Can you really live entirely off dividends? That’s a hot topic on Reddit’s popular “/dividends” discussion board, where hundreds of users share their income investing strategies and seek advice. With over 570,000 members, it’s no surprise the community sees frequent questions about financial independence through dividends.
About nine months ago, a user posed this very question: Can one survive on dividend income alone? The responses varied, but one in particular grabbed attention. A 59-year-old Redditor shared his impressive experience of building a dividend portfolio that now pays him $70,000 annually.
He explained that he initially invested $250,000 in dividend-paying stocks after the COVID-19 market crash. As the market rebounded, his portfolio grew, and he later added another $200,000 to his investment. He attributes his success to holding mostly energy stocks at first but later diversified into different sectors. Here’s a look at the seven dividend stocks in his portfolio.
1. Sunoco LP (NYSE: SUN)
Sunoco LP, a Texas-based energy company, is one of the top picks in the Redditor’s portfolio. With a hefty dividend yield of 6.8%, this stock provides consistent returns for income-focused investors. Sunoco’s second-quarter earnings beat expectations, and its $7.3 billion acquisition of NuStar Energy further solidified its position in the market. Citigroup recently upgraded Sunoco to a “Buy,” with a price target of $65. With strong performance and a commitment to shareholder returns, Sunoco fits well in a dividend-focused portfolio.
2. Exxon Mobil (NYSE: XOM)
Exxon Mobil is a cornerstone in this dividend portfolio, yielding 3.4%. Exxon has a legacy of over 40 consecutive years of dividend increases. The company continues to invest heavily in fossil fuels, betting on the long-term demand for oil and gas. By 2050, Exxon projects over 50% of the world’s energy will still come from these sources. Despite the green energy shift, Exxon is also investing in carbon capture technology. For investors like this Redditor, Exxon offers a stable source of dividend income, even during turbulent times.
3. CrossAmerica Partners LP (NYSE: CAPL)
This motor fuel distribution company provides one of the highest dividend yields in the portfolio at nearly 10%. CrossAmerica’s dividend payouts are a significant draw for income investors. While its revenue dropped slightly in the second quarter, it still outperformed Wall Street expectations for earnings. For investors seeking strong income from energy infrastructure, CrossAmerica Partners remains an attractive pick.
4. Energy Transfer (NYSE: ET)
Originally, the Redditor invested in Crestwood Equity Partners, an energy infrastructure company, which was later acquired by Energy Transfer in a $7.1 billion deal. Energy Transfer now powers his portfolio, continuing to provide reliable returns through a solid dividend yield and strong performance in the energy sector. Mergers like this one demonstrate how long-term investors can benefit from industry consolidation.
5. Altria Group (NYSE: MO)
A favorite among dividend investors, Altria offers a 7.5% yield and over 50 years of consistent dividend growth. While concerns persist over declining smoking rates, Altria has diversified its portfolio with investments in smoke-free and oral tobacco products. In August, the company increased its dividend by 4.1%, reaffirming its commitment to rewarding shareholders. For those seeking steady income, Altria remains a reliable bet.
6. Pfizer (NYSE: PFE)
Pfizer, with a dividend yield of over 5%, is another key stock in the Redditor’s portfolio. Known for its COVID-19 vaccine and robust pharmaceutical pipeline, Pfizer has increased its dividend for 15 straight years. The company spends billions on research and development, ensuring a steady stream of innovative products that support future earnings. The Redditor added Pfizer later in his journey to diversify his holdings further.
7. Johnson & Johnson (NYSE: JNJ)
Johnson & Johnson is a titan in the dividend world, with over six decades of payout growth. The company’s diverse revenue streams across pharmaceuticals, medical devices, and consumer health products make it a staple in many income portfolios. Despite facing legal challenges related to product safety, J&J’s strong earnings and financial stability keep it a top choice for dividend investors.
Maximizing Dividends in a High-Yield Environment
For those considering dividends as a path to financial independence, this Redditor’s success story offers valuable insights. With a diversified portfolio primarily focused on high-yield stocks, he’s managed to create an income stream of $70,000 per year. That’s a remarkable feat, especially given the uncertainties of the post-COVID economy.
The Redditor’s strategy serves as a blueprint for anyone looking to build a reliable source of passive income. By focusing on well-established companies with a track record of dividend payments and making strategic investments during market downturns, it’s possible to generate significant income over time.
Investing in high-dividend stocks requires patience and a well-thought-out plan, but as this story shows, it can be done—even in uncertain economic times. For those seeking to emulate his success, the lesson is clear: focus on dividend-paying companies with strong fundamentals, and you too can create a sustainable income stream for the future.
