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Dividend stocks are gaining attention because of their ability to provide downside protection during difficult times. Data shows that from Dec. 29, 1989, to July 31, 2023, the S&P 500 Dividend Aristocrats — companies with at least 25 consecutive years of dividend growth — outperformed the S&P 500 69.34% of the time in down months.
A few months ago, someone asked income investors on r/Dividends — a community on Reddit with over 680,000 members — whether anyone had $1 million invested in dividend stocks. The question received over 200 comments, with many investors sharing their portfolios and income reports.
An investor said he had $1 million invested in dividends and collected about $14,000 a month in income. Despite an extremely high yield, the investor said his income was "pretty stable" but he was aware of the risks involved.
"Been over a year, so far, so good. Not too concerned, as I can recalibrate at a moments notice. I'm not ignorant to the fact that everything is performing well right now."
The investor said at the time that he knew the overall market was on a bullish trajectory and his portfolio was not a "typical" one.
"High risk high reward. Split share funds, covered call funds etc not typical low dividend stuff. I realize we are in a major bull market so I will recalibrate if necessary."
The investor also had several split share funds in his portfolio. These funds divide their portfolios into two share classes — preferred shares for dividends and capital shares for growth potential.
Let's take a look at some of the key holdings in this portfolio.
The Simplify Volatility Premium ETF
The Simplify Volatility Premium ETF (NYSE:SVOL) generates income by shorting the CBOE Volatility Index and betting that volatility will remain stable. Since the broader market tends to go higher in the long term, investing in this ETF suits those looking for stable income checks.
JPMorgan Nasdaq Equity Premium Income ETF
JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) is a high-yield covered call ETF that distributes monthly dividend income. The ETF invests in Nasdaq companies and generates extra income by selling call options.
The Defiance S&P 500 Income Target ETF
The Defiance S&P 500 Income Target ETF (NYSE:SPYT) invests in ETFs that track the S&P 500's performance and sells daily credit call spreads on the Index. This means the ETF sells a call option and buys another one at a higher price, earning income from the premium received. The ETF has a distribution rate of about 20% and pays monthly.
Life & Banc Split Corp. gives investors exposure to some of the top Canadian insurance companies and banks. It has a distribution rate of 14%.
Brompton Split Banc Corp
Brompton Split Banc Corp. invests in top Canadian banks. It has a monthly distribution rate of 12.4%. Royal Bank of Canada, National Bank of Canada, Bank of Nova Scotia, and Bank of Montreal are among its top holdings.
Global Dividend Growth Split Corp.
Global Dividend Growth Split Corp. is a Canadian fund that invests in global dividend growth companies. It has a distribution rate of over 11%. About 75% of its portfolio consists of US companies. Apple (NASDAQ:AAPL), American Express (NYSE:AXP), Boston Scientific (NYSE:BSX), Welltower (NYSE:WELL) and JPMorgan (NYSE:JPM) are among its top holdings.
Dividend Growth Split Corp
The Dividend Growth Split Corp has a dividend yield of about 18%. Its portfolio mostly consists of large-cap Canadian companies. Some of the top holdings include Constellation Software, Dollarama, Waste Connections (NYSE WCN), and Manulife Financial (NYSE:MFC) , among others.
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