Redditor Reveals Dividend Portfolio That Earns $18,492.07 Per Year After '4 Years of Investment'

Dividend portfolios start small but grow over time as you make regular contributions and reinvest the dividends. A Redditor let us see this in action by showcasing their portfolio after "4 years of investment."

The individual earns $18,492.07 in annual dividend income and prioritizes high-yield funds like the JPMorgan Equity Premium Income ETF JEPI and JPMorgan Nasdaq Equity Premium Income ETF JEPQ.

Several people commented on the post. The reactions were mixed, with some people being impressed while others expressed caution.

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Yield Chasing

Some commenters expressed their concerns about the original poster chasing high yields. While high-yield stocks and funds result in elevated dividend income, these investments tend to lag the stock market. For instance, JEPI has only delivered an annualized 7% return over the past three years, which has trailed the S&P 500 during the same timeframe.

One of the commenters offered a brutal assessment. "OP will lose his tail on the Yield Max funds," the commenter stated. The Redditor has allocated approximately $20,000 into Yield Max funds.

Another detail about the Redditor's yield chasing is that the dividend distributions are not qualified dividends. The Redditor generates their income from REITs and ETFs that generate income from options trading. This distinction results in all of the dividend income being taxed at ordinary income. While JEPI has given an annualized 7.0% return over the past three years, the real return is lower after you account for taxes.

Slow and Steady Wins the Race

One commenter said that they wished they got those returns, but the individual was worried about the investments losing value. "Only getting 4% on $600k but also would be worried sick of principal drop," the commenter stated.

A 4% yield is still higher than average, but you can find a bunch of dividend stocks that offer qualified dividends and 4% yields. A $600,000 dividend portfolio that yields 4% produces roughly $24,000 per year. That amount should continue to climb higher as the commenter makes more contributions and reinvests the dividend.

Most young dividend investors don't need high yields right now. They aren't going to retire for a few decades, and setting their sights on lower-yielding dividend stocks can minimize risk and potentially lead to more capital appreciation. This approach also results in a lower tax bill since the distributions are treated as qualified dividends.

Good Motivation

One commenter thanked the original poster for sharing their portfolio and referred to it as good motivation. Seeing someone else earn more than $18,000 in annual dividend income can inspire you to set more ambitious goals and pursue similar results for your portfolio.

It's good to surround yourself with like-minded people. The Dividends subreddit brings dividend investors together. The people in the community share their portfolios and tips while responding to each other. Putting yourself in these types of communities can show you what's possible if you work hard.

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