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Giving yields too much importance in dividend investing comes with risks and caveats. But high-yield dividend stocks have never lost their allure over the past several decades. For beginner investors with a limited budget and high-risk appetite, focusing on stocks with high yields is the only way to reach a significant dividend income.
While dividend growth stocks with strong fundamentals and growth history provide investors better long-term opportunities, many are crushing it by investing in high-yield stocks.
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About two months ago, a dividend investor shared his portfolio and income report on r/Dividends, a discussion board for dividend investors on Reddit. The investor said he collected about $1,000 monthly with $40,000 invested, giving the portfolio an insane yield of about 34%.
“I created a hyper dividend portfolio last month and collected 1k last month. Goal is to reach 2.5k /month by next August,” the investor said.
As expected, most of the holdings in the portfolio are risky high-yield options ETFs. When asked whether he’s aware of the risks of losses in principal that come with investing in such kinds of ETFs, the investor said:
“Yes, I know. These are called synthetic ETFs. Don’t care how they pay it as long as principal + interest < final value."
Let’s look at some of the biggest holdings in this extremely high-yield dividend portfolio.
Please note that many of these holdings are risky ETFs. This article is based on an income report shared publicly by an investor. It’s not investment advice.
The YieldMax MSTR Option Income Strategy ETF
The YieldMax MSTR Option Income Strategy ETF (NYSE:MSTY) generates income by selling call options on MicroStrategy (MSTR) stock. Its distribution rate is about 75%.
The Simplify Volatility Premium ETF
The Simplify Volatility Premium ETF (NYSE:SVOL) is a high-yield (16%) dividend ETF gaining popularity on Reddit. The ETF generates income by shorting the CBOE Volatility Index (VIX) and betting that volatility will remain stable or decrease. Since the broader market tends to go higher in the long term, investing in this ETF suits those looking for stable income checks. The Redditor, earning $1,000 monthly with a $40,000 investment, said he owned 200 SVOL shares.
The Pacer Pacific Asset Floating Rate High Income ETF
The Redditor earned $1,000 monthly and said he owned about 100 shares of The Pacer Pacific Asset Floating Rate High Income ETF (NYSE:FLRT). FLRT generates income by primarily investing in floating-rate loans of non-investment-grade companies. These ETFs gain traction when interest rates are rising. The fund yields about 8%.
JPMorgan Equity Premium Income ETF
JPMorgan Equity Premium Income ETF (NYSE:JEPI) was among the notable dividend ETFs in the portfolio of the Redditor earning $1,000 a week with $40,000. His hyper-dividend portfolio had 100 JEPI shares. JEPI makes money by investing in large-cap U.S. stocks and selling call options. JEPI is ideal for those looking for exposure to defensive stocks. It usually underperforms during bull markets but protects investors against large losses during bear markets, as its portfolio consists of defensive equities like Trane Technologies PLC (NYSE:TT), Southern Co (NYSE:SO), Progressive Corp (NYSE:PGR), among others.
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YieldMax AMZN Option Income Strategy ETF
The YieldMax AMZN Option Income Strategy ETF (NYSE:AMZY) generates income by selling call options on Amazon. The Redditor with the hyper-dividend portfolio said he owned 100 AMZY shares. The fund has a distribution rate of about 41%. AMZY is down 9% so far this year.
YieldMax TSLA Option Income Strategy ETF
YieldMax TSLA Option Income Strategy ETF (NYSE:TSLY) is a popular YieldMax dividend ETF for high-yield seekers. With a distribution rate of over 120%, TSLY generates income by selling call options on Tesla shares. Over the past year, TSLY has been down about 55%, while Tesla stock has been down 7%.
Realty Income
Realty Income Corp (NYSE:O) is a staple in Reddit dividend portfolio success stories. The REIT has a dividend yield of over 5% and has raised its payouts for 30 years. The Redditor making $1,000 a month with $40,000 said he owned 100 shares of Realty Income.
JPMorgan Nasdaq Equity Premium Income ETF
The Redditor earning $1,000 a month had about 100 shares of JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) in his portfolio. JEPQ invests in Nasdaq companies and generates extra income by selling call options. As of Oct. 14, the ETF yields about 9.4%.
YieldMax NVDA Option Income Strategy ETF
YieldMax NVDA Option Income Strategy ETF (NYSE: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 57%. NVDY suits investors who believe in Nvidia’s long-term potential but want to hedge against possible declines in the chipmaker’s shares.
Wondering if your investments can get you to a $5,000,000 nest egg? Speak to a financial advisor today. SmartAsset’s free tool matches you up with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.
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This article Dividend Investor Making $1,000 Per Month With Just $40,000 Invested Shares His ‘Hyper Dividend’ Portfolio: Top 9 Stocks and ETFs originally appeared on Benzinga.com
