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Should you invest in growth stocks for capital gains through stock price appreciation or in dividend stocks for steady, reliable income? There's no one-size-fits-all answer, but patient investors are crushing it with income strategies, earning substantial returns through regular dividends.
About two months ago, a dividend investor shared his success story and income report on r/Dividends – a community of over 600,000 members on Reddit. The investor, 48, said he was collecting about $2,200 per month in dividend income with a portfolio worth $378,351. This gives the portfolio a strong dividend yield of over 7%.
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The investor was asked about his expectations of capital growth from his portfolio. Here was his response:
"I expect it to grow between 5-7% annually without reinvesting dividends. Yes, I am reinvesting dividends. With dividends reinvested, I expect it to grow 8-10% annually."
Based on the screenshots shared by the investor publicly, let's examine some of the biggest holdings of this high-yield dividend portfolio.
Vanguard 500 Index Fund Admiral Shares
Vanguard 500 Index Fund Admiral Shares (MUTF: VFIAX) was one of the Redditor’s biggest positions, earning $2,200 per month in dividends. His portfolio screenshots showed that VFIAX accounted for about 34.5% of the entire portfolio. This fund tracks the S&P 500 Index, with about 79% of the portfolio comprising large-cap stocks. The fund yields 1.3% and pays quarterly dividends.
Fidelity Total Bond K6 Fund
Fidelity Total Bond K6 Fund (FTKFX) invests in U.S. government securities, investment-grade corporate bonds, mortgage-backed securities and other debt instruments. The fund suits investors looking for safer, fixed-income investments rather than stocks. FTKFX has a dividend yield of about 4.5% and pays monthly. About 32% of the investor’s total portfolio making $2,200 per month was invested in FTKFX.