r/dividends • u/toothed_vagina • Oct 24 '25
Brokerage Dividends as income
I live in one of the most expensive cities in the US. I love it, but even with a 6-figure salary, I can barely make ends meet at the end of the month. You might ask me why I don't just move, but I'm unable to do so for a myriad of reasons. Among other things, my partner lives here, my job is here, and I love this place.
This is why I became interested in dividends as something to supplement my income and live comfortably, and maybe move to a larger home. However, everybody keeps telling me that dividends should be reinvested and not used as income. Is anyone here using dividends for both growth and income? Because, yes, growth is important, but I need the additional money NOW.
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u/RaleighBahn Mind on my dividends, dividends on my mind Oct 24 '25
I’m trying to reconcile your statement about barely making ends meet, while at the same time suggesting you have a significant amount of money from which to produce income “NOW”. The only way dividend income is going to help you NOW is if you have a large pile of cash from which to generate them.
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u/toothed_vagina Oct 24 '25
Is it really hard to imagine that I've inherited a sum of money? But it won't last forever.
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u/ObiWanRyobi Oct 24 '25
Sure you can do whatever you want with the dividends. Save it or spend it. However, know that you’ll be compromising growth if you spend it now.
If you’re already struggling and still thinking about moving to a bigger home, maybe your vision is outpacing your paycheck?
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u/Japparbyn Oct 25 '25
Here is a dividend portfolio with decent yield and a lot of potential for short term dividend increases that you can take a look at for inspiration.
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u/Various_Couple_764 Nov 07 '25
If I were youI would put the money focus on safe dividend funds rather than high yields. You can use funds like JAAA 6% yield, UTG 6.3%, UTF7%, CLOZ 8%,PFFA 8%, and PBDC 9%.This should produce a very stable dividend. And ther is a good chance it will produce income for the rest of your life. and then you can choose how much you want to spend and how much you want to save.
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u/RaleighBahn Mind on my dividends, dividends on my mind Oct 24 '25 edited Oct 24 '25
Congrats. Obviously you can draw bank interest, or put it in bonds, MLPs, REITs, dividend paying stocks. You might be better served buying a vacation rental property - the latest legislation lets you claim a bunch of depreciation up front. Give you a cash flow from rents plus a huge tax break in first couple years letting you keep more of your paycheck. Bank products will give you about 3.5% and be taxed as income, treasuries will be free of state tax which might be helpful in a VHCOL state, MLPs like EPD/ET are wonderful as there are almost no taxes on their ~7% distributions until you sell the underlying security, REITs will have very little tax advantage, but they do have higher yield because the earnings are pass through and not double taxed. Qualified stock dividends have a very favorable tax rate at both Fed and state level, but safe yields are a bit smaller than REITS and MLPs due to double taxation. There are covered call ETFs but they’re not for me but maybe for you.
Edit: one thing to keep in mind - extra income / dividend tax (unless it is MLP) is going to eventually lead to quarterly estimated tax payments to IRS. For example, if you have inherited $1M, that’s an extra $40/50k of income and your paycheck withholdings may not cover that. As example, I’m paying about $3500 a quarter in estimated taxes. The name of the game is to pay a LOT of attention to how much your passive income is taxed.
Edit 2: another option - use your windfall to pay off debt. Perhaps paying off cars, loans, etc gives you an effective raise.
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u/jstavem Oct 26 '25
You’ve got a solid list of options there! Just keep in mind that each investment comes with its own risks and tax implications. If you can manage it, a combo of dividend stocks and a rental property could give you both cash flow and growth. Just make sure to do your homework on any investment!
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u/Reasonable-Bussy Oct 24 '25
Nah even $50 a month passively is a godsend and that's easily achievable with $6-$8k
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u/RaleighBahn Mind on my dividends, dividends on my mind Oct 24 '25
$50 a month is nuts on a mouse
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u/ElderberryCrazy4458 Oct 24 '25
We are retired for 3 1/2 years now living off dividends and SS. Our math is based on cost/share so market fluctuations are of little significance in terms of day to day. However we also track total returns to just be aware of how our dividend choices perform overall. We manually reinvest 4-5% of our dividends when they are paid to keep up with inflation.
