NYSE:SCHD) tracks the Dow Jones US Dividend 100 Index and provides exposure to some of the top dividend stocks traded in the US, including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi and AbbVie . among many 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.
Real estate income
With a 5% dividend yield and 30 years of consecutive dividend increases, Realty Income Corp (NYSE:O) has become a top dividend pick for many investors, especially after the first rate cut. Last month, Scotiabank raised its price target on Realty Income Corp (NYSE:O) from $61 to $64 and maintained its Sector Perform rating.
JPMorgan Equity Premium Income ETF
JPMorgan Equity Premium Income ETF (NYSE:JEPI) was a key part of the Redditor’s portfolio, earning about $2,400 in monthly dividends. JEPI makes money by investing in large-cap US stocks and selling call options. It is ideal for those looking for exposure to defensive stocks.
Altria Group
Altria Group Inc. (NYSE:MO) was among the top high-yield dividend stocks in the investor’s portfolio, contributing $2,400 to its monthly income. The stock yields more than 8% and is up about 20% this year.
Arbor Realty Trust
The Redditor said he owns a “small amount” of Arbor Realty Trust Inc. stock. (NYSE:ABR) in its portfolio. Arbor Realty Trust is a mortgage REIT with a dividend yield of over 11%.
WisdomTree Treasury fund with variable interest rate
WisdomTree Floating Rate Treasury Fund (NYSE:USFR) invests in floating rate US government bonds. The fund yields approximately 5% and pays out monthly dividends.
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Arrivald Homes, the Jeff Bezos-backed investment platform, has launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a net annual return of 7% to 9% paid out monthly to investors. In August it paid 8.1%. The best part? Unlike other private credit funds, this one has a minimum investment of just $100.
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This article from a 34-year-old who says ‘bye bye’ after earning $2,400 a month in dividend income: The 8 Best Stocks in His Portfolio originally appeared on Benzinga.com
