This Dividend Snowball Portfolio Helped Investor Retire Early: Top 11 Stocks You Can't Miss
2025.02.09
This Dividend Snowball Portfolio Helped Investor Retire Early: Top 11 Stocks You Can't Miss
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The US stock market is wavering as China announced new tariffs against the US in response to President Donald Trump's additional 10% levy on imports from the country. Analysts expect volatility to prevail in the coming months. Dividend stocks are gaining attention because of their impressive track record in difficult times. In 2022, when the inflation crisis was hammering the markets and interest rates began to rise, dividend stocks fell 11.1%, compared with a 38% decrease in non-dividend-paying stocks.
A few days ago, someone asked income investors on r/Dividends — a community on Reddit with over 660,000 members — about the rationale of investing in dividends given the common perception that one cannot enjoy strong capital appreciation while investing in dividends. The question sparked a debate, drawing more than 200 comments. One investor explained why he loves dividend investing with interesting details.
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The investor said his dividend growth portfolio became a dividend "snowball" portfolio over time and helped him retire in his early 50s. The portfolio also outperformed the S&P 500 with dividends and was "growing twice as fast as long-term inflation."
"Now we are living off our dividends that are still growing faster than long-term inflation while never having to worry about selling our holdings. And the Dividend Income portfolio still outperformed the S&P 500 in 2024. That is why I like dividends so much."
The investor had about 40 stocks in his portfolio. Let's take a look at some of the key dividend companies he was invested in.
Verizon
With a 6.9% dividend yield and 18 consecutive years of dividend growth, Verizon (NYSE:VZ) is among the most popular dividend stocks among investors on Reddit. For 2025, Verizon expects adjusted earnings growth of up to 3%.
Enterprise Products Partners
Midstream energy company Enterprise Products Partners LP (NYSE:EPD) was another top high-yield dividend stock in the portfolio of the Redditor living off his dividend income. The stock yields 6.6%.
Midstream energy infrastructure company MPLX LP (NYSE:MPLX) was one of the high-yield dividend stocks in the Redditor's portfolio. The company has a dividend yield of about 7.4% and is owned by Marathon Petroleum (NYSE:MCO).
JPMorgan Equity Premium Income ETF
JPMorgan Equity Premium Income ETF (NYSE:JEPI) makes money by investing in some of the most notable large-cap U.S. stocks and selling call options. JEPI is ideal for those looking for exposure to defensive stocks. JEPI usually underperforms during bull markets but protects investors against huge losses during bear markets, as most of its portfolio consists of large, defensive equities.
JPMorgan Nasdaq Equity Premium Income ETF
JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) is another high-yield covered call ETF that distributes monthly dividend income. The ETF invests in Nasdaq companies and generates extra income by selling call options.
The NEOS S&P 500 High Income ETF (BATS:SPYI) is a high-yield covered call ETF that pays monthly dividend income. It invests in some of the top S&P 500 companies and generates extra income by selling call options on stocks, generating extra premium income for shareholders.
Home Depot
Home Depot (NYSE:HD) was one of the many dividend growth stocks in the portfolio of the investor living off his dividend income. The home improvement retailer has raised its payouts for 15 straight years. The stock yields over 2%.
Johnson & Johnson
With over six decades of consistent dividend growth, Johnson & Johnson (NYSE:JNJ) is among the top dividend growth stocks in the portfolio. The stock recently fell despite reporting better-than-expected Q4 earnings because of the underperformance of its MedTech division.
Procter & Gamble (NYSE:PG) has raised its dividends for 68 straight years now. The consumer products giant recently posted better-than-expected quarterly results and maintained its full-year earnings outlook. Over the past 12 months, the stock is up 6.7%.
PepsiCo
PepsiCo (NYSE:PEP) has been raising its dividend payouts for 52 years without a break. Last month, Piper Sandler issued an Overweight rating on the stock and said the uncertainties Pepsi is facing are already priced in its shares. The firm believes Pepsi's Frito-Lay food business is poised to make a comeback.
Caterpillar
Caterpillar (NYSE:CAT) shares are under pressure after the company's fourth-quarter revenue missed Wall Street estimates due to the underperformance of key business segments. Sales fell 5% from last year. CAT has a dividend yield of 1.4%.