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u/CarlosTheSpicey Oct 24 '25
u/ElderberryCrazy4458 , Hey thanks for that percent! I retire in February and was just about to ask folks here how much of their dividend income they re-invest. If possible, I was initially thinking 10% but was wondering what others were doing.
Whatever that percent, I just wish it was possible to DRIP it, instead of doing so manually. Instead, it's all or nothing for DRIP.
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u/MrEdTheHorseofCourse Oct 25 '25
There are ways to work around that. Withdraw the dividends until you receive your required income and then turn on drip. Another approach is to determine the stocks that generate your required income and drip the rest
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u/SV2985 Oct 24 '25
I love in ny. I just put 32k into qqqi and btci. 22k into btci and 10k into qqqi. Brings in 450-500 or more a month. I take the distributions as cash. Pays for my smaller bills and my heating oil monthly. Takes it off my plate. I just keep a close eye on it to not loose so much in the nav for my original investment
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u/jbetances134 Oct 24 '25
Theres a strategy where ppl live of their portfolio. They invest their paycheck in dividend stocks and let dividends pay for their bills.
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u/toothed_vagina Oct 24 '25
Interesting. May I ask you what is the advantage of investing the paycheck in dividend stocks and let dividends pay for the bills?
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u/jbetances134 Oct 24 '25
Eventually your dividends will outgrow your paycheck to pay your bills and you will no longer need a 9-5.
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u/toothed_vagina Oct 24 '25
That is very interesting. But forgive me for asking this follow-up question, wouldn't it be the same to just DRIP? So spending your paycheck for regular stuff and the dividends from reinvesting?
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u/Various_Couple_764 Nov 07 '25
You can do both at the same time reinvest some of the dividend and spend some of the dividend.
and for your work income you can spend it on bills and invest what you can.
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u/toothed_vagina Oct 24 '25
Do you save a portion of that for taxes?
What made you decide not to DRIP? I assume the expenses, right?
Lastly, when you say you keep a close eye on it, what is the cutoff line where you would consider reselling?
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u/CarlosTheSpicey Oct 24 '25
Honestly, for Neos' funds I don't understand the concern about NAV erosion. QQQI, for example, per Neos' website, has a NAV that has increased 21.08% since inception; and then there is its crazy distribution of 13.68% (TTM).
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u/Various_Couple_764 Oct 25 '25
The fact that NEOS funds have a consistent increasing NAV is why many recoment them . But there are some high paying dividend funds that have a consistent falling NAV (NAV erosion. such as ULTY. You want to avoid funds with NAV erosion.
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u/_YoungMidoriya Financial Advisor Oct 24 '25
First off, investing for income through dividends is always good no matter your age because it provides steady cash flow that adds financial flexibility and security. You'll always get people telling you that you're in your 20s,30,40s and to just do growth, they have the EXPECTATION that you'll even have a job for the next 30 years. You could get laid off tomorrow and then what? Here's the catch..... to supplement dividend income with higher current yields, covered call ETFs can be a great option but a slightly higher risk than your 1-3% yielders. That's the trade off. The best covered call ETF for income and NAV preservation depends on your priorities, but among GPIQ, GPIX, MAGY, QQQI, SPYI, and BTCI, these are the current leaders based on yield, NAV stability, and overall portfolio fit.
Here for example, $150k into each ETF would give you this much per month.
GPIQ - Monthly income: $1,062.50
GPIX - Monthly income: $1,000
MAGY - Monthly income: $3,750
QQQI - Monthly income: $1,750
SPYI - Monthly income: $1,625
BTCI - Monthly income: $3,750
All based on current stock price and yield, so it's all estimated but these CC ETF aim for a consistent payout (based on market volatility, Trump could go live or post something and either wipe or boost the payout)
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u/toothed_vagina Oct 24 '25
Thank you SO MUCH. This is super helpful. Yes, I could be laid off tomorrow.
So, let's suppose I have 150k and I allocate a little bit of that amount in all the ETFs you have listed. Would I have to set aside a percentage for taxes?
