How To Invest $600,000 In 2024 To Live Off Of Dividends Forever


After several years of sky-high inflation, the cost of living is higher than ever. This is particularly true if you did not already own a home before mortgage interest rates and rents soared over the past few years. As a result, an increasing number of people believe that retirement is an . The average American they need ~$1.2 million to be able to retire and therefore fully expects to be perpetually trapped in 9-5 employment in order to meet their financial needs.

Why Live Off Of Dividends Forever?

What Does It Take To Live Off Of Dividends Forever?

Defensive and Durable Business Model: In order to deliver stable and growing dividends year after year over the long term, the business model should be one that is generally secure against technological disruption and also tends to remain at least somewhat profitable during good times and bad. The more stable its cash flows across an economic cycle, the better.

Strong Balance Sheet: Additionally, companies with low debt, ample liquidity, and strong credit ratings are less likely to encounter financial distress during economically challenging periods and, therefore, more likely to maintain or grow their dividends over time.

Safe and Growing Dividend Payout: In addition to having a defensive and durable business model and a strong balance sheet, a good dividend stock should also cover its dividend comfortably with cash flow. The more capital-intensive and/or cyclical its business model and the weaker its balance sheet, the lower the dividend payout ratio should be for you to feel confident in its ability to keep paying its dividends. Moreover, to fit in a long-term passive income retirement portfolio, a stock should not only offer a safe dividend payout today but also demonstrate potential for consistent dividend growth for years to come, ensuring that the income stream keeps pace with or outpaces inflation over the long-term, thereby preserving your purchasing power.

High Enough Current Dividend Yield: Last, but not least, while future growth is essential, a significant current yield is crucial for meeting immediate income needs. After all, without enough passive income from your portfolio today, you are in not much better shape than those who are pursuing the 4% Rule as you will still be forced to sell some of your stocks to meet living expenses, even if the market is crashing.

Can You Live Off Of A $600,000 Portfolio Forever?

Sample 10-Stock Portfolio

Investment Allocation Percentage Yield Income Expected Growth EPD $30,000 5% 7.7% $2,310 5% ET $30,000 5% 9.2% $2,760 4% BXSL $30,000 5% 10.9% $3,270 2% WPC $15,000 2.5% 5.3% $795 3.5% O $15,000 2.5% 5.4% $810 3.5% RQI $90,000 15.0% 8.0% $7,200 0% JEPI $100,000 16.7% 8.4% $8,400 0% PFFA $120,000 20.0% 9.6% $11,520 0% AY $20,000 3.3% 8.5% $1,700 3% SCHD $150,000 25.0% 3.5% $5,250 10% Total $600,000 7.34% $44,015 2.1% Click to enlarge

Enterprise Products Partners L.P. (EPD): EPD’s diverse, fully integrated, and highly contracted business model in the midstream energy sector generates very stable cash flows even in the face of macroeconomic volatility. With a strong balance sheet evidenced by its A- credit rating, low leverage ratio, and substantial liquidity, EPD has demonstrated a consistent track record of increasing distributions for over a quarter century. Currently yielding 7.7% and offering inflation-beating growth potential for the foreseeable future, it is an excellent pick for a retirement portfolio.

Energy Transfer LP (ET): ET’s vast network of midstream assets and a high percentage of EBITDA from contracted assets provide it with a defensive business model. Recent steps to reduce high leverage ratios and maintain an investment-grade credit rating, coupled with a very well-covered and growing 9.2% yield, position ET as a strong passive income investment for the long term.

Blackstone Secured Lending (BXSL): BXSL’s focus on first-lien senior secured loans, skilled underwriting with the support of its trillion-dollar asset manager parent (BX), and investments in higher EBITDA companies position it well in economic downturns. With strong dividend coverage and recent increases in its regular dividend, BXSL offers a secure income stream that should also continue to grow gradually over the long term, making it an attractive option for income-focused investors while also balancing out our portfolio a bit to profit from periods with rising interest rates.

W.P. Carey Inc. (WPC): WPC’s shift towards industrial and warehouse properties represents a strategic move towards a more defensive and durable business model that generates very stable long-term cash flows. With a solid balance sheet, including a BBB+ credit rating and CPI-linked leases, WPC’s dividend, currently yielding over 5.3%, is well-positioned for stable long-term growth, offering an attractive balance of yield and security for retirees.

Realty Income Corporation (O): Known for its consistency as a Dividend Aristocrat, O’s diversified property portfolio and focus on triple net leases generate stable cash flow to support its monthly payouts. The company’s strong A- credit rating facilitates low-cost financing, supporting its dividend sustainability, which currently yields 5.4% and is likely to continue growing each year for years to come.

Cohen & Steers Quality Income Realty Fund (RQI): RQI’s diversified real estate investment trust (VNQ) portfolio and attractive yet consistent monthly distribution – even during periods of market turmoil – currently yielding ~8%, make it a very compelling income investment.

JPMorgan Equity Premium Income ETF (JEPI): JEPI, with its covered call strategy, offers investors exposure to mega-cap tech stocks like Apple (AAPL) and Microsoft (MSFT) while also still paying out a hefty monthly distribution. This makes it a nice portfolio diversified for investors who desire the stable sequence of returns provided by dividends, but still want to diversify their portfolios to include exposure to mega-cap technology stocks.

Virtus InfraCap U.S. Preferred Stock ETF (PFFA): PFFA’s focus on high-yielding preferred shares, combined with modest leverage and active management, enables it to pay out a very attractive, sustainable, and defensive 9.6% yield.

Atlantica Sustainable Infrastructure plc (AY): AY’s focus on renewable energy and stable cash flow profile from long-term power purchase agreements with investment grade counterparties, along with a strong balance sheet, positions it well for sustainable income generation for years to come. Between its current yield of 8.5% and long-term growth potential in the renewable power industry, AY offers investors a compelling combination of attractive current yield, defensive cash flows, and growth potential.

Schwab U.S. Dividend Equity ETF (SCHD): Last, but not least, SCHD’s focus on dividend growth stocks has resulted in strong long-term total return and dividend growth performance. Although its yield of 3.5% is lower compared to the rest of our portfolio and is well shy of our target yield, its low expense ratio and track record of generating double-digit dividend CAGRs make it a nice complementary holding in our portfolio by increasing our average dividend growth rate to keep our purchasing power growing in line with inflation.

Investor Takeaway

This article was originally published by a . Read the Original article here. .