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There is more than one way to achieve financial success through investing. Some prefer riding the gains of tech growth stocks to build wealth, while others enjoy collecting dividend income alongside portfolio growth. Let's see an interesting success story of an investor crushing it with the latter strategy.
In June last year, a dividend investor shared his detailed income report with portfolio screenshots on r/Dividends, a discussion board for income investors with more than 600,000 members. The investor said he earned about $10,200 per month in dividends or $122,930 per year. He said his total portfolio value was $977,000, excluding reinvested dividends, with a yield of 12.5%.
However, the investor did not seem happy with his portfolio performance and repeatedly said his principal investment was in the "red."
"I am selling everything and for a month I was working on a different approach and totally different set up with stocks. I will keep you all updated. Not posting actual brokerage as I did last time. In a span of a last month that I would consider a great months for stocks it did not worked. And I developed a new strategy. So I am done with this."
Asked how much time it took to save money for his investment, the Redditor said:
"It took 13 years to save one Million as a disposable amount that I can use to try / test strategies. Moneys were made outside of stocks. So far stocks is in a red for me."
Later in the discussion, it was revealed exactly how much his portfolio was in the red, when someone commented:
"I bet you he started with one million and he's down 35k in red."
Nonetheless, raking in over $100,000 annually in dividends impressed many and the investor was flooded with questions and requests for advice. Let's dig deeper and see some of the top holdings in this portfolio.
BlackRock Multi-Sector Income Trust
BlackRock Multi-Sector Income Trust (NYSE:BIT) yields about 10% and invests in loan and debt instruments. The fund's goal is to generate income and capital appreciation. Some of its top holdings include the FEDERAL NATIONAL MORTGAGE ASSOCIATION, UNIFORM MBS, TRANSDIGM INC., CLOUD SOFTWARE GROUP INC. and HUB INTERNATIONAL LTD.
According to the portfolio screenshots he shared publicly, the Redditor’s investment in the trust was worth about $46,914.
Guggenheim Strategic Opportunities Fund
Guggenheim Strategic Opportunities Fund (NYSE:GOF) was among the biggest holdings of the Redditor, who earned $10,200 per month, as his investment in the fund was about $190,371. GOF provides investors with exposure to fixed-income and other debt securities. It invests in various credit instruments, including corporate bonds, asset-backed securities, mortgage-backed securities and other high-yield debt. It's a risky investment since it invests in ungraded bonds, also known as junk bonds.
BlackRock Corporate High Yield Fund Inc. (NYSE:HYT) is another junk bonds fund in the portfolio of an investor earning $10,200 per month in dividend income. The fund aims to invest most of its assets in domestic and foreign high-yield securities, including high-yield bonds, corporate loans, convertible debt securities and preferred securities of below investment-grade quality. The fund yields about 9.4%.
The Redditor's stake in HYT had a total worth of about $44,357.
JPMorgan Equity Premium Income ETF
The Redditor earning $10,200 per month in dividends had an $84,360 stake in JPMorgan Equity Premium Income ETF (NYSE:JEPI). JEPI, which has a monthly dividend yield of about 7%, 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 but protects investors against huge losses during bear markets, as most of its portfolio consists of large, defensive equities like Trane Technologies PLC (NYSE:TT), Southern Co. (NYSE:SO) and Progressive Corp. (NYSE:PGR), among many others.
The investor’s biggest position was in the Global X Nasdaq 100 Covered Call ETF (NASDAQ:QYLD), which earned him $10,200 per month in dividend income. The total worth of his position in the fund was a whopping $206,430. QYLD generates income by selling covered call options on the Nasdaq-100 Index. The fund was started in 2013 and has since paid monthly income to investors. The fund yields about 12%. Some of the top holdings of the ETF are Apple, Nvidia, Microsoft, Amazon and Broadcom.
Brookfield Real Assets Income Fund
Brookfield Real Assets Income Fund Inc. (NYSE:RA) yields about 10% and pays monthly dividends. The fund mainly invests in real assets, including infrastructure and real estate securities. The Redditor earning $122,939 annually or $10,200 per month in dividends, had a $195,287 position in the fund. RA is up 12% over the past year.
Global X Russell 2000 Covered Call ETF
Global X Russell 2000 Covered Call ETF (NYSE:RYLD) generates income by selling call options on the small-cap-heavy Russell 2000 Index. The ETF yields about 12%. Being a covered call ETF, RYLD is also not risk-free and often posts losses during down markets. The ETF is now in the limelight as analysts believe small-cap stocks will be among the top beneficiaries of an easing monetary environment.
The Redditor had a $197,969 position in the ETF.
Better Yields Than Some REITs?
The current interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through publicly-traded REITs.