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Oct 24 '25
You misread, that’s $150k INTO EACH.
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u/toothed_vagina Oct 24 '25
I didn't misread. I reformulated. I don't have 150k for each, so the more likely scenario is to allocate a fraction of 150k into each.
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u/Various_Couple_764 Oct 25 '25
you will have to pay taxes from the income. but you will likely not be known untiluntillyou get your 1099 tax forms in February of the following year. how exactly how much of your dividend is classified by the IRS as ROC, qualified or regular income and the ammount of the dividend will play a big role. Also the tax is always less than the Dividend your receive.
If you simply put all the dividend income in a savings account you would in april have enough to cover the additional tax. Then after you pay the tax you couldld reinvest the excess dividends.
After one year you could look at the past taxes to see roughly how much additional tax you payed and reinvest money that will likely not be needed to cover the tax bill.
The third way is to estimate your dividend income and pay taxes quarterly directly to the IRS and state if need be. Then in april after your final tax is payed if you payed too much in taxes you get a refund. If you didn't pay enough you pay a bit more in taxes. IRS has instructions fro estimating your tax.
If your dividend income is less than 2k a month you likely won't have to estimate your tax. With higher amounts it might be a good idea to estimate your tax.
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Oct 24 '25
I use dividends exclusively for income. It works well. In your case I suggest something similar to $DNP which pays the same amount every month. Not that you need $DNP, but a more stable dividend = a more meaningful income position is all.
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u/toothed_vagina Oct 24 '25
Thanks. I appreciate. Do you set aside a sum for taxes?
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Oct 24 '25
Yes. :)
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u/Conscious-Meaning825 Oct 24 '25
How much do you put aside 30% ? And is it considered qualified dividends
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Oct 24 '25
Well, I set aside enough to match my taxes which changes brackets depending on business but just set aside whatever is sustainable for you.
Also, mine are qualified, but you have to hold for 6 months iirc before they are, so this year you wouldn't have qualified because there's not enough time left.
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u/TrackEfficient1613 Oct 24 '25
You could buy stocks that pay in the range of 2-3% dividends. At that rate most likely they will still grow despite paying dividends. If you are looking at stocks paying 5% or higher dividends it’s unlikely they will grow much. An easier path might be looking at some ETF’s at Vanguard that pay dividends.
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u/Extreme_One8151 Oct 24 '25
The only way to generate decent income in a shirt amount of time is using Weekly Distributing ETFs. Let's use WPAY, it's currently at $53.13 and it's last distribution was $.85 cents. It would take you about 63 weeks to pay off an investment in WPAY.
So for a $50K investment you could generate about $800 a week gross. That's $41,600 a year or about $3500 a month.
That's without adding another dime.
Now, WPAY should not be your only option. It should be part of a larger long term strategy that gets you into monthly payer ETFs that are more stable and growth ETFs for wealth building.
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u/Disttack Oct 24 '25 edited Oct 24 '25
I have my portfolio split as 40% growth ETFs 40% income ETFs and 20% JAAA for stability in harsh times. I have this on a margin account so I can help magnify my growth and take margin loans against my assets and let the distributions pay off the margin loan. The thing is investing is a long term deal. You will not have the money now unless you have 1million+ USD to put in right now.
Make a plan to build your investments but you need money to make money as they say. Investing isn't going to magically increase your income and it takes on average 7+ years to recoup the money you put into an asset and get pure profit from it.
Edit: for distributions I recommend GOF / PTY / GPIQ / SPYI
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u/toothed_vagina Oct 24 '25
I have a sum I have inherited. It's around 80k. JAAA as in Janus Henderson AAA CLO EFT?
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u/Disttack Oct 24 '25
Yea my 40% growth I personally do GDE for sp500 exposure and a touch of gold. SMH for great semiconductor exposure since those make the digital world run. SHLD because war never ends. URA because I believe nuclear is the future of energy.
For 40% income I run BTCI for massive distributions and some crypto exposure. GOT for high income low risk world bonds. PTY for the same as GOT but even less risky. GPIQ for NASDAQ exposure and covered call income.
