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Dividend stocks are in focus as concerns for a higher-for-longer interest rate scenario rise and investors turn to stable companies to offset potential volatility. Dividend stocks also perform well when interest rates are going down. Ed Clissold, Chief U.S. Strategist at Ned Davis Research, said on CNBC a few months back that dividend stocks outperforming non-dividend-paying companies during the Fed’s easing cycles has been a “pretty consistent” trend over the past few decades.
But which dividend stocks can help you reach a stable and significant income? Let’s see a case study for ideas.
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Last week, someone asked old, experienced dividend investors for investment advice and ways to reduce tax liabilities and risks during income investing on r/Dividends, a Reddit discussion forum with over 660,000 followers. The post received over 90 comments, with many investors sharing their success stories and advice.
An investor said he had 50 years of experience in stock investing and shifted to dividend income about five years ago. He, 77, revealed in a separate comment that he raked in about $270,000 in retirement income.
“I now love actively managing my nest egg portfolio and sleep much better at night. I believe investment return, risk mitigation and minimal tax’s are directly proportional to investment knowledge and experience. Five years ago I was yielding about 8% with COVID discounted preferred dividend stocks. They appreciated and B grade or higher have not yielded 8% for several years so, researched other dividend stocks,” he said.
Let’s discuss some of his portfolio’s notable dividend stocks and funds.
YieldMax NVDA Option Income Strategy ETF
The 77-year-old retired investor said he had YieldMax NVDA Option Income Strategy ETF (NVDY) in his portfolio “for fun.” He recommended the ETF to Redditors who have a higher risk appetite.
“I am doing a test investment with NVDY to learn more about YieldMax, their trading strategy and technology. Hoping for some longevity and no decay, not just short term speculation worries. NVDY is about the longest offering of their funds at two years, with the most assets at $1.3B,” he said in a separate comment.
YieldMax NVDA Option Income Strategy ETF (NVDY) makes money by selling call options on Nvidia. Recently, the ETF has gained popularity amid the buzz around Nvidia. The fund has a distribution rate of about 52%. NVDY suits investors who believe in Nvidia’s long-term potential but want to hedge against possible declines in the chipmaker’s shares.
Altria
Altria (MO) was a high-yield stock in the portfolio of the investor who collected about $270,000 a year in retirement income. Altria has a 7.8% dividend yield and over 50 years of consecutive payout increases. Last month, Bank of America increased its price target on the stock to $65 from $55. The firm believes lower corporate taxes, tariffs and tighter border controls under the new U.S. administration could bode well for the tobacco company.
JPMorgan Nasdaq Equity Premium Income ETF
The investor said he was “very happy” with his dividend ETFs, including the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ). JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) is a covered call ETF that distributes monthly dividend income. It invests in Nasdaq companies and generates extra income by selling call options. The fund has a dividend yield of more than 9%. In the December quarter, the JPMorgan Nasdaq Equity Premium Income ETF outperformed its benchmark, the Nasdaq 100 Index.
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 dividend yield of over 12%.
Some of SPYI’s biggest holdings include Apple, Nvidia, Microsoft, Amazon, Meta Platforms, Tesla, Alphabet and Broadcom.
Guggenheim Strategic Opportunities Fund
Guggenheim Strategic Opportunities Fund (GOF) exposes investors to fixed-income and debt securities. It invests in various credit instruments, including corporate bonds, asset-backed securities, mortgage-backed securities and other high-yield debt. However, it’s a risky investment because it invests in ungraded bonds, also known as junk bonds.
Cornerstone Strategic Investment Fund
Cornerstone Strategic Investment Fund, Inc. (CLM) is a closed-end management investment company that seeks capital appreciation through investment in U.S. and non-U.S. stocks. The fund has a dividend yield of 16%.
The changing interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.
For instance, the Ascent Income Fund from EquityMultiple targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000. Benzinga Readers: Earn a 1% return boost on your first EquityMultiple investment when you sign up here (accredited investors only).
