Dividend investing hardly loses its allure but gains more attention when the Fed cuts interest rates. A recent report from Sterling Capital showed that dividend stocks outperform non-dividend stocks after the first rate cut. The report also said that dividend growers perform better than high-yield stocks in this environment.
But for those looking to buy and hold dividend stocks for decades, these short-term trends might not matter. What matters for such investors is to pick reliable and safe dividend stocks and keep adding to them to reach their financial goals.
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About six months ago, a Redditor shared his detailed dividend income report on r/Dividends – a community of about 600,000 members on Reddit. The investor, who said he's 53 years old, was making just over $48,000 in annual dividend income, according to the portfolio screenshots he shared publicly. The total value of his portfolio was about $1.23 million.
The investor said he was "getting ready" to retire. Asked what he did for a living, here was his response:
"Retired military (enlisted). Wife works in tech and will be retiring this year because she gets annoyed I’m going fishing while she works."
He said he started investing when he was 26 (talk about long-term goals!).
"Lost the bulk of our money three separate times ($20k, $25k and $90k) before changing my investment strategy. Once I stopped chasing high flyers and went for the long-term plan I started making money. When I was young, I kept trying to get a jump on our retirement savings and it kept burning me. Slow and steady really does work."
There were about 23 ETFs and stocks in the portfolio. Let's look at some of the biggest holdings in the portfolio.
Schwab U.S. Dividend Equity ETF
About 33% of the portfolio of the Redditor making $48,000 per year was allocated to Schwab U.S. Dividend Equity ETF SCHD. According to the portfolio details, he made approximately $13,480 in annual income from the fund. Schwab U.S. Dividend Equity ETF SCHD tracks the Dow Jones U.S. Dividend 100 Index and exposes you to some of the top dividend stocks trading 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.
The Vanguard High Dividend Yield Index Fund ETF
The Vanguard High Dividend Yield Index Fund ETF VYM tracks the FTSE High Dividend Yield Index, providing investors with exposure to high-yield U.S. dividend stocks. The fund’s top holdings include Broadcom, JPMorgan, ExxonMobil and Procter and Gamble. VYM is up 15% so far this year. It pays quarterly dividends.
The Vanguard International High Dividend Yield Index Fund ETF
The Vanguard International High Dividend Yield Index Fund ETF (VYMI) was the third biggest holding of the 53-year-old Redditor earning $48,000 a year in dividends. According to the portfolio screenshots shared publicly, he owned about $131,000 worth of VYMI shares. VYMI tracks the FTSE All-World ex U.S. High Dividend Yield Index. It's a suitable ETF for those seeking exposure to non-US dividend stocks. Nestle, Novartis and Roche are the three biggest holdings of the fund.
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SPDR Portfolio S&P 500 High Dividend ETF
The investor who shared his portfolio details, claiming to be earning over $48,000 per year in dividends, showed that 6.6% of his portfolio is allocated to SPDR Portfolio S&P 500 High Dividend ETF SPYD and the total worth of the stake was about $81,600. SPYD yields over 4% and tracks the total return performance of the S&P 500 High Dividend Index. Some of the fund’s top holdings include Kellanova, Public Storage, Hasbro and Simon Property, among others. The fund brought about $3,600 in annual income for the investor.
The Fidelity High Dividend ETF
The Fidelity High Dividend ETF (FDVV) tracks the Fidelity High Dividend Index, which consists of mid- and large-cap dividend stocks. The fund’s top holdings are Apple, ExxonMobil, Nvidia and Broadcom.
Vanguard Dividend Appreciation Index Fund ETF
The Redditor making $48,000 per year in dividend income had a $40,000 position in Vanguard Dividend Appreciation Index Fund (VIG). According to his portfolio screenshots, his annual dividend income from the fund was about $710. VIG is ideal for anyone seeking exposure to companies that consistently grow dividends. The fund tracks the S&P U.S. Dividend Growers Index. The fund's portfolio consists of about 337 stocks, most large-cap companies. Apple, Microsoft, Broadcom, UnitedHealth, ExxonMobil and Procter & Gamble are among the ETF's top holdings.
The iShares International Select Dividend ETF
The iShares International Select Dividend ETF IDV gives investors exposure to dividend stocks from developed markets outside the US. It tracks the Dow Jones EPAC Select Dividend Index, which includes dividend-paying companies from Europe, Asia and Australia.
Pfizer
The Redditor had a $27,800 position in Pfizer Inc. PFE, which has raised its dividends for 15 consecutive years. The stock brought about $1,680 in annual income for the investor. However, PFE shares are down about 11% over the past year.
Reaves Utility Income Fund
Reaves Utility Income Fund (UTG) was bringing about $2,300 in annual income for the 53-year-old Redditor, according to the details he shared publicly on the social platform. The fund invests in utilities and infrastructure companies to generate monthly dividend income for investors. UTG yields about 8% and distributes monthly dividends. Some of the fund’s top holdings include Talen Energy Corp., Constellation Energy, Vistra and CenterPoint Energy.
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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