Best Monthly Dividend ETFs That Still Grow Your Money
Summary
Brian outlines a comprehensive strategy for building a monthly income portfolio, highlighting the importance of a 'price test' to ensure that investments maintain their share value while paying dividends. Brian emphasizes that total return—the combination of dividends and price appreciation—is the most critical metric for success. Brian warns against common mistakes like misinterpreting annual yields as monthly rates and falling into 'dividend traps' where high yields mask poor performance.
Brian provides a breakdown of several investment options:
Finally, Brian discusses the tax implications of monthly dividends, distinguishing between qualified and non-qualified dividends. Brian strongly recommends holding high-yield monthly assets in tax-advantaged accounts like an IRA to avoid heavy tax burdens on reinvested income.
Mentioned Stocks
Reasoning: Brian states that JEPI failed Brian's price test because the share price has not held up sufficiently over time. Brian excludes it from Brian's list of top monthly dividend recommendations for this reason.
Reasoning: Brian recommends JEPQ for investors who want tech exposure with high income. Brian explains that Brian uses an option-selling strategy to generate a 12% yield while holding companies like Nvidia and Apple. Brian notes that JEPQ provides a balance between growth and immediate cash flow, requiring $500,000 for a $5,000 monthly income.
Reasoning: Brian supports SPYI for those seeking a 12% yield based on the full S&P 500. Brian points out that despite being younger and barely passing Brian's price test, it provides strong monthly checks. Brian calculates that a $500,000 investment in SPYI generates $5,000 in monthly income.
Reasoning: Brian excludes QYLD from Brian's list because it failed the price test. Brian notes that QYLD's share price has not shown the necessary resilience or growth to justify its inclusion for long-term income seekers.
Reasoning: Brian rejects Realty Income because it failed Brian's price test, with the share price down 14% over the last five years. Brian argues that a high dividend is not worth the loss in principal investment. Brian prioritizes assets that show share price growth or stability alongside payouts.
Reasoning: Brian views DIVO as a high-quality fund for stability and downside protection. Brian states it holds blue-chip companies like Microsoft and Visa and generates a 5% yield. Brian mentions it is ideal for retirees because DIVO tends to fall less than the S&P 500 during market crashes. Brian notes that $1.2 million is required in DIVO to reach a $5,000 monthly payout.
Reasoning: Brian likes IDVO for its international exposure and high performance, citing an 81% return over the last three years. Brian highlights its 6% yield and holdings like Taiwan Semiconductor. Brian cautions that IDVO has not yet experienced a full -20% bear market due to its short history.
Reasoning: Brian recommends DHS for income derived from steady, established companies like AbbVie and Exxon. Brian states that DHS provides a 3% yield and can outperform the S&P 500 during value-oriented cycles. Brian warns that $1.9 million is needed to generate $5,000 a month and that DHS can be volatile during specific crashes like COVID-19.
Reasoning: Brian identifies MAIN as the best monthly-paying individual stock Brian found, having outperformed the S&P 500 over five years. Brian emphasizes that Main Street Capital has never cut its regular monthly dividend since 2007. Brian advises keeping it as a small portfolio part because Brian notes it can drop significantly during economic uncertainty.