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As investors look for attractive opportunities to channel capital into the markets after the first rate cut, dividend stocks are gaining ground. In a recent interview with CNBC, T. Rowe Price Chief Investment Officer of Equity John Linehan said dividend stocks outperform the market over the long term. The analyst said he prefers dividend stocks with decent yields and attractive valuations.
Looking beyond interest rate cuts, what types of dividend stocks and ETFs can help you generate enough dividend income so you don’t have to live paycheck to paycheck anymore? There are plenty of success stories that can provide inspiration and guidance to beginners.
Check it out:
About two years ago, someone shared their detailed dividend income report on the r/dividends community on Reddit, saying they reached about $60,000 in annual dividend income while their portfolio returned 9%.
Almost the entire investor’s portfolio was allocated dividend ETFs. This is what he said about this:
“My money is mainly in closed-end funds, so I try to understand them before investing in them. A lot of them are leveraged, which means they were hit by the rate hike last quarter. We’ll see in the long run how that will happen.” plays anyway.”
The dividend investor said the total value of his portfolio was about $1.1 million, with about $600,000 in “high dividends.”
The investor was asked how he could save this kind of money for his investments. This is what he said:
“I started around 21. I saved and worked in tech. I got lucky with a few IPOs and a home sale, so it wasn’t really stable. I didn’t miss my IRA and 401(k). ) contributions, but that is a separate account with about 500k.”
This dividend investor received a lot of praise on Reddit for generating such high returns from his investments. However, he repeatedly said that he is setting higher goals for himself and trying to save more.
“But there’s a lot more to do before I can take my foot off the gas pedal. Still grinding and not spending much. My wife drives a 2015 minivan. We don’t take luxury vacations. Eating out is generally Chipotle, Chick Fil A and Tijuana Plains.”
Many people criticized the investor for worrying too much about his expenses and urged him to take it easy and live his life. In response, the Redditor said he wasn’t “frugal.”
“I have a new house on a half acre lot. My cars are paid for. We go out to eat whenever we want. I buy/build a new gaming PC every two years. We just don’t do the expensive versions of those stuff. Although last year I spent a lot of money and got the 3080 instead of the normal 3060 I would have bought.
There were about 20 dividend funds in this dividend investor’s portfolio. Let’s take a look at the largest funds in this high-yield portfolio.
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Global X Russell 2000 Covered Call ETF
Global X Russell 2000 Covered Call ETF (NYSE:RYLD) was the Redditor’s largest holding company, earning about $60,000 in annual dividend income. RYLD generates income by selling call options on the small-cap Russell 2000 Index. The ETF yields approximately 12%. Being a covered call ETF, RYLD is also not risk-free and often posts losses during bear markets. The ETF is now in the spotlight as analysts believe small-cap stocks will be among the biggest beneficiaries of an easing monetary environment.
First Trust Energy Infrastructure Fund
First Trust Energy Infrastructure Closed Fund (FIF) was the Redditor’s second-largest holding when he shared his portfolio details a few years ago. However, in May this year, the fund was merged with FIRST TRUST EXCHANGE-TRADED FUND VIII (EIPI).
Western Asset Inflation-Linked Opportunities & Income Fund
About 7% of the Redditor’s portfolio, which generated $60,000 in dividend income per year, was allocated to the Western Asset Inflation-Linked Opportunities & Income Fund (WIW). The fund invests mainly in US government bonds. It yields more than 8% and pays monthly income.
Squared interest rate volatility and inflation hedge ETF
About 6% of the Redditor’s portfolio that earned $60,000 in annual dividends was allocated to Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL). The fund invests in government bonds and interest rate options, allowing investors to hedge against fluctuations in interest rates and inflation. Approximately 80% of the fund’s portfolios are invested in Schwab US TIPS ETF, which tracks the total return of an index composed of inflation-protected U.S. Treasury bonds.
Eaton Vance Corporation Tax-Managed Global Buy-Write Opportunities Fund of Beneficial Interest
Eaton Vance Corporation Tax-Managed Fund (ETW) invests in U.S. and international stocks and generates income by selling call options on a portfolio of its investments.
It is a tax efficient fund because it minimizes taxable distributions through its options strategy and management of the timing of stock sales. Apple, Nvidia, Amazon and Microsoft are among the fund’s top holdings.
Eagle Point Credit Company Inc.
Eagle Point Credit Company (ECC) is a publicly traded fund that primarily invests equity tranches of collateralized loan obligations (CLOs). These are high-risk, bundled leveraged loans from companies with limited credit access. These are investments with a high return and a high risk.
Cohen & Steers REIT and Preferred and Income Fund
Portfolio data shared publicly by the Redditor who earned about $60,000 in dividend income per year showed that about 2% of his total investments were in Cohen & Steers REIT and Preferred and Income Fund (RNP), which generates income by investing in real estate shares. The fund also invests in fixed income securities, including bonds and preferred securities of companies active in diversified sectors.
Nuveen Real Asset Income and Growth Fund
Nuveen Real Asset Income and Growth Fund (JRI) invests in real estate shares and fixed income securities. The portfolio consists of common stocks, preferred securities and corporate debt involved in infrastructure, facilities, services and REITs.
Interest rates are falling, but these returns aren’t going anywhere
Lower interest rates mean that some investments won’t return what they have in recent months, but you don’t have to lose those gains. Certain private market investment properties offer retail investors the opportunity to take advantage of these high-yield opportunities, and Benzinga has found some of the most attractive options you can consider.
Arrivald Homes, the Jeff Bezos-backed investment platform, offers a Private credit fund. This fund provides access to a pool of short-term loans, backed by residential real estate, with a target of 7% to 9% net annual return paid out to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of just $100.
Don’t miss this opportunity to take advantage of high-yield investments while interest rates are high. See Benzinga’s favorite high-yield deals.
Wondering if your investments can earn you a $5,000,000 nest egg? Talk to a financial advisor today. SmartAsset’s free tool pairs you with up to three vetted financial advisors serving your region, and you can interview your advisors for free to decide which one is right for you.
This article 44-Year-Old Who Earns $60,000 Annually in Dividends Says He’s ‘Still Grinding and Not Spending Much’ While Relying on These 8 Investment Choices originally appeared on Benzinga.com