Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.
The appeal of quality dividend stocks is rising because they provide stability and reliable income when times are tough and broader markets are wavering. Data shows that over a 10-year period through 2019, stocks with reinvested dividends performed better in both down and up markets.
Over a year ago, someone asked income investors on r/Dividends – a Reddit community with more than 650,000 members – living off dividend income about any risks or downsides young investors should be aware of when depending entirely on dividends. The question received 150 comments, with many experienced investors sharing their personal stories and advice. A particular comment got attention.
An investor, 72, said he was making over $160,000 in dividends and advised investors to always diversify their portfolio for downside protection.
"I can tell you the #1 rule is to stay diversified. #2 is to live within your means, no matter what your income level. I've survived dividend cuts ... but that barely made a dent in our income thanks to Rule #1," he said.
The investor at the time said his portfolio was down about 10% from its peak in 2020, but his dividend income saw an increase because he lived below his means and reinvested in dividends. He also made an additional $15,000 to $25,000 from selling call options on stocks and reinvested that income, too.
"I've had portfolio drops or gains (usually drops) of >$50k daily, sometimes several days in a row. I ask my wife, ‘Has anything changed in your life?' The answer is no. We are frugal but buy whatever we want or need. Just bought a new car for cash. After putting three kids through college with no loans, we now contribute to grandkids' 529 plans. It would take a nuclear war or a complete economic collapse to degrade our lifestyle," he added.
The investor shared the names of his biggest positions. Let's take a look at these stocks.
Realty Income
Realty Income (O) was the biggest holding of the investor, who collected over $160,000 in annual dividend income. Realty Income has raised its dividends for 30 consecutive years. The stock has been under pressure amid tariff concerns and the possibility of a higher-for-longer interest rate. Investors will be closely watching its latest quarterly results, scheduled for late February.
With over six decades of consistent dividend increases and a diverse business portfolio, health care giant Johnson & Johnson (JNJ) is a notable dividend stock popular among Redditors. The company recently beat Wall Street estimates for fourth-quarter results. For 2025, Johnson & Johnson expects revenue between $89.2 billion and $90 billion, below the consensus estimate of $91.1 billion.
Pembina Pipeline Corporation
Midstream energy company Pembina Pipeline Corporation (PBA) was the third-biggest holding of the investor earning over $160,000 a year in dividends. The stock has a dividend yield of over 5.1%. TD Cowen recently called PBA its top pick for Canadian midstream exposure.
Procter & Gamble was another dividend stock in the portfolio with a stellar growth history. The company has raised its payouts for 68 consecutive years. PG shares gained recently after the company beat fiscal second-quarter estimates. Organic sales rose 3% in the quarter, above the 2.4% growth expected by Wall Street.
W.P. Carey
WP Carey Inc. (WPC) is among the top net lease REITs with over 1,200 properties in the U.S., Europe and other parts of the world. Retail stores, restaurants, automotive companies and grocery stores are among the REIT's tenants.
Eli Lilly
Eli Lilly (LLY) was a low-yield dividend stock in the portfolio. The investor said in a separate post that he recently took "substantial" profits in LLY and planned to sell another stock with a low dividend yield.
Eli Lilly yields less than 1%. Earlier this month, the company said it expects fourth-quarter revenue to come in at around $13.5 billion, below the consensus of $13.95 billion. The company's CEO said the previous guidance had expected "faster acceleration" of growth.
Earlier this month, BlackRock (BLK) shares jumped after the company's latest quarterly results beat Wall Street estimates due to record inflows.
In December, Citi said in a note that BlackRock was one of the best asset managers heading into 2025. The firm gave a Buy rating to the stock.
OGE Energy
Oklahoma-based utility company OGE Energy Corp. (OGE) was also part of the portfolio that generated $160,000 in annual dividend income. The stock has a dividend yield of 3.9%.
