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Building wealth through investing is many people’s dream but not everyone knows where to start or how to strategize their investments.
Some people live frugally, saving a huge chunk of their income to put the money into stocks, index funds, or other assets, hoping to become financially free later in life.
Passive income is a key goal for many people, which is why dividend stocks and funds are so popular among investors. Dividend-focused stocks offer investors reliable payouts, making them a favorite for those looking to build long-term wealth without taking major risks.
Enter a 45-year-old tech professional who has achieved what many investors aspire to: a $1 million portfolio yielding $5,200 in monthly dividends. For 20 years, the investor lived on just 50% of his income, avoiding overspending and focusing only on investing.
“I am an old-school spreadsheet budgeter and kept a tight lid on fixed expenses (housing, cars) for a long time. Set a travel/hobby budget and stuck to it. Savings came off the top first and put that away,” he wrote in Reddit’s r/Dividends community.
But he hasn’t reached this result with a single stock or an initial public offering. Instead, he focused his efforts on being disciplined and relied on the power of compounding.
“In the long run, putting $ away every month, be it [high-yield savings account] or a growth ETF or a dividend ETF is what sustained me. One-hit wonders and one-day drops don’t make a strategy. You could get lucky for sure, but getting lucky is not a strategy. Putting 25% to 50% of your money away every month is a strategy that benefited me,” the investor said.
The 45-year-old shared his top stocks in the thread which include well-known names like JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) and Ares Capital Corporation (NASDAQ:ARCC), so let’s analyze them below.
Investor With $1 Million Portfolio Shares Top Dividend Stocks That Made Him Rich
SPDR S&P 500 ETF Trust
SPDR S&P 500 ETF Trust (NASDAQ:SPY) is the investor’s largest holding. The trust doesn’t pay high dividends (1.31%), but it tracks the performance of 500 of the largest U.S. companies. People invest in SPY because of the stability it offers and its focus on growth, meaning that its value increases as the giants in the index grow.
The investor’s second-largest holding, ARCC, is a business development company that invests in small- and mid-sized businesses. Compared with SPY, ARCC pays higher dividends (8.35%) and is focused on generating reliable cash flow.
Pfizer Inc.
With a dividend yield of around 4.5% currently, Pfizer (NASDAQ:PFE) is among the largest pharmaceutical companies in the world. PFE is a favorite dividend-paying company among investors thanks to its great track record and reliable cash flow.
Realty Income Corporation
Often called “The Monthly Dividend Company,” Realty Income Corporation (NASDAQ:O) is a real estate investment trust REIT that concentrates its efforts on commercial properties, especially retail and industrial spaces. Paying a dividend yield of around 5% to 6%, O is a low-risk option for many investors because its portfolio also includes long-term leases.
Paying a dividend yield of 9.54%, JEPQ focuses on NASDAQ-listed companies. The ETF mixes dividend-paying tech stocks with options strategies to increase income. JEPQ is a go-to for investors who want to benefit from the tech sector’s potential while still cashing dividends.
Kinder Morgan
Kinder Morgan (NASDAQ:KMI) is a giant in the infrastructure sector, specializing in storage facilities and pipelines for oil, natural gas and other energy products. Yielding around 4.14% in dividends, KMI has a steady cash flow produced by long-term contracts, making it a reliable choice for investors looking to earn dividends.
Invesco NASDAQ 100 ETF
Invesco NASDAQ 100 ETF (NASDAQ:QQQI) tracks the NASDAQ-100 index, which covers the largest 100 non-financial companies found on NASDAQ. Although QQQI is more growth-focused than the other picks, the ETF still pays dividends (14.1%).
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