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I Retired Early After Investing In These 5 Dividend Stocks

March 18, 2024

4 min Read

Written by Laura Beck

Edited by Chris Cluff

Bjoern Wylezich / Shutterstock.com

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Looking to retire early? Investing in dividend stocks can be a powerful way to make your dream a reality. While there are various investment approaches out there, one that has proven successful is building a portfolio of companies that consistently pay out a portion of their profits to shareholders — a practice known as dividend investing.

Unlike growth stocks that primarily focus on capital appreciation, dividend stocks offer a two-pronged advantage: the potential for your investment to grow in value over time, coupled with a steady stream of income from regular dividend payouts. This makes dividend investing an attractive option if you’re trying to achieve early retirement.

GOBankingRates recently spoke with Noah, the founder of WiseStacker.com who has successfully employed this strategy.

“I am a 47-year-old semi-retired wealth manager, managing my own $5 million portfolio,” Noah said. “At the moment, $1 million is invested in defensive dividend stocks.”

Also see the best monthly dividend stocks this year.

Understanding Dividend Stocks

Dividend stocks are investments that make regular cash payments to shareholders. These payments are typically made quarterly or annually and can provide a reliable source of income. The amount of the dividend is determined by the company’s board of directors and is based on the company’s earnings, cash flow and likely growth prospects.

For Noah, defensive dividend stocks — typically large, well-established companies with track records of consistent dividend payments and low volatility — provide reliable sources of passive income. This steady stream of dividends has been a cornerstone of his strategy to achieve early retirement.

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“Currently, my portfolio stands at $1 million, predominantly comprised of pure dividend stocks,” he said. “This hand-picked collection generates a steady $25,000 in passive income annually, facilitating financial independence and security.”

To mitigate risk, Noah has invested in large, established companies from multiple countries.

“At the heart of my portfolio lie large international blue-chip stocks, reflecting my preference for a diversified and globally oriented investment approach,” Noah said. “Living in Asia, I find value in an international allocation, leveraging the stability and growth potential offered by prominent companies across different regions.”

Building a Dividend Portfolio

Constructing a well-diversified dividend portfolio helps mitigate risk by spreading your investments across various industries and countries. When selecting dividend-paying stocks for your own portfolio, consider focusing on companies with a history of consistent dividend growth, strong financial metrics and competitive advantages in their respective markets.

“Diversification is key to my investment strategy, with 25% of my holdings allocated to real estate investment trusts (REITs) and another 15% invested in consumer staples,” Noah said. “My holdings reflect a balance between income generation and growth potential, aligning with my objectives for sustainable wealth accumulation and retirement planning.”

Noah’s portfolio includes the following five stocks, known for delivering consistent dividends and long-term value appreciation:

Realty Income REIT

Annual dividend: 5.9%

Realty Income Corporation is a real estate investment trust (REIT) that owns and manages commercial properties across the United States. It’s renowned for its reliable income stream, making it an attractive choice for dividend investors seeking consistent returns.

Siemens

Annual dividend: 2.5%

Siemens AG is a multinational conglomerate headquartered in Germany. Siemens’ strong financial performance and commitment to innovation have enabled it to maintain steady dividends.

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Castellum REIT

Castellum REIT is a Swedish real estate investment trust that owns and manages a portfolio of commercial properties, primarily office buildings and logistics centers. Castellum has demonstrated a track record of stable cash flow and dividend payments.