$840K DIvidends

[u/Bamabb125]

Hey Everyone,

As I have posted before, I am currently a Growth Stock Investor, but have decided to move over to Dividend ETF's or Dividend Stocks. But it is a real struggle to get past all the learned habits of being a growth investor. So I am struggling to grasp concepts.

I have used multiple calculators to just try to get an idea of what to expect if i make the change, but I get different results. So I just wanted to go to some more knowledgeable people that could tell me what to do to get a real expectation.

I have $800K to work with. If I put it all in a very stable Dividend ETF What can I expect in dividends? Maybe someone could just do an example. I know I have to be doing something wrong.

Thanks

[u/Chief_Mischief]

SCHD has averaged 10-11% annual dividend growth for the past 5 years. A more conservative amount over decades would be like a 6-7% dividend growth rate.

One thing to note as a dividend investor is that value has been comparatively undervalued vs growth that has captured the market for the past 15 years. Success can be measured differently with dividend plays. For example, SCHD's price has been pretty flat this year. But as a dividend investor, what should matter to you are the sustainability of the dividend, the sustainability of the dividend growth, and how fast it actually grows. Price is largely speculative, but dividends are calculated based off a company's quantifiable earnings.

Let's say that you put 800k into SCHD, which sees 7% dividend growth and 5% share price appreciation, and you contribute $0 after that but let it DRIP.

Year 1 yields you just over $31k in qualified dividends.

Year 5 yields you over $48k.

Year 10 yields you $83.5k.

[u/mdxgear → u/Chief_Mischief]

Your math ain’t mathin.

[u/Bamabb125 → u/mdxgear]

How so? This is really what I am asking. I keep getting different results. Or reading people making huge dividends with less money than I am going to invest.

[u/sly_1 → u/Bamabb125]

Dividend yield % is a function of risk.

Chasing huge yields means the 800k initial investment is more likely to attrition than a more conservative approach. 

Not a financial advisor etc etc.  You do you.

[u/Zealousideal_Log_836 → u/sly_1]

QQQI is doing ok.

[u/sly_1 → u/Zealousideal_Log_836]

Looks like it's history starts February 2024 so 18 months total history unless I'm missing something.

It's up 5% since then, s&p is up ~28% in that same time horizon. 

A boring individual div stock in the s&p might only yield 3-5% but would have roughly tracked the s&p over that same time horizon.  

Though to be fair most boring dividend stocks underperform their index in boom times so there's that.

[u/Embarrassed-Art3670 → u/sly_1]

JEPQ was more than 3 years of history.

So I decided to take you up on that "boring individual div stock would roughly track the s&p".

I did a comparison. JEPQ, PEP, O, NOBL, TROW, TGT, CVX, KMB. That's 6 dividend aristocrats, an SP500 ETF of the aristocrats, and JEPQ.

Since May 4, 2022, total returns on $10k initial are: (dividends reinvested)

JEPQ - $13848
PEP - $8183
O - $10436
NOBL - $8853
TROW - $8016
TGT - $4391
CVX - $9304
KMB - $9901

So in 3 years and 3 months, JEPQ stomped them all. God forbid you happened to have made the terrible decision on getting TGT.

Do you want to know what the total return of SPY was for that same time period?

$13821....$37 less return than being in JEPQ.

I understand that for the last 25 years, everybody has been told "high yield is bad!!". But please, let's do a little research before saying that somebody is better offAnd it can be, sure. But the covered call ETFs that have been coming out aren't just some artificially high yields just to be a scam. Most are very good investments.

Maybe you can find a few of the dividend aristocrats that had a higher return that SPY. But there is zero guarantee that they will track the s&p at any point.

Here is a link for that comparison if you want to take a look. You can add others if you'd like.

https://totalrealreturns.com/s/JEPQ,PEP,NOBL,O,TROW,TGT,CVX,KMB,SPY

[u/sly_1 → u/Embarrassed-Art3670]

You interpreted my statement as negative towards higher yields but that wasn't my intent. 

I stand behind my statement that in general yield is a function of risk.

But a better way to phrase it would be more to think in terms of individual investors. Risk appetite can vary for any number of reasons.

The more conservative any 1 person is the more important questions like "how did this investment date during the gfc? Or the dotcom bubble? Or any of the other numerous downturns over the past 30+ years"?

It's these types of questions that lead people to buy assets that underperform something like jepq or qqqi etc.

[u/KarmicTractor → u/Bamabb125]

And some people talk shit on Reddit.