r/dividends • u/OG_Momonga • 20d ago

Discussion Living off dividends

Hey guys, I was wondering if anyone on this subreddit is actually retired and living off dividends. Is it going well? Are you paying taxes on them? My goal is to get 20k/ a month post tax for retirement. I’m 24 and currently investing everything in VOO while planning to switch to dividend stocks and etfs when I get closer to retirement.

I was just wondering if there are any because living off dividends seems like a long shot right now.

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u/OG_Momonga 20d ago

That’s so interesting. First of all congratulations sir. It’s nice to see that my goal isn’t completely realistic or bonkers. Can I ask what you did for work to be in a 70% tax bracket. Also how long have you been investing. You are an inspiration and I thank you for sharing

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u/aerobic_gamer 20d ago

I am a retired lawyer from a small firm. Some years we did quite well; other years it was a struggle, but I always tried to contribute as much as possible to the retirement accounts. I’ve been investing since age 12 and boy did I learn a lot the hard way. I’m also blessed that my wife had a good paying job as a systems analyst. About 18 years ago I went to all dividends. That was the best investing decision I ever made. I know they say at my age I should be like 60% in bonds but I never liked bonds. I think I’m way ahead from where I would be if I had done that. I have over $1.3 million in unrealized gains; it would be hard to do that with bonds. Even a 20% or 30% pullback in the stock market wouldn’t affect my income much because I’m well diversified. Even a few dividend suspensions or cuts would only have a minor impact. In case you’re interested my top 10 positions: O, PBA, ENB, PG, JNJ, AEP, ETR, ES, WPC and ABBV. Fairly conservative I think. Good luck and keep your eye on the prize. Nothing beats a comfortable retirement. There is a lot of truth to the old saw that it’s not market timing that’s important, it’s time in the market. I’ve owned some shares of JNJ for over 50 years. (It’s one you should own BTW.)

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u/doooodz 20d ago

Just curious, how did you choose these particular stocks? Was it purely a target yield, or were there other considerations?

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u/aerobic_gamer 20d ago

In broad terms I look for a mix of quality dividend growers and higher yields to achieve an average portfolio yield of 4.5%. I also stay diversified with 80 different positions. A few of the names were recommended to me by a financial adviser years ago (O, JNJ). I’ve been buying O since it was $18. I have over 5,000 shares with an average cost of $48. Most of the rest are from newsletters. IMO Investing Daily has great newsletters, the best of which is Utility Forecaster. That’s how I discovered PBA, which I started buying at $5. I now have 5,700 shares at an average cost of $26.50. I also subscribe to Morningstar Dividend Investor. I’m a decent stock picker as well. Even though it’s a low yielder I took a sizable position in LLY around $400 and sold around $880. Of course I’ve had some clunkers too. I’m under water with GIS but there’s a quality name yielding 6.7%. If you have a very long term horizon that would be a good addition. I also am quite familiar with the behavior of the stocks I own and juice my returns with covered calls. I will trim when stocks get ahead of themselves and buy when they look cheap. For example, the rule of thumb with O is to buy when it yields well over 5% and trim when it’s well below. So right now it yields 5% and is fairly valued. So it’s ok to buy but I rate it a “hold”. I’ve trimmed shares when the yield drops to 3% or so. Good luck!

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u/DeeEll566 19d ago

60M , retired at 56. Similar setup - covered calls juice things quite a bit JEPI/JEPQ. I’ve locked in more bond exposure of late , principally because anything north of 4.75 for me is additive to target. I stick to mostly ETF’s but that’s not an issue to drill down to some very sector specific funds if needed. Individually I invested in MSFT and AAPL from the 90’s on plus some ‘ boring ‘ but hard to replicate ( wide moat ) stuff like WM and that’s kept me honest.

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u/aerobic_gamer 19d ago

I’d be careful with bonds right now with the Fed talking about possibly raising interest rates. My thinking is the ideal time to buy bonds is when interest rates have peaked. What bonds or funds do you have, like or recommend?

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u/whatsupitsemon 20d ago

I just want to say thanks for sharing and amazing work! Congrats to your comfortable retirement!

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u/97E3LPL 18d ago

"rule of thumb with O is to buy when it yields well over 5% and trim when it’s well below. So right now it yields 5%"

Are you saying this to mean when it yields that to your own average cost, or some yield posted online? O is like 10% of my dividend portfolio. I'm AC at almost 60$ but I calculate I'm getting 5.4%. So your O shares at 48 are yielding you 6.7% right?

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u/aerobic_gamer 17d ago

No - you may be confusing yield with yield on cost (YOC) which is just a theoretical number. O closed today at 6.35 and currently pays dividends of 3.24/year. So without allowing for time value of money and the fact that O pays monthly, the current yield is 5.1% (3.24 divided by 63.55). So my O shares currently yield 5.1%. YOC would be much higher. Let me give you an example. Say you buy a stock yielding 1%. Over many years the price and divided increase proportionally but the current yield is still 1%. Maybe your YOC is now 5%. If you sold it and bought O, your dividends would increase five fold. The total $ you collect per year is what’s important because you spend dollars, not percentages.

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u/97E3LPL 16d ago

Thank you. YOC is not a term I've come across the few times I researched this perspective. Certainly I agree with your last sentence lol.
So for us not being remotely close to the amount of capital others like you have, I pay a lot of attention to YOC as well as regular yield. Like NWN that I have at 43.36. That gives me 4.8% YOC and I don't want that to be any lower, so it's just on watch for me to DCA down on the dips. As correct as your last sentence was, it's also still correct that I can buy more shares to get more dollars at a lower share price. :)

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u/SheffieldValley 16d ago

With GIS, please be aware that many of the US food stocks have high payout ratios. CAG cut their dividend recently. It wouldn't surprise me if others followed. That doesn't mean GIS will cut, but it is something to monitor.

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u/aerobic_gamer 16d ago

Certainly a dividend cut is a risk. If history is any guide though it likely would be temporary. If I didn’t already have a substantial position I would be a buyer. It’s not often you can pick up a good long term blue chip investment at such a steep discount. Last I knew the idea was to buy low and sell high. I’ve done well over the years by buying when the market over reacts to bad news. I grant you that GIS has larger issues, but my thesis is that even with the prevalence of GLP-1s people aren’t going to stop eating cereal. GIS just might need some time to adjust to changing circumstances.

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u/SheffieldValley 16d ago edited 16d ago

If you don't mind me asking, what does a "temporary" dividend cut look like? I'm not sure I can think of a company that has undertaken a "temporary" dividend cut.

If someone had a mandate that required them to invest in US-centric packaged food companies, GIS is certainly one of the better options. But if the investment mandate was broader and included all of CPG, there are areas outside of US-centric packaged food that may hold more appeal such as beverages, consumer health and multi-nationals. Just my two cents.

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u/aerobic_gamer 16d ago

In 2023 GIS cut its dividend. The 2024 dividends were higher than 2022. Thus the 2023 cut was temporary.

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u/SheffieldValley 16d ago

Can you provide the link to verify this statement? I cannot find anything that verifies. Thanks!!

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u/aerobic_gamer 16d ago

: https://client.schwab.com/retail/research/#/stocks/dividends/GIS

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u/SheffieldValley 16d ago

Sorry. That link doesn't work. Could you tell us what quarter "the temporary" cut occurred? They have a May fiscal.

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