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Dividend investing is an efficient way to hedge against risks and market volatility. Data from Ned Davis Research showed that dividend stocks returned about 8.8% from 1972 through 2012, while their non-dividend counterparts returned 1.6% annually.
But is it possible to reach a decent monthly dividend income for beginner investors? Many investors achieve this by investing small chunks of their savings or earnings in reliable and safe dividend stocks. Let's take a look at a case study.
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In May last year, a dividend investor shared his detailed investing journey, income report and stock portfolio on r/Dividends, a discussion board with over 600,000 members.
The investor said he reached the milestone of $600 per month in dividend income and gave some important details about himself before sharing his portfolio details:
"I'm 32yo, work in IT since university, currently live in Dubai, married no kids. Started my portfolio in 2019 and I was buying just VT for a while, but then I tilted more to dividend growth investing (it feels more motivating and fun)."
He had a goal of $4,000 per month before he could retire. Would that be enough for him to retire?
"My current goal is 4K per month, assuming I won't be living in Dubai when I retire (the place is kinda expensive). I'm thinking Spain or Portugal maybe. I make a decent amount of money and my spouse is also working, so we're building our financial future together," he added.
The investor’s portfolio screenshots showed his total portfolio worth was $145,828. He collected about $601 in monthly dividends or $7,216 annually. The investor said he added $2,500 in monthly contributions and expected this to increase over time.
Let's look at some of the most important holdings in this dividend portfolio.
Schwab U.S. Dividend Equity ETF
Schwab U.S. Dividend Equity ETF (NYSE:SCHD) was among the Redditor’s biggest holdings. He earned $600 per month in dividend income on a $145,828 investment. He owned 513 SCHD shares and his total stake in the fund was worth $36,195.
Schwab U.S. Dividend Equity ETF (NYSE:SCHD) tracks the Dow Jones U.S. Dividend 100 Index and provides exposure to top dividend stocks in the U.S., including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi and AbbVie, among many others. Since SCHD's holdings are mostly conservative dividend payers, it's suitable for investors close to retirement looking for consistent dividend income.