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Staying invested in the stock market is one of the most efficient ways to grow your wealth. But it’s easier said than done. Market swings, volatility and the constant pressure of daily news could overwhelm investors, causing them to sell their positions on a whim. According to a report from Lord Abbett, dividend stocks provide a way to avoid this emotional decision-making. The report said that over 50 years through September 2023, high-quality companies initiating and growing their dividends posted higher returns and lower volatility than the equal-weighted index.
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Earlier in December, a dividend investor shared his income report and some portfolio holdings on r/Dividends, a community of income investors with over 625,000 members.
The investor’s portfolio screenshots showed that his portfolio generated $29,920 in annual dividend income or about $2,490 monthly. When asked how much his portfolio was worth, the investor said it was $152,000. This comes out to a 20% dividend yield.
“Will make it, it’s a slow process … but, almost at 30K a year & will still keep climbing,” he said.
The investor’s portfolio consisted of high-risk, high-yield dividend ETFs. Several Redditors warned him about the potential risks of investing in high-yield covered ETFs. He sounded confident and aware of the risks and said he’s happy to invest in “whatever pays the bills.”
“I’ll get into higher risk when I get a moat. I build out a “safe” revenue stream & then I pour dividends into higher yields,” he said.
The investor was asked whether this income was enough to pay his bills or if he still experiences money anxiety. He responded:
“Right now, it covers my fines & expenses per month & I save $400 a month with no job.”
He urged others in the discussion to start saving to invest in the stock market and live below their means if necessary. He said he still does not have a car.
“Dividends paying bills is nirvana,” he said.
During the discussion, the investor shared his top three investments, saying he had about $20,000 invested in each. Let’s take a look at these dividend ETFs.
Rex Fang & Innovation Equity Premium Income ETF (FEPI) provides investors with exposure to technology and innovation stocks. The fund seeks capital appreciation and income generation by selling call options. The covered call strategy protects investors from downside risks associated with tech stocks. Some of the fund’s biggest holdings include Micron, Tesla, AMD, Intel, Apple, Salesforce and Nvidia, among many others.
FEPI has a distribution rate of about 25% and pays monthly. The investor, who earned $2,490 per month with just $152,000 invested, said he had about $20,000 allocated to FEPI.
FEPI is down about 5% this year, while the S&P 500 (SPY) is up 27% in the same period.
The Simplify Volatility Premium ETF
The Simplify Volatility Premium ETF (NYSE:SVOL) generates income by shorting the CBOE Volatility Index (VIX) and betting that volatility will remain stable. Since the broader market tends to go higher in the long term, investing in this ETF suits those looking for stable income checks.
The investor earning $2,490 monthly in dividends had a $20,000 position in SVOL. During the discussion on his post, he said SVOL was one of his favorite funds.
SVOL is down about 4.3% so far this year. It yields about 17% and pays monthly dividends.
In the third quarter, the Simplify Volatility Premium ETF returned 1.95%. Its short positions in VIX futures detracted 2.36%. The fund noted in its quarterly report that fixed-income securities and option overlays are expected to slightly increase portfolio yield below historical levels amid the FOMC’s 0.5% rate cut in September.
The investor making $2,490 per month in dividends said Roundhill Innov-100 0DTE Covered Call ETF (QDTE) was among his top three holdings with a $20,000 position. QDTE generates income via a zero-day-to-expiration (0DTE) options strategy on the Roundhill Innovate Index. This strategy involves selling call options that expire the same day. The fund has a distribution rate of 26% and pays weekly.
