Major technology stocks like Meta Platforms and Microsoft fell after their latest earnings as Wall Street was spooked by their mounting expenses and AI spending. With election-related uncertainties and the need for portfolio diversification, dividend stocks remain in focus. Data shows dividend growth stocks have outpaced inflation over the past 23 years. However, choosing the right dividend stocks and ETFs in today’s market remains a key question for beginner investors.
About a year ago, a dividend investor shared his detailed income report and story on r/Dividends – a discussion board for income investors with over 600,000 members. The investor said his investing account was started with $60,000, which he saved in his 403(b) retirement plan while working at his first job for eight years. He then rolled over this money into an IRA.
The investor said this $60,000 rose to $1.2 million in 27 years from 1996 “without putting any new money.”
“During that time, I have experienced tremendous market ups/downs like the internet (tech) bubble/burst, housing bubble/burst, Great Recession and recent Covid-19 crash and recovery. During all these times, my focus was the growth of company stocks, mutual funds and ETFs. My core holdings were always SPY and QQQ about 50-70% and occasionally some speculative stocks about 20-30%,” the investor said.
He highlighted that he stayed invested in the market during all these ups and downs. The investor said he is now retired and switched his focus to dividend investing in 2022.
“My only regret is that I should have switched to dividend focus a little sooner when I had $1.5m, but I guess it’s life. Its projected dividend yield is ~9%, but I will be content with ~8% dividend yield.”
The investor clarified that most of his portfolio gains came from when he focused on growth.
“The only dividend I have received during my accumulation phase was from SPY & QQQ. I heavily focused on growth,” he said.
The investor’s portfolio screenshots showed his monthly dividend income of about $9,495 or $113,949 per year. Most of his holdings were dividend ETFs. Let’s take a look at the portfolio.
JPMorgan Equity Premium Income ETF (NYSE:JEPI) was the biggest position in the portfolio of the investor earning $9,495 per month in dividend income. The portfolio screenshots showed he owned 5,323 shares of JEPI, worth about $288,187 at the time. The investor raked in about $32,933 in annual dividend income from the ETF.
JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) was the second-biggest position of the Redditor, earning $9,495 per month in dividends, as his position in the covered call ETF was valued at about $268,275. JEPQ distributes monthly dividends, invests in Nasdaq companies and generates extra income by selling call options. The ETF yields about 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 stock price appreciation as the ETF exposes some of the top tech stocks in the NASDAQ-100 index. The fund pays quarterly dividends and yields about 0.6%. The investor owned 544 shares of the fund, according to the screenshots he publicly shared on Reddit.
During the discussion on his post, the investor commented about his conviction in the QQQ:
“Since I am much younger than Buffett, I also have faith in QQQ. I have faith in American entrepreneurship and technological creativity. So, my core holdings are always SPY and QQQ.”
The SPDR S&P 500 ETF Trust
One of the key perks of investing in The SPDR S&P 500 ETF Trust (NYSE:SPY) is that it allows you to see your capital grow and get quarterly dividend payments. The fund has a dividend yield of about 1.2%. The Redditor earning $9,495 per month in dividends had 433 SPY shares in his portfolio, valued at about $181,868. The investment brought in $2,792 in annual dividend income for the investor.
Ares Capital
Ares Capital Corporation (NASDAQ:ARCC) is a business development company with a dividend yield of about 9%. The investor had 5,820 shares of Ares Capital in his portfolio, worth about $109,532 at the time. The investment earned about $11,174 in income.
Global X Russell 2000 Covered Call ETF
The investor earning $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 about 12%. Being a covered call ETF, RYLD can incur losses during down markets.
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iShares iBoxx $ High Yield Corporate Bond ETF
The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) provides investors with exposure to U.S. dollar-denominated high-yield corporate bonds. It tracks the Markit iBoxx USD Liquid High Yield Index, which comprises a broad range of below-investment-grade bonds. The fund has a dividend yield of about 6%.
YieldMax TSLA Option 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 shares. Over the past year, TSLY has been down about 42%, while Tesla is up 28%.
Guggenheim Strategic Opportunities 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’s a risky investment because it invests in ungraded bonds, also known as junk bonds.
The investor, who earned $9,495 per month, had 776 shares of GOF in his portfolio. This investment generated $1,695 in annual income.
iShares 20+ Year Treasury Bond BuyWrite Strat ETF
iShares 20+ Year Treasury Bond BuyWrite Strat ETF (BATS:TLTW) invests in U.S. Treasury bonds with 20 years or more maturities. It also generates income by selling call options on the U.S. Immigration and Customs Enforcement 20+ Year U.S. Treasury Index.
The current interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through publicly-traded REITs.
Arrived 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 target 7% to 9% net annual yield paid to investors monthly. It paid 8.1% in August. The best part? Due to high demand the maximum investment amount is currently $5,000 with a minimum investment of ONLY $100.
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This article Dividend Investor Earning $9,495 Per Month Regrets Not Focusing on Dividends Sooner, Shares His 10 Stock, ETF Picks originally appeared on Benzinga.com
