Dividend Investor Earning $1,000 a Month Shares Top 3 Stock Picks, Asks Reddit to 'Talk Me Out Of' Chasing Higher Yields
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Dividend stocks are making moves as investors seek dependable income sources amidst a new U.S. administration and renewed inflation concerns. Jenny Van Leeuwen Harrington, the CEO & Portfolio Manager of Gilman Hill Asset Management, recently made the case for income investing, saying S&P 500 dividends have grown 5.7% over the last five to six decades. She also believes dividend income’s potential to outpace inflation and its tax advantages make dividend stocks more appealing to average investors.
Earlier this month, a dividend investor shared his detailed income report and portfolio on r/Dividends, a Reddit community with over 650,000 members. The investor said he collected about $1,031 a month in dividend income. However, he was considering "chasing" high-yield stocks and solicited Reddit's advice.
"Finally hitting about $1,031/month in dividends. Been tracking everything and it got me thinking – what if I moved more into higher yield stuff?"
The investor, who asked Redditors to "talk me out of" pursuing high yields, said he was aware that chasing yields was "dangerous."
"But with rates this high, seems like a good time to be aggressive. Anyone try this or am I being dumb," he added.
Redditors poured in with advice and stock recommendations in response to this post. First, we will examine the investor's top three holdings and then see what recommendations he received from fellow income investors.
The investor earning about $1,000 in monthly dividends had a $125,000 position in Schwab U.S. Dividend Equity ETF (SCHD). The stake generated about $353 per month. Schwab U.S. Dividend Equity ETF (SCHD) tracks the Dow Jones U.S. Dividend 100 Index and provides exposure to some of the top dividend stocks trading in the U.S., including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi and AbbVie. Since SCHD's holdings are mostly conservative dividend payers, it's suitable for investors close to retirement looking for consistent dividend income.
JPMorgan Equity Premium Income ETF
The investor had a $75,000 position in JPMorgan Equity Premium Income ETF (JEPI) and earned roughly $445 monthly from the fund. JPMorgan Equity Premium Income ETF (JEPI) makes money by investing in some of the most notable large-cap U.S. stocks and selling call options. JEPI is ideal for those looking for exposure to defensive stocks. JEPI usually underperforms during bull markets and protects investors against huge losses during bear markets since most of its portfolio consists of large, defensive equities like Trane Technologies PLC (NYSE:TT), Southern Co (NYSE:SO), Progressive Corp (NYSE:PGR), among many others.
Realty Income
Realty Income (O) is one of Reddit’s most popular monthly dividend stocks. The REIT has raised its payouts for 30 straight years. As of the end of the third quarter, Realty Income had $5.2 billion in liquidity. The investor made about $233 a month from O.
Investor Considers Chasing High-Yield Stocks and Asks for Recommendations and Advice: Redditors Respond
NEOS S&P 500 High Income ETF
Several Redditors urged the investor to consider adding the NEOS S&P 500 High Income ETF (SPYI) to his portfolio. NEOS S&P 500 High Income ETF (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 about 12%.
NEOS Nasdaq-100 High Income ETF
NEOS Nasdaq-100 High Income ETF (QQQI) exposes investors to Nasdaq 100 companies and generates income by selling covered call options on the index. It pays a monthly income and has a yield of about 13%.
ProShares Bitcoin ETF
A Redditor recommended the ProShares Bitcoin ETF (BITO) as a high-yield holding. The fund gives investors exposure to Bitcoin’s performance. It has a distribution rate of over 50% and pays monthly.
With a dividend yield of over 8%, business development company Ares Capital was among the top high-yield recommendations from Redditors.
"It's not chasing yield if you're smart about it. Leave what you have and put your dividends into higher-yielding consistent payers," a Redditor said while recommending ARCC and a few other BDCs.
Over the past year, the stock is up 14%.
Main Street Capital
Main Street Capital Corp (MAIN) was among the top recommendations of Redditors to investors. It's a business development company that raises capital by selling notes and shares to the public, lends money to small – and mid-sized companies and earns interest income. Unlike many other BDCs, Main Street Capital also asks for equity stakes in the companies it lends to.
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