Early Retiree Making $170,000 a Year in Dividends Shares Top 7 Stock Picks, Says 'I've Zero Regrets'

In the ever-evolving world of investing, one strategy that has consistently stood the test of time is dividend investing. With the recent market turbulence and the fading momentum in AI stocks, investors are once again turning to stable dividend-paying companies to navigate the uncertainties. One such investor, who retired at the age of 48, is making $175,000 a year in dividends and has zero regrets. Let's dive into his top 7 stock picks and the strategies that have led to his financial success.

The Power of Dividend Investing

Dividend investing is not just about receiving regular income; it's about building a sustainable portfolio that can weather market storms. The early retiree's strategy revolves around high savings rates, long-term investment, and a diversified portfolio. He saved and invested a significant portion of his income over 11 years, allowing him to retire early and enjoy a comfortable lifestyle.

Top 7 Stock Picks

1. Schwab U.S. Dividend Equity ETF (SCHD)
- Exposure to Top Dividend Stocks: The SCHD tracks the Dow Jones U.S. Dividend 100 Index, providing exposure to some of the top dividend-paying companies in the U.S. These companies include ConocoPhillips (COP), Chevron (CVX), Verizon Communications (VZ), and Bristol-Myers Squibb (BMY). These companies are known for their stable dividend payments and strong financial performance.
- Diversification: By investing in an ETF that holds a diversified portfolio of dividend stocks, the retiree reduces the risk associated with individual stock holdings. This diversification helps in maintaining a steady income stream even if some companies face temporary setbacks.

2. NEOS S&P 500 High Income ETF (SPYI)
- High-Yield Covered Call Strategy: The SPYI is a high-yield covered call ETF that pays monthly dividend income. It invests in top S&P 500 companies and generates extra income by selling call options on these stocks. This strategy not only provides regular dividend income but also generates additional premium income for shareholders.
- High Dividend Yield: The SPYI has a dividend yield of over 12%, which is significantly higher than many other dividend-paying investments. This high yield contributes substantially to the retiree's overall dividend income.

3. iShares 0-3 Month Treasury Bond ETF (SGOV)
- Hedging Against Market Volatility: The retiree allocated a portion of his portfolio to short-term government bonds to hedge against market volatility. This strategy helps in protecting the portfolio during market downturns while still generating income.

4. Vanguard FTSE Developed Markets ETF (VEA)
- Global Diversification: The VEA provides investors exposure to companies trading in developed markets outside of the U.S., including Canada, Europe, and the Pacific region. VEA pays quarterly dividends, adding to the retiree's income stream.

5. Janus Henderson AAA CLO ETF (JAAA)
- High-Quality Asset Class: The JAAA invests in high-quality collateralized loan obligations and provides investors with exposure to asset classes with low risk and volatility. It yields over 6%, contributing to the retiree's high dividend income.

6. ConocoPhillips (COP)
- Energy Sector Stability: ConocoPhillips is a leading energy company known for its stable dividend payments. The company's strong financial performance and dividend growth make it a reliable addition to the retiree's portfolio.

7. Chevron (CVX)
- Energy Sector Stability: Chevron is another energy giant with a strong track record of dividend payments. The company's financial stability and dividend growth make it a valuable holding in the retiree's portfolio.

Lessons Learned

1. Diversification and Stability: The inclusion of diversified ETFs like SCHD and SPYI ensures that the retiree's portfolio is not overly reliant on a few individual stocks. This diversification helps in maintaining stability and reducing risk.
2. High-Yield Strategies: Investing in high-yield ETFs like SPYI can significantly boost dividend income. The covered call strategy employed by SPYI not only provides regular dividends but also generates additional income through option premiums.
3. Focus on Quality Dividend Stocks: The SCHD's focus on top dividend-paying companies ensures that the retiree's portfolio includes stable and financially sound companies. This focus on quality helps in maintaining a reliable income stream.
4. Adaptability: The retiree's decision to allocate a portion of their portfolio to short-term government bonds due to recession worries shows adaptability. This strategy helps in protecting the portfolio during market downturns while still generating income.

Conclusion

The early retiree's success story is a testament to the power of dividend investing. By focusing on high savings rates, long-term investment, and a diversified portfolio, he has achieved financial independence and enjoys a comfortable lifestyle. His top 7 stock picks, including the Schwab U.S. Dividend Equity ETF and the NEOS S&P 500 High Income ETF, contribute significantly to his high dividend income. By replicating these strategies, other investors can aim to achieve similar levels of financial success and enjoy the benefits of passive income.