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Attaching too much importance to returns when investing in dividends entails risks and caveats. But high-yield dividend stocks have never lost their appeal over the decades. For novice investors with a limited budget and a high risk appetite, focusing on stocks with high yields is the only way to earn significant dividend income.
While dividend growth stocks with strong fundamentals and strong growth histories offer investors better long-term opportunities, many are crushing them by investing in high-yield stocks.
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About two months ago, a dividend investor shared his portfolio and income report on r/Dividends, a discussion board for dividend investors on Reddit. The investor said he collected about $1,000 monthly with $40,000 invested, giving the portfolio an insane return of about 34%.
“I created a hyper-dividend portfolio last month and raised 1k last month. The goal is to reach 2.5k per month by August next year,” the investor said.
As expected, most of the holdings in the portfolio are risky high-yield options ETFs. When asked if he is aware of the risks of principal losses associated with investing in these types of ETFs, the investor responded:
‘Yes, I know. These are called synthetic ETFs. It doesn’t matter how they pay it, as long as the principal + interest is < the final value.'
Let’s take a look at some of the biggest holdings in this extremely high-yield dividend portfolio.
Keep in mind that many of these investments are high-risk ETFs. This article is based on an earnings report shared publicly by an investor. It is not investment advice.
The YieldMax MSTR Option Income Strategy ETF
The YieldMax MSTR Option Income Strategy ETF (NYSE:MSTY) generates income by selling call options on MicroStrategy (MSTR) stock. The distribution rate is approximately 75%.
The Simplify Volatility Premium ETF
The Simplify Volatility Premium ETF (NYSE:SVOL) is a high-yield (16%) dividend ETF that is gaining popularity on Reddit. The ETF generates income by shorting the CBOE Volatility Index (VIX) and betting that volatility will remain stable or decrease. 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 Redditor, who earned $1,000 monthly on a $40,000 investment, said he owned 200 shares of SVOL.
The Pacer Pacific Asset Variable Rate High Income ETF
The Redditor earned $1,000 monthly and said he owned about 100 shares of the Pacer Pacific Asset Floating Rate High Income ETF (NYSE:FLRT). FLRT generates income by investing primarily in variable rate loans from non-investment grade companies. These ETFs gain popularity as interest rates rise. The fund yields approximately 8%.
JPMorgan Equity Premium Income ETF
JPMorgan Equity Premium Income ETF (NYSE:JEPI) was among the notable dividend ETFs in the Redditor’s portfolio, earning $1,000 per week on $40,000. His hyper-dividend portfolio consisted of 100 JEPI shares. JEPI makes money by investing in large-cap US stocks and selling call options. JEPI is ideal for those looking for exposure to defensive stocks. It usually underperforms during bull markets but protects investors from big losses during bear markets because its portfolio consists of defensive stocks such as Trane Technologies PLC (NYSE:TT), Southern Co (NYSE:SO), Progressive Corp (NYSE:PGR), including others.
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YieldMax AMZN Options Income Strategy ETF
The YieldMax AMZN Option Income Strategy ETF (NYSE:AMZY) generates income by selling call options on Amazon. The Redditor with the hyper-dividend portfolio said he owned 100 shares of AMZY. The fund has a distribution percentage of approximately 41%. AMZY is down 9% so far this year.
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 payout percentage of over 120%, TSLY generates income by selling call options on Tesla shares. Over the past year, TSLY is down about 55%, while Tesla stock is down 7%.
Real estate income
Realty Income Corp (NYSE:O) is a key part of the Reddit dividend portfolio success stories. The REIT has a dividend yield of over 5% and has been increasing its payouts for 30 years. The Redditor who made $1,000 a month on $40,000 said he owned 100 shares of Realty Income.
JPMorgan Nasdaq Equity Premium Income ETF
The Redditor who made $1,000 a month had about 100 shares of JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) in his portfolio. JEPQ invests in Nasdaq companies and generates additional income through the sale of call options. As of October 14, the ETF yields approximately 9.4%.
YieldMax NVDA Option Income Strategy ETF
YieldMax NVDA Option Income Strategy ETF (NYSE:NVDY) makes money by selling call options on Nvidia. Recently, the ETF has gained popularity amid the buzz surrounding Nvidia. The fund has a distribution percentage of approximately 57%. NVDY is suitable for investors who believe in Nvidia’s long-term potential but want to hedge against possible declines in the chipmaker’s stock.
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 Dividend Investor Makes $1,000 a Month With Just $40,000 Invested in Stocks His ‘Hyper Dividend’ Portfolio: Top 9 Stocks and ETFs originally appeared on Benzinga.com