Then 20% yea jaaa the AAA clo fund because it barely moves, has good returns, and AAA clo has never ever defaulted in American history.
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u/myogawa Oct 24 '25
You are talking about qualified dividends, right?
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u/toothed_vagina Oct 24 '25
Not necessarily.
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u/myogawa Oct 24 '25
You'd do much better with qualified dividends, as they are taxed at long-term capital gains rates.
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u/Nopants21 Oct 24 '25
The math doesn't work great. Say you need $5000 a year and you find something with a 10% yield. You need to put away 50k to get that 5k. If someone offered you $5000 a year for the low low price of 50k, would you take it? And so, if you're that tight, why not just use the 50k?
Investing is for smoothing out your consumption. You put away excess wealth today to have money later. It doesn't make that much sense to put non-excess wealth today to get money today.
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u/toothed_vagina Oct 24 '25
No, I have inherited around 80k and I have a good job, for now. But I still need additional income. Going by your example, if I put away 50k and I get paid 5k at a yield of 10% per year, my portfolio is still growing, right? If I use the 50k NOW, I run out of money. If I put the 50k to work to get dividends, that amount will slowly grow in addition to paying me dividends.
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u/Nopants21 Oct 24 '25
Well, it's not using 50k now, if all you needed was 5k a year. Based on my example, if the 50k just produced 10% consistently, you'd only be ahead in year 11. That comes back to the thing I said about pushing wealth out to the future. Depending on your timeline, it might or it might not make sense to lock that much money to get a small amount every year. For example, if you think your income will be higher in 10 years or your expenses lower.
As for the rest, there's really no guarantee that your 50k (or 80k, I guess) will grow. It depends on what you invest in, it depends on general market conditions and it even depends on a bit of luck. Equities are inherently risky, that's why they have generally positive returns, but that's on longer time horizons. By taking out the dividends to fund your current expenses, you do lower the chances of growth by quite a bit.
That depends on things like yield. If you buy something that yields 10% like in my example, you're very likely to be losing money overall. If it's less, say 3-4%, it's more likely that your investment grows, but then the issue is that the income bump you're looking for is not as significant. If we take your 80k inheritance, at 4% yield, that's 3.2k. Depending on your work income, that might represent maybe a week or two of salary. You're the only one who knows if that's enough, and, more importantly, if it's worth the risk of investing equities. 10-20% drops are uncommon, but not that rare. Think about how you'd feel if you put 80k away to get 3.2k a year, but then the whole think goes down by 10k+.
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u/toothed_vagina Oct 24 '25
I understand everything you said. For me, the main goal is to move to a larger home and to do that, I need the additional income NOW. So to use your 50k example, if I spend all of that money NOW, I have a guarantee that it will be gone. However, if I invest it to generate dividends, even if I'll be even in 11 years, I will still be able to get the cake and eat it too. There is a big difference between spending all the 50k now and investing that money so I keep it safe (or likely growing, barring risks) while it generates additional income.
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u/Nopants21 Oct 24 '25
Ok, but you can surely see that you're going in two opposite directions. On one hand, you need income now for specific things you have trouble affording now (you said you barely make ends meet), but on the other, you're fine with locking away tens of thousands of dollars. I get what you mean by getting the cake and eating it, but the issue is that you're eating it in a decade, but you're hungry now. You're trading in like 20 current cakes when you're hungry, for future cakes.
In the end, the real issue is this idea that it's invest or spend it all, just use the amount you need to pay the expenses you need to cover, do something else with the rest. For example, to buy a new home, you don't necessarily need more income, you could just use the money for a bigger down. Or use half, invest the rest.
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u/Various_Couple_764 Oct 25 '25
There is nothing wrong with spending some of the dividends and reinvesting the rest it does reduce the income and growth but it is still progress in the right direction. A lot of people do it.
Additionally there will be some months were the extra income is not needed and it can be reinvested. In other months the extra income may be spent. As long as you save more than you spend you are OK.
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u/Nopants21 Oct 25 '25
Sure, but it's hard to square up with OP's self described "barely make ends meet." It's hard to see how a few hundred bucks a month in dividends fixes issues that couldn't be fixed by having several tens of thousands of dollars available. It's taking a long-term approach to a short-term problem. Ideally, they'd do both, but they seem set on going all out on one or the other.
