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Dividend investing is an efficient way to hedge against risks and market volatility. Data from Ned Davis Research showed that dividend stocks returned about 8.8% from 1972 through 2012, while their non-dividend counterparts returned 1.6% annually.
But is it possible to reach a decent monthly dividend income for beginner investors? Many investors achieve this by investing small chunks of their savings or earnings in reliable and safe dividend stocks. Let’s take a look at a case study.
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In May last year, a dividend investor shared his detailed investing journey, income report and stock portfolio on r/Dividends, a discussion board with over 600,000 members.
The investor said he reached the milestone of $600 per month in dividend income and gave some important details about himself before sharing his portfolio details:
“I’m 32yo, work in IT since university, currently live in Dubai, married no kids. Started my portfolio in 2019 and I was buying just VT for a while, but then I tilted more to dividend growth investing (it feels more motivating and fun).”
He had a goal of $4,000 per month before he could retire. Would that be enough for him to retire?
“My current goal is 4K per month, assuming I won’t be living in Dubai when I retire (the place is kinda expensive). I’m thinking Spain or Portugal maybe. I make a decent amount of money and my spouse is also working, so we’re building our financial future together,” he added.
The investor’s portfolio screenshots showed his total portfolio worth was $145,828. He collected about $601 in monthly dividends or $7,216 annually. The investor said he added $2,500 in monthly contributions and expected this to increase over time.
Let’s look at some of the most important holdings in this dividend portfolio.
Schwab U.S. Dividend Equity ETF
Schwab U.S. Dividend Equity ETF (NYSE:SCHD) was among the Redditor’s biggest holdings. He earned $600 per month in dividend income on a $145,828 investment. He owned 513 SCHD shares and his total stake in the fund was worth $36,195.
Schwab U.S. Dividend Equity ETF (NYSE:SCHD) tracks the Dow Jones U.S. Dividend 100 Index and provides exposure to top dividend stocks in the U.S., including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi and AbbVie, among many others. Since SCHD’s holdings are mostly conservative dividend payers, it’s suitable for investors close to retirement looking for consistent dividend income.
Vanguard Total World Stock Index Fund ETF
Vanguard Total World Stock Index Fund ETF (NYSE:VT) provides exposure to the U.S., emerging markets, Europe and the Middle East stock markets. The fund pays quarterly dividends and yields about 1.85%. The Redditor who reached $600 per month in dividend income with a $145,828 portfolio said he owned 419 shares of VT.
According to the portfolio screenshots he shared publicly on Reddit, the investor had a $32,260 position in JPMorgan Equity Premium Income ETF (NYSE:JEPI), which yields about 7%. It invests in notable large-cap U.S. stocks and generates income by selling call options. JEPI is ideal for those looking for exposure to defensive stocks. JEPI usually underperforms during bull markets but protects investors against large losses during bear markets, as most of its portfolio consists of large, defensive equities like Trane Technologies PLC (NYSE:TT), Southern Co. (NYSE:SO) and Progressive Corp. (NYSE:PGR), among many others.
During the discussion, the investor shared more thoughts on JEPI:
“From my perspective, jepi can be okay-ish in times likes this – when the market is down I get a reasonable cash flow from it and buy more shares of stocks/VT.”
JPMorgan Nasdaq Equity Premium Income ETF
The Redditor making $600 monthly had a $558 position in JEPQ. JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) is a high-yield covered call ETF that distributes monthly dividend income. The ETF invests in Nasdaq companies and generates extra income by selling call options. As of Oct. 25, JEPQ yields 9.2%.
AbbVie
AbbVie Inc. (NYSE:ABBV) was an important stock in the investor’s portfolio, which earned $600 per month in dividend income on a $145,828 portfolio. His initial investment in the company was $2,890, which rose to $3,705, as per the portfolio screenshots shared publicly by the investor. AbbVie has a dividend yield of 3.3%.
Ally Financial
Detroit-based banking company Ally Financial Inc. (NYSE:ALLY) has a dividend yield of about 3.5%. The investor earning $600 per month in dividends with about $145,800 invested had 151 shares of the company, valued at $4,067 at the time of his post. Ally Financial recently beat Wall Street estimates for its third-quarter results.
Church & Dwight Co
Home and personal care products company Church & Dwight Co., Inc. (NYSE:CHD) has a dividend yield of just 1.1% but has raised its payouts for 28 consecutive years. The Redditor’s original investment in the company was $3,358, which increased to $3,662, according to his shared portfolio screenshots.
Realty Income
Realty Income Corp. (NYSE:O) is among the top monthly dividend stocks popular among investors due to its steady and reliable payments. The company has increased its dividend for 30 consecutive years. The Redditor earning $600 per month in dividends had 62 O shares in his portfolio.
The current interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through publicly-traded REITs.
