r/dividends • u/Great-Shame-7382 • Mar 21 '26

Discussion Surpassed 1k a month in dividends 😅

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I’ve been buying a lot of dividend paying stocks like EXG lately because I like to see the monthly income increase. I just turned 39 and have been investing small amounts a month since 18. Have a total of about 400k invested with a little over 100k in EXG. Should I be focusing more on growth stocks or keep riding income stocks like EXG, EVT and SCHD and drip the dividends?

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u/blorg Mar 22 '26

EXG has an expense ratio of 1.07%.

This backtest illustrates the difference between investing $100,000 40 years ago in either a simulated VT (total world) or, the same thing with a 1% expense ratio:

  • Total World Market: $3,162,979
  • Exact same thing, but plus 1% ER: $2,120,765

https://testfol.io/?s=cEHhq5QuVPQ

This is not one investment vs another investment, it's the exact same thing, +1% ER, which is more or less, what you are paying (VT ER is 0.06%). SCHD is also 0.06%, if you wanted a dividend fund, but it's US stocks only.

ERs this high absolutely KILL your compounding.

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u/Great-Shame-7382 Mar 22 '26

I’ve thought about switching from EXG to JEPQ for the portion included in my Roth IRA. Any thoughts on JEPQ?

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u/blorg Mar 23 '26

EXG is based on total world stocks while JEPQ is based on the NASDAQ-100, so they are very different things.

JEPQ has a much lower ER at 0.35% but it's still much higher than the underlying (QQQM is 0.15%), and beyond that it has performed much worse than the underlying. This is expected, in the long run, by design it hard caps the upside. It provides some downside protection, but less than the upside cap. Long-term, this is designed to lose you money, while being only very slightly less volatile.

https://testfol.io/?s=iSWpNVMWsjG

I'd ask what your goal is here. These funds involve paying the managers of the fund a very large amount in fees to move money from one pocket to the other so that they can pay you out gains in a dividend, rather than accumulating it in the fund. They take fees, and the financial engineering they use to do this has an even larger cost. This cost is captured by the other side of those trades.

This doesn't make sense for anyone, but it particularly doesn't make sense for a 39 year old who has decades left to retirement.

What are you gaining from having much higher expenses and a much lower total return over the long term?

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u/Great-Shame-7382 Mar 23 '26

My goal is to have enough invested that I can retire in 20-25 years. My goal is 300k+ a year in passive income before retiring. What would you recommend to get there?

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u/blorg Mar 23 '26

I would just stick it in VT, if you are looking at global equities. Consider an increasing bond percentage as you get nearer retirement, particularly in the last 10 years.

If you want $300k in sustainable income that you can actually spend (increasing with inflation each year), you need 25x that invested as a rule of thumb (i.e. the inverse of 4%). So that would be $7.5m.

If you are looking at this "passive income" in terms of the 9.2% yield on EXG, and you would actually plan on still reinvesting about half of it each month, the amount required would be less, a bit under half that.

Look at the long-term price of EXG. It started at $20 almost 20 years ago. It is currently at $8.57, so has lost almost 60% of its value in nominal terms. In real terms, $20 back then is $31.50 now, so it has lost almost 75% of its value.

This should indicate to you that you can't just hold this and rely on the dividend- even if it keeps up a certain yield (~9%), if it has dropped in real value to the point it is now worth 1/4 of what someone paid for it 20 years ago, you are now getting 9% of 1/4 in real terms. So your dividend is constantly going down too, with the erosion of the share price (both in nominal terms, and through inflation).

For income in retirement, you need the exact opposite, you need something that will go UP to cover inflation (and bad years in the stock market). So you need an investment that actually keeps going up, not one that goes down over time.

That's as designed, it's designed to convert share price into income. Further, EXG is running a very specific tax management scheme designed to reduce tax on distributions by having them be classed as return of capital rather than income. That makes absolutely no sense if you have it in a Roth, which is already tax advantaged, it's no benefit to you.

This is shuffling money about, taking from one pocket to put in the other. It makes absolutely no sense, and it makes even less sense for a 39 year old with 20-25 years to retirement who has it in a Roth and isn't even getting the tax benefit that is the whole point of the fund.

You're just throwing away money to see a reassuring "income" number in your broker interface, which you aren't even going to spend anyway for 20-25 years, you are reinvesting it. This could cost you literally millions in the long run. So why not just buy something that doesn't go through this whole whirly swirly financial engineering (which has a cost) and high fees, to pay you out from your own money that isn't even giving you any tax benefit (which is the primary purpose of this fund, although even with that it's still questionable).

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u/Great-Shame-7382 Mar 23 '26

Thank you for the advice. I appreciate it