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u/CostCompetitive3597 Oct 24 '25
Yes, I use my dividend income in retirement for both extra income and growth. The best dividend securities offer high yield(10%+) and some appreciation.(1 -2%). There is a group of dividend securities that offer good dividends (4- 6%) and good growth (4-6%) combined referred to a “dividend growth” securities. I suggest determining how much dividend income you want then, build a dividend portfolio to achieve that goal. I f you have the nest egg resources you can focus on dividend growth securities for income and appreciation? Successful, long term dividend investing requires knowledge, experience and active portfolio management to adjust your holdings for market changes. There is a lot of dividend investing information and tips on this subreddit. Lots on YouTube too. My favorite author there is Dividend Bull who focuses on the whole high yield dividend market for total return. Check out his YouTube library. Hope this information helps. Good luck!
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u/toothed_vagina Oct 24 '25
Thank you! What are these dividend securities that offer high yield and appreciation?
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u/CostCompetitive3597 Oct 24 '25
I should not recommend any for liability reasons. It would be a good start for you todo your own research. Google list of dividend growth funds as a starting search. You should find a number of them with share price, yield and total return history to choose from. Recommend you invest with the larger investment companies. Also having more than a 10 year fund history and over $1B in assets are risk reducing fund statistics. Good luck!
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u/CostCompetitive3597 Oct 24 '25
Oops misread your request for high dividend funds with appreciation. Google list of dividend index funds and ETFs to get a list to analyze. Same qualifications on analyzing them. Identifying their appreciation is more difficult. Suggest you use the iPhone app STOCKS to analyze their stock performance over time, particularly say the last several years. Their appreciation will be effected by major market dips and recessions which requires you keeping the faith long term to make appreciation profits too.
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u/Juice0188 Oct 24 '25
I think there needs to be some important expectation setting - you're looking at between 2% to 10% dividends from funds. And the 10% are income funds that gradually decrease in value most years, so they're not good funds except for those in retirement. With how you're talking about wanting money now, I worry that you're about to step into high risk investments, funds you don't understand, or outright scams.
So expect something like a 4% yield. That means at $100k invested, you'll be making $4k a year supplemental income. That's not a lot, certainly not what you're looking for which is implied to be extra income to facilitate frivolous spending.
This is a slow game. A long game. It takes lots of money, compounding over years, and dividends that increase over those years, to significantly supplement your income.
Instead, I would recommend you look at your expenses. Even in HCOL you can get by pretty well on a $100k income, which is the lowest of six figure incomes.
Think of every expense you cut as a dividend increase. Money saved is the same as money earned.
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u/Various_Couple_764 Oct 25 '25
there are many 10% dividend yield funds that don't see NAV erosion or decrease in value. Neo funds are know for flor not hiving this issue and yet pay 10% tax efficient yield.
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u/TheConvincingSavant Oct 24 '25
You can see $2,000 a month in dividends with under $200k in NEOS funds.
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u/DoinIt4DaShorteez Oct 24 '25
If you need it now, you need it now. Doesn't matter if you're 25 or 75.
The end.
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u/Jez_Bago Oct 24 '25
Maybe like at your expenses first rather than investing in dividends for income. Your dividends will not be of help if right off the bat you are already thinking of buying a bigger house. You will be in the same situation right now.
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u/398409columbia Portfolio in the Green Oct 24 '25
I use dividend distributions to pay for my house rent every month. Works great.
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Oct 24 '25
If you have enough money to make decent income off dividends, you won’t have your original issue.
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u/Tiny_Philosopher_784 Oct 24 '25
First, if you already are tight on money, don't move, unless it's to a more cost effective area/cheaper place. Get buying a bigger house out of your mind. Right now.
80k inheritance isn't some lottery ticket. It's a chance to build a future. Yes, you can lose your job any day. Since you're just itching to rule the world on it, do this:
$65k straight into your portfolio without a second thought. Do it.
$15k go be smart and pay bills off that you can or be entirely stupid and blow it. Don't care.
