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The idea that you can't beat the broader market and see your capital grow by sticking to dividend stocks is becoming outdated. With major tech companies like Meta Platforms, Salesforce and Alphabet, among many others, joining the growing ranks of dividend-paying growth stocks, the opportunities for investors looking for both dividend income and stock price appreciation are expanding.
About a year ago, a dividend investor on Reddit shared his success story, saying he was making over $10,000 in passive income and beating the S&P 500 by investing in dividend stocks. He shared screenshots of his investing portfolio, showing his annual income at about $11,800 a year or $991 per month.
When asked how much he had invested, the Redditor said his total value was $200,000. Since the investor had highlighted in his post that he was feeling "doubly awesome" by making significant dividend income and beating the market, someone asked him whether he had beaten the market for just one year.
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Let's examine some of this portfolio’s biggest holdings to see which stocks helped the investor earn significant dividend income and beat the market.
Arbor Realty Trust
Arbor Realty Trust Inc. (NYSE:ABR) is a mortgage REIT with a dividend yield of over 11%. It was the biggest position in the portfolio of the Redditor making about $11,800 a year in dividends. Analysts believe the future is bright for REITs like ABR amid declining interest rates and hopes of a soft landing. Wells Fargo said in a recent note that "less restrictive" policy from the Fed can lay the groundwork for commercial real estate recovery.
Altria
With an over 8% dividend yield and more than 50 years of consecutive dividend hikes, Altria Group Inc. (NYSE:MO) is perhaps one of Reddit’s most popular dividend stocks despite concerns about the declining use of traditional tobacco products. Analysts believe Altria is making a timely shift toward smoke-free products like vapes and nicotine pouches. MO was the second-biggest holding of the Redditor earning $11,800 a year in dividends.
Petroleo Brasileiro
Petroleo Brasileiro ADR (NYSE:PBR) is a state-owned Brazilian energy company. Once famous for its eye-popping dividends, PBR's dividend yield stands at about 13% amid a decline in payouts after a difference of opinion about cash allocation in management. The Redditor, who posted his income report in October 2023, said Petroleo Brasileiro ADR (NYSE:PBR) was his third-biggest holding.
United Parcel Service
The Redditor making $11,800 a year in dividend income had United Parcel Service Inc. (NYSE:UPS) among his biggest holdings. The stock has a dividend yield of about 5% and 15 years of consecutive payout increases. UPS shares are down 15% over the past year. In July, the company reported second-quarter results that missed Wall Street estimates on both EPS and revenue. However, the company restarting its $1 billion stock buyback program gave investors something to cheer about.
Texas Instruments
Texas Instruments Inc. (NASDAQ:TXN) has a dividend yield of about 2.6% and the stock has gained 28% over the past year. Citi recently published a bullish note on the semiconductor industry following better-than-expected August data driven by dynamic random access memory. The firm has a Buy rating on TXN.
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PepsiCo
PepsiCo Inc. (NASDAQ:PEP) has a dividend yield of about 3.2% and over 50 consecutive years of dividend increases. Like Coca-Cola, it's considered a defensive stock that investors like for all market cycles. The portfolio screenshots shared by the Redditor making $11,800 annually showed Pepsi among the top holdings.
Apple
When asked which stocks helped him beat the S&P 500, the Redditor named Apple Inc. (NASDAQ:AAPL) among the top companies. Apple shares are up 28% over the past year and the company has raised its dividends for more than a decade in a row.
Broadcom
Broadcom Inc. (NASDAQ:AVGO) was one of the stocks that helped the Redditor beat the S&P 500. The stock is up more than 110% over the past year, thanks to the rising demand for the company's custom AI chips. The stock has a dividend yield of about 1.1%.
Cisco Systems
Cisco Systems Inc. (NASDAQ:CSCO) yields over 3% and has increased its payouts yearly since 2011. Cisco's CFO Scott Herren recently said in a conference that the company expects about $1 billion in AI product orders in fiscal 2025, with 30% growth in hyperscalers recorded by the company during the second half 2024 alone.
Home Depot
Home Depot Inc. (NYSE:HD) shares have gained 37% in the past year and the stock yields 2.2%. Home Depot Inc. was among the top holdings of the Redditor making $11,800 a year in dividends. The home improvement retailer has raised its dividends for 15 straight years.
Microsoft
When asked about stocks that helped him beat the market, the Redditor said Microsoft Corp. (NASDAQ:MSFT) was one of the companies that pulled his overall portfolio performance higher than the S&P 500. Microsoft shares are up 26% over the past year and the company announced a 10% bump in dividends last month.
