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Dividend investing has been an efficient way for investors to protect against inflation. For example, data shows that between 1974 and 1980, when inflation averaged 9.3%, stocks delivered a total return of 10%, with 5% from dividend income and 4.8% from price gains.
About eight months ago, a dividend investor shared his investing journey on r/Dividends – a community of income investors on Reddit with about 630,000 members. He wanted to celebrate the fifth anniversary of his portfolio. He said his dividend income reached $3,300 per year from $470 in five years.
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The investor, 49, said he started investing in dividend stocks in his mid-40s and developed a portfolio of “core holdings.”
“I spent about a month researching how to pick the best individual stocks to include in my portfolio. I was lucky to have $15K to start with and I wanted to make sure I was diversified but still had enough of each investment to make it worthwhile,” he said.
The Redditor initially invested about $2,500 each in six stocks, with a focus on dividend aristocrats and dividend kings. He wanted to invest in stocks that would grow over the next five to 10 years and avoided volatile industries like oil.
‘This is a Big Mountain to Climb’
“This is a big mountain to climb. My goal to generate more passive income is a great goal, but I look at my current passive income and it is $275/month. That would cover a couple of nice dinners in retirement or a Tim Horton’s run every day, but certainly is not close to paying for living expenses. For now, I will carry on with my goals to see how far up the mountain I can get!”
The investor gave a detailed breakdown of his stock portfolio when he started investing five years ago and his latest stock portfolio as of the time of his post.
Let’s take a look at some of the biggest positions in this portfolio.
Target Corp (NYSE:TGT) was one of the core positions of the investor who reached $3,300 in dividend income over five years. He had 29 shares of the company in his portfolio. The investor said he chose Target because of its dividend growth history and belief in the brand and e-commerce growth.
Coca-Cola
The investor initially bought 50 shares of Coca-Cola Co (NYSE:KO) at $47.74 per share. At the time of his post, he had 75 shares of the beverage giant. The investor said he sold some KO shares to diversify his portfolio and bought Pepsi. However, he later sold his PEP stake and bought more KO stock.
“Diversification for the sake of diversification does not always yield better results, sometimes just stick with a proven winner,” he said.
Sysco Corp
Food products company Sysco Corp (NYSE:SYY) was among the investor’s core holdings and he saw his dividend income rise from $470 to $3,300 in five years. He had 35 shares of the company in his portfolio. According to Benzinga Pro, SYY has a dividend yield of about 2.5%.
AT&T
The investor making about $3,300 per year bought 65 shares of AT&T Inc (NYSE:T) five years ago at $30.58 per share. At the time of his post, he had 140 company shares. He said he chose AT&T because of its yield.
“The dividend yield is still high, but there does not seem to be a commitment to grow the dividend. I have thought about transitioning these shares to VZ, but also not sure about them either. For now, I have removed this as a core holding, with plans to enjoy the income for now and hope for a rebound in the stock price,” he said.
Costco Wholesale
Costco Wholesale Corporation (NASDAQ:COST) was one of the investor’s core holdings in his latest portfolio. He made $46 in annual dividend income from his investment in the retailer. COST shares are up 53% so far this year.
“Unbelievable dividend growth, special dividend and still untapped opportunities in e-commerce / store growth,” the investor said about the company.
Microsoft Corp (NASDAQ:MSFT) accounted for about 5.9% of the investor’s latest portfolio, making $3,300 per year in dividends. He made about $51 in dividend income from the stock.
“This was good before AI. Now it is an even more interesting tech play. Strong potential for dividend growth,” he said.
Realty Income
Realty Income Corp (NYSE:O) is one of the most popular monthly dividend stocks among investors on Reddit. The investor making $3,300 in annual dividends had 125 shares of the REIT in his portfolio. Annually, he made $385 from this investment.
“I love the yield and I love getting monthly income to buy new stocks,” he said.
Brookfield Renewable Corp
According to Benzinga Pro, renewable power solutions company Brookfield Renewable Corp (NYSE:BEPC) has a dividend yield of about 4.8%. The investor had 215 shares of the company in his portfolio and made about $305 in annual dividend income from the stock.
“I am long on renewables, despite this sector going out of favor. Planning to continue to add while prices are low,” he said.
Home Depot
The investor said he likes Home Depot Inc (NYSE:HD) because of its “retail performance” and focus on building a contractor network. He had 14 shares of the home improvement retailer in his portfolio.
Procter & Gamble
Procter & Gamble Co (NYSE:PG) was another key part of the investor’s portfolio. His dividend income increased from $470 to $3,300 per year and he owned 28 shares of the company.
Visa
The Redditor said he invested in Visa Inc (NYSE:V) because he wanted exposure to the finance industry without investing in brick-and-mortar banks. Visa contributed about $31 to the investor’s overall dividend income annually.
“While the current yield is small, the dividend growth has been strong. I also like V’s willingness to try new things via acquisitions,” the investor added.
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