Dividend investing attracts many investors who want to generate extra cash flow without any additional work. One Redditor just got started with dividend investing and posted his portfolio in the Dividends subreddit. 

He is a 30-year-old who makes $206.10 per month with his portfolio. That comes to $17.18 per day. The investor currently has a 5.15% yield on his assets. 

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What's in the Portfolio?

The Redditor has five holdings in his portfolio. He has some ETFs, so the portfolio is more diversified than it sounds. These are the positions:

• Enterprise Products Partners LP EPD: 14 shares
• JPMorgan Equity Premium Income ETF JEPI: 8 shares
• Realty Income O: 28 shares
• Schwab US Dividend Equity ETF (NYSE Arca): SCHD): 24 shares
• Real Estate Select Sector SPDR Fund XLRE: 20 shares

The Redditor has a high concentration of high-yielding ETFs and REITs. The exposure to REITs is noteworthy since those dividends are treated as ordinary income. If you are in a high tax bracket, investing in stocks that offer non-qualified dividends doesn't make as much sense. These types of dividend payouts are treated as ordinary income, which results in more taxes.

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Realty Income, the JPMorgan Equity Premium Income ETF, and the Real Estate Select Sector SPDR Fund give out non-qualified dividends. The dividend investor should use their current tax rate to assess the true yield. 

For instance, if a non-qualifying dividend stock has a 5% yield, and your top dollar is taxed at 22%, then you are only getting a real yield of 3.9% (5% x 0.22 = 3.9%).

Know Your Strategy

It's hard to gauge if the Redditor is doing a good job or not since we don't know the Redditor's strategy. For instance, if the 30-year-old wants to maximize risk to achieve the highest possible reward, then this is a bad portfolio. However, if the same investor wants to reduce volatility and receive high cash flow, then it fulfills that objective.

The Redditor is diversified into a few ETFs which minimizes risk. Putting all of your eggs in one basket is riskier since your entire portfolio would be tied to a single stock's performance.

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DRIP and Continue Investing

When you're getting started out with a dividend portfolio, it won't provide much cash flow. The Redditor earns $206.10/yr from his dividend portfolio. It's extra money, but it's nothing life-changing. However, the Redditor can end up earning thousands of dollars every month from this portfolio by the time he retires.

Reinvesting dividends ensures that your annual dividend income grows each year. Dividend investors should also contribute at least 10% of their paycheck, but higher contributions will lead to more gains, especially if you make those big contributions when you are young.

Dividend-paying stocks tend to hike their dividends each year, giving you an additional opportunity to boost your dividend income. It can take multiple decades to reach your desired dividend income level, but it's worth the effort.

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