The latest jobs report has spooked the financial markets. Analysts now believe the Federal Reserve is set to slow down its interest rate cuts amid signs of elevated inflation and a strong labor market. Income investing is expected to gain steam this year as dividend stocks provide a cushion for investors during recessions and uncertain times. But which dividend stocks can help you reach a significant monthly income figure? Let's see a case study for ideas.
Last month, someone asked dividend investors earning over $2,000 a month to share their strategy and portfolio details on r/Dividends, a Reddit discussion board for income investors. The question received nearly 300 comments, with many successful income investing stories and interesting portfolios. A particular comment caught our eye.
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An investor said he collected about $12,100 per month from his portfolio worth about $3.59 million. In a separate comment made on a discussion on early retirement, the investor, 50, said he never dreamed of achieving what he had when he was 27.
"I'm 50, sitting on a beach in Thailand and feeling like I'm still 30. 50 is a long way away from you and a lot can change. I never dreamed I would be where I was at 50 when I was 27. Aiming for $1M is good, but recognize that you may end up with a lot more than that or a lot less depending on what happens in the next 23 years," he said.
Based on the details he shared on Reddit, let's examine some of the key dividend stocks in the investor's portfolio.
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Schwab U.S. Dividend Equity ETF
The Redditor who collected $12,100 in monthly dividends had Schwab U.S. Dividend Equity ETF (SCHD) in his portfolio. The fund tracks the Dow Jones U.S. Dividend 100 Index, exposing investors to top dividend stocks in the U.S., including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi and AbbVie, among others. Since SCHD's holdings are mostly conservative dividend payers, it's suitable for investors close to retirement looking for consistent dividend income.
iShares 0-3 Month Treasury Bond ETF
iShares 0-3 Month Treasury Bond ETF (SGOV) tracks the performance of U.S. Treasury bonds with maturities of 0-3 months.
Cohen & Steers Infrastructure Fund
The Cohen & Steers Infrastructure Fund (UTF) has a distribution rate of 7.8% and pays monthly dividends. It invests in infrastructure companies like American Tower, The Southern Company, NextEra, TC Energy and Duke Energy.
PIMCO Dynamic Income Fund
The PIMCO Dynamic Income Fund (PDI) invests in fixed-income securities to generate income and appreciate capital. It focuses on mortgage-backed securities, investment-grade and high-yield corporate and sovereign bonds from developed and emerging markets.
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PIMCO Dynamic Opportunities Fund
The PIMCO Dynamic Opportunities Fund (PDO) was another fixed-income fund in the portfolio of an investor who earned $12,100 a month in dividends. The fund adjusts its portfolio based on market conditions and interest rate movements.
Cohen & Steers Quality Income Realty Fund
The Cohen & Steers Quality Income Realty Fund (RQI) targets income generation and capital appreciation by investing in real estate stocks. It has a distribution rate of about 7.8% and pays monthly. American Tower, Welltower, Prologis, Digital Realty, Simon Property, Equinix and Crown Castle International were among the top real estate companies in the fund’s portfolio. Over the past year, RQI has been down 2.3%.
AbbVie
AbbVie (ABBV) has increased its dividends without a break for over 50 years. According to Benzinga Pro, the stock yields about 3.7%. Last month, BofA started covering AbbVie with a Neutral rating and a $191 price target.
Petroleo Brasileiro
Petroleo Brasileiro ADR (PBR) is a state-owned Brazilian energy company. PBR's dividend yield stands at about 20%. In November, the company announced about $3.4 billion in extraordinary dividends to shareholders.
Vanguard Energy ETF
The Vanguard Energy ETF (VDE) provides investors with exposure to oil and gas companies. Its dividend yield is about 2.9%. The fund’s top holdings are ExxonMobil, Chevron, ConocoPhillips, EOG Resources, ONEOK and Schlumberger.
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Energy Transfer LP
Energy Transfer (ET) is an energy dividend stock with an almost 6.6% yield. The company is less exposed to volatile commodity prices than its rivals since most of its revenue comes from fee-based contracts.
The Invesco QQQ Trust Series 1
The Invesco QQQ Trust, Series 1 (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.
Virtus Artificial Intelligence & Technology Opportunities Fund
The Virtus Artificial Intelligence & Technology Opportunities Fund (AIO) targets capital appreciation and dividend income by investing in AI and tech companies. Over the past year, AIO is up 30%. The fund pays monthly and has a dividend yield of about 11%.
Realty Income Corporation
With a dividend yield of over 6% and three decades of consistent payout increases, Realty Income (O) is one of the most popular monthly dividend stocks. However, the stock has been under pressure lately due to fears stemming from the possibility of a higher-for-longer interest rate scenario.
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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