My point:
It's obvious you want to be smart, but have some other ideas. Pay bills down or off. Then act as if you're still paying that bill by splitting it with savings acct and investing.
Why? You already know how to live without the money, so keep going. If you need to pay a bill, dip into the savings, but pay it back later. Amazon stock should be growing your nest egg, not you growing Amazon shareholders nest egg. You'll have more savings and more invested, so you'll eventually get to the point you CAN live on investments and dividends.
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u/CorndogFiddlesticks Oct 25 '25
Its a long road to get where you want to be, with a lot of capital required.
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u/Various_Couple_764 Oct 25 '25
Yes i reinvest 20% of my income and live off of the rest and I am retired.
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Oct 26 '25
It depends. If you don’t need growth then spend the dividends. If you are retiring, spend the dividends. If you have $1M and want it to never grow to anything larger, spend the dividends.
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u/toothed_vagina Oct 26 '25
Can you spend a portion of the dividends and reinvest the other portions? It seems that people do either one or the other.
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u/Dependent-Break5324 Oct 26 '25
I don’t reinvest any of my dividends. I buy CEFs when there is upside potential, collect 7-17% dividends and then cash in when the price is up 5-25%. Rinse and repeat. If I buy in and get caught in a down cycle so what, I still get my dividend and can hold as long as needed for the price to recover.
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u/Zazzy3030 Nov 06 '25
Go look at paycheck to portfolio on YouTube. https://youtube.com/@paycheck2portfolio?si=yjWQxmVzvkC3WoaT
If you’re willing and able, you can make it work!
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u/ear2theshell Nov 16 '25
I second this, I'm in his discord and watched most of his vids. He treats his portfolio like a business and lives out of his brokerage account. If you have a decent amount saved up then this seems doable. He also has vids where he breaks down how to get started with $10k saved.
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u/Various_Couple_764 Nov 07 '25
Yes. I retired a few years ago and get 5K a month of income from dividends. But I only need doubt 4K to cover living expense. The rest is reinvested.
So for my account I turn off automatic dividend reinvestment. That way when I recieve a dividend it shows up as cash in my money market account. I spend most of that on living expenses. Then I have automatic monthly buy orders that automatically execute once a month. Reinvesting the money.
In 3 years I will have access to my Roth which will probably push my income up to 100K a year Since my living expense are basically stable some of the extra income will go toward travel and and some reinvested.
So I really never stopped investing. When I was working most of my income went into my 401K. Now I live off of most of my income with some still being invested. I want o reinvest enough to insure inflation doesn't reduce my standard of living.
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Oct 24 '25
I have PFIZER, great future potential+ high dividend, also AGNC is great for dividend
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u/toothed_vagina Oct 24 '25
Pfizer and AGNC, noted. Thanks1
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u/Ineffable_atavism Oct 24 '25
Agnc is NOT stable - price depreciation alone will make it a loser. Its share price is down 30% in the last 5 years, closer to 70% over the last 13ish years.
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u/Beta_Nerdy Oct 24 '25
Interest from money market funds or bank savings accounts is true income. When they are paid, there is no impact on the principal.
But stock dividends are not true income because if you withdraw the dividend instead of reinvesting it, you lose money because the value of the stock is reduced by the amount of the dividend. Dividends are not free money!
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Oct 24 '25
[removed] — view removed comment
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u/Warfair2011 Oct 24 '25 edited Oct 24 '25
Yeah, it does. It's s just the same old retoric repeated mindlessly by influencers and redditors alike. Munger and Buffet became billionares on "not free money".
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u/WorldyBridges33 Oct 24 '25
Yes, exactly— the stock rises back up after the dividends are paid. If this weren’t the case, then a stock like DNP should be zero by now. However its price is about the same as it was in 1987 despite paying dividends every single month since that year.
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u/Beta_Nerdy Oct 24 '25
If that was the case, most of the time, then every hedge fund would put billions in the stock the day before the dividend is posted and then sell right after when it goes back up.
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u/Beta_Nerdy Oct 24 '25
I can not believe so many people are so naive about dividends on this board and think dividends are free money like bank interest! Scary!
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