We all know investing is hard. Building a nest egg of $1 million or more can take a lifetime.
But let's say you do it. You have $1 million (or more) and the time has come to switch from a growth mindset to an income mindset. How could you generate $4,000 per month in dividend income alone? Is it even possible?
Of course. You just need to know where to look. So, here's a few ways to do it using Vanguard exchange traded funds (ETFs).
Image source: Getty Images.
Vanguard High Dividend Yield Index Fund
First up is the Vanguard High Dividend Yield Index Fund (VYM 0.74%). This ETF has a nearly 20-year history and has performed well over that time. It boasts a lifetime 8% total return compound annual growth rate (CAGR). Moreover, its 3.1% dividend yield and 0.06% expense ratio give value-oriented investors plenty to smile about.
| Company Name | Symbol | Percentage of Assets |
|---|---|---|
| Broadcom | AVGO | 3.59% |
| JPMorgan Chase | JPM | 3.55% |
| ExxonMobil | XOM | 2.94% |
| Johnson & Johnson | JNJ | 2.70% |
| Procter & Gamble | PG | 2.61% |
Data source: Vanguard.
Top sectors include financial services (22% of total holdings), industrials (12%), and technology (11%).
Investing $500,000 in this fund would yield $15,500 in annual dividend income, or $1,292 per month.
Vanguard Real Estate Index Fund
Next is the Vanguard Real Estate Index Fund (VNQ -0.07%). This real estate-focused ETF has a history dating back to 2005. Its 7.4% CAGR over the last 19 years is solid, and its 4.2% dividend yield isn't too shabby either.
The fund's holdings are almost entirely within the real estate sector, with 99.1% of assets invested in the industry.
| Company Name | Symbol | Percentage of Assets |
|---|---|---|
| Vanguard Real Estate II Index Fund | VRTPX | 13.06% |
| Prologis | PLD | 7.63% |
| American Tower | AMT | 5.95% |
| Equinix | EQIX | 5.06% |
| Crown Castle | CCI | 3.06% |
Data source: Vanguard.
Investing $500,000 in this ETF would generate $21,000 in annual dividend income, or $1,750 per month.
Vanguard International High Dividend Yield Fund
Last is the Vanguard International High Dividend Yield Fund (VYMI 0.45%). This ETF focuses on non-American stocks with high dividend yields. Started in 2016, it has a shorter track record than the other ETFs noted here, but it does boast a solid 7.5% CAGR over its lifetime. Add to that a beefy 4.7% dividend yield and a below-average 0.22% expense ratio, and this ETF is one to consider for income-seeking investors.
| Company Name | Symbol | Percentage of Assets |
|---|---|---|
| Toyota Motor | TM | 2.05% |
| Novartis | NVS | 1.84% |
| Shell | SHEL.L | 1.76% |
| Roche | ROG.SW | 1.66% |
| BHP Group | BHP | 1.32% |
The ETF's top sectors are financial services (36%), energy (10%), and industrials (10%).
Investing $500,000 in this ETF should generate $23,250 in annual dividend income, or $1,938 per month.
Income-seeking investors would be wise to consider these Vanguard ETFs. Even for those with more modest sums to invest, these funds can generate much-needed portfolio income.
