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Should you invest in growth stocks for capital gains through stock price appreciation or in dividend stocks for steady, reliable income? There’s no one-size-fits-all answer, but patient investors are crushing it with income strategies, earning substantial returns through regular dividends.
About two months ago, a dividend investor shared his success story and income report on r/Dividends – a community of over 600,000 members on Reddit. The investor, 48, said he was collecting about $2,200 per month in dividend income with a portfolio worth $378,351. This gives the portfolio a strong dividend yield of over 7%.
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The investor was asked about his expectations of capital growth from his portfolio. Here was his response:
“I expect it to grow between 5-7% annually without reinvesting dividends. Yes, I am reinvesting dividends. With dividends reinvested, I expect it to grow 8-10% annually.”
Based on the screenshots shared by the investor publicly, let’s examine some of the biggest holdings of this high-yield dividend portfolio.
Vanguard 500 Index Fund Admiral Shares
Vanguard 500 Index Fund Admiral Shares (MUTF: VFIAX) was one of the Redditor’s biggest positions, earning $2,200 per month in dividends. His portfolio screenshots showed that VFIAX accounted for about 34.5% of the entire portfolio. This fund tracks the S&P 500 Index, with about 79% of the portfolio comprising large-cap stocks. The fund yields 1.3% and pays quarterly dividends.
Fidelity Total Bond K6 Fund
Fidelity Total Bond K6 Fund (FTKFX) invests in U.S. government securities, investment-grade corporate bonds, mortgage-backed securities and other debt instruments. The fund suits investors looking for safer, fixed-income investments rather than stocks. FTKFX has a dividend yield of about 4.5% and pays monthly. About 32% of the investor’s total portfolio making $2,200 per month was invested in FTKFX.
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JPMorgan Nasdaq Equity Premium Income ETF
The Redditor, who earns about $2,200 in monthly dividend income on a $378,000 portfolio, had about 7.2% of his total investments in the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ). This covered call ETF distributes monthly dividend income. It invests in Nasdaq companies and generates extra income by selling call options. The fund has a dividend yield of more than 9%.
NEOS S&P 500 High Income ETF
According to the portfolio screenshots shared publicly by the investor, about 6.7% of the $378,000 portfolio generating $2,200 in dividend income per month was allocated to the NEOS S&P 500 High Income ETF (BATS:SPYI). SPYI is a high-yield covered call ETF that pays monthly dividend income. It invests in some of the top S&P 500 companies and generates extra income by selling call options on stocks, generating extra premium income for shareholders. SPYI has a distribution rate of more than 12%.
Goldman Sachs Nasdaq-100 Core Premium Income ETF
Goldman Sachs Nasdaq-100 Core Premium Income ETF (NASDAQ:GPIQ) generates income by selling call options on stocks comprising the Nasdaq-100 Index. Apple, Nvidia, Microsoft, Broadcom and Meta Platforms, among many top tech companies, form the fund’s biggest holdings. The Redditor making $2,200 monthly had 6.2% of his total portfolio allocated to the fund.
Capital Group Dividend Value ETF
Capital Group Dividend Value ETF (NYSE:CGDV) is another dividend-focused ETF in the portfolio of the Redditor, who makes $2,200 a month. The fund mostly invests in large-cap dividend-paying stocks. It pays quarterly dividends and is up 37% so far this year.
The Simplify Volatility Premium ETF (NYSE:SVOL) accounted for about 3% of the Redditor’s total portfolio, generating $2,200 in income per month. SVOL, which has a yield of about 16%, generates income by shorting the CBOE Volatility Index (VIX) and betting that volatility will remain stable or decrease. Since the broader market tends to go higher in the long term, investing in this ETF suits those looking for stable income checks.
Roundhill S&P 500 0DTE Covered Call Strategy ETF
Roundhill S&P 500 0DTE Covered Call Strategy ETF (BATS:XDTE) generates income by selling call options on the S&P 500 Index that expire on the same day, known as 0DTE options. The ETF is suitable for those looking to generate short-term income by focusing on daily market movements.
iShares 1-3 Year Treasury Bond ETF
iShares 1-3 Year Treasury Bond ETF (NASDAQ:SHY) tracks the performance of Treasury bonds with maturities between one and three years. Short-term bond ETFs like SHY are less vulnerable to interest rate fluctuations, providing stability to investors.
The current interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through publicly-traded REITs.
Arrived Homes, the Jeff Bezos-backed investment platform, has launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. It paid 8.1% in July. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
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