Where To Invest $1,000 A Month In Dividends? Redditors List Their Favorite Stocks And ETFs

Many investors dream of a future of passive income from dividend stocks, but we all have to start somewhere. With the Fed in rate-cut mode, potentially delivering another cut before the end of the year, dividend stocks are becoming more attractive. 

In September, John Linehan, T. Rowe Price’s chief investment officer of equity, appeared on CNBC’s “Squawk On The Street” to share his opinion on dividend stocks. “I think dividend stocks right now are very attractive,” he said. "The valuations are fairly compelling. Over time, people might not realize this, but dividend-paying stocks outperform the market over a longer period.” 

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On Reddit's popular dividends subreddit, Redditors are weighing in on what dividend stocks and ETFs they find most appealing right now for investing $1,000 a month. That sum is enough to build a steady passive income stream that could grow substantially over time.

The 24-year-old Redditor who started the conversation is currently splitting $1,000 between two ETFs: VOOG and VTI and was looking for other suggestions. 

VOOG VOOG is the Vanguard S&P 500 Growth ETF. It tracks the S&P 500 Growth Index, seeking to deliver an investment return of large-capitalization growth stocks. It is up nearly 41% this year, nearly meeting its benchmark. Over three years, the performance is close to 10%. 

VTI VTI is the Vanguard Total Stock Market ETF. It casts a wider net, tracking the CRSP U.S. Total Market Index and incorporating large, mid and small-cap equity diversified across growth and value styles. Its returns have been close to 22% for the year so far. 

Other Redditors weighed in with their choices. Several dividend fans on the forum cited the Schwab U.S. Dividend Equity ETF SCHD. This ETF is a perennial favorite in the dividends subreddit and is beloved for its consistency. It tracks the Dow Jones U.S. Dividend 100 Index and is a low-cost way to access the top dividend-paying stocks. It underwent a 3-for-1 share split recently. It provides quarterly distributions and top holdings include Home Depot Inc. HD, BlackRock Inc. BLK, Cisco Systems, Inc. CSCO and Chevron Corp. CVX. 

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One Redditor investing $1,000 a month pairs SCHD with the Schwab U.S. Large-Cap Growth ETF SCHG. This ETF recently had a 4-for-1 share split. It tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index and focuses more on tech. As of this writing, approximately one-third of its holdings are in Apple, Inc. AAPL, Nvidia Corp NVDA and Microsoft MSFT. Another investor noted, "I'm about to start doing this for the next 30 years. I was surprised the other day when I saw how much tech is in SCHG." The original poster asked about Nvidia, saying they are already very heavy on the stock but want to diversify a bit. 

While most of the investors chiming in were looking at ETFs, not all were taking that approach. One investor divides money between two high-yield dividend-paying stocks: Main Street Capital MAIN and Realty Income O. Main Street Capital, a business development company, has an impressive 8.09% dividend yield and an annual payout of $4.09. In August, Jim Cramer was asked about Main Street Capital and said he has never trusted business development companies. Realty Income, a Dividend King, is popular for its steady monthly payouts, but one investor cautioned that the appreciation is cyclical. 

Regarding strategy, these dividend investors are planning for the long haul, putting most of their monthly payments into ETFs with a broader large-cap approach while adding some high-risk growth stocks and ETFs. While the potential for an immediate income stream is tempting, at least one investor is using the DRIP approach, putting those dividends not into their pocket but back into the dividend payers to develop a bigger passive income stream for when they need it most. 

Wondering if your investments can get you to a $5,000,000 nest egg? Speak to a financial advisor today. SmartAsset’s free tool matches you up with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.

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