He's Living on $500,000 Per Year in Dividends from JUST 5 ETFs...(Dividend Investing)

Summary

Trevor describes retiring at age 50 and funding his lifestyle from a multi-million-dollar ETF portfolio, primarily through distributions from covered-call ETFs. He says he left his accounting firm on May 31 and began living on portfolio income afterward. His reported income is more than $42,500 per month, or about $510,000 per year.

These amounts are Trevor’s self-reported estimates. Much of the covered-call ETF income consists of options-related distributions, not conventional company dividends.

Reported portfolio income and performance

Trevor estimates his annual income at approximately:

• $438,600 from covered-call ETFs
• $35,000 from SCHD
• $6,000 in interest on cash, excluding possible additional income from CSHI
• $31,000 from other funds
• Total: roughly $510,600 per year

He reports an overall portfolio distribution yield of about 9.02%. He cites an average return of approximately 13.25% for the covered-call ETF portfolio, and yields of roughly 3.3–3.48% for SCHD, close to 4% for cash, and about 4% for other funds. These figures refer to different measures—distribution yield and reported return—and should not be treated as directly comparable.

Approximate monthly payouts mentioned include:

• TSPY: about $12,000
• QQQI: about $7,300
• TDAC: about $9,300
• SPYI: more than $4,000
• SCHD: a little over $2,500, paid quarterly rather than monthly

He says TSPY remains his largest holding and pays about $145,000 annually, despite selling more than seven figures’ worth of it and reallocating much of that money to other covered-call funds.

Portfolio approach and changes

Trevor says he became concerned about the S&P 500’s concentration in the Magnificent Seven, estimating their share of its market capitalization at roughly 40–47%. He worries that heavy AI investment and rising debt at large technology companies could weigh on the S&P 500 and related indexes if AI fails to deliver expected profits.

His portfolio changes reflect an effort to diversify while retaining market exposure:

• He shifted some TSPY into TDAC, QQQI, and SPYI, spreading covered-call exposure across different funds and management approaches.
• He replaced much of his VOO position with VTI, citing VTI’s roughly 3,000 holdings versus about 500 in VOO. He acknowledged that this only modestly reduces exposure to the largest companies.
• He uses SCHD as a less technology-concentrated income and growth holding. He cited a current distribution yield around 3.3% and roughly 10% share-price return since inception, without specifying the measurement period.
• He described covered-call funds as an income engine while continuing to buy “uncovered” equity ETFs for growth.
• He described his five largest positions as TSPY, SCHD, TDAC, QQQI, and CSHI, with SPYI also close in size.

He says his current weekly purchases are mainly VTI, VUG, SCHD, SPMO, and XQQQI. He is no longer buying TSPY, TDAC, SPYI, or QQQI, apart from a small recurring purchase of XQQQI. He began buying XQQQI after the April market decline, attracted in part by its cited 20% distribution rate. He says that position is currently in the red and generates around $2,000 per month. He characterizes it as a leveraged income fund with amplified gains and losses.

Budgeting, withdrawals, and risk management

Trevor pools distributions in a checking account rather than reinvesting them automatically. He makes a monthly withdrawal for living expenses and uses surplus cash for weekly ETF purchases. He says the exact payout dates matter less than planning his budget monthly.

• He estimates minimum monthly spending at about $15,000 and says he targets a withdrawal of roughly $30,000—substantially more than his minimum needs.
• The surplus supports travel, dining, family expenses, and a contingency fund, as well as continued investing.
• He maintains a cash reserve and has an Excel model projecting distributions through 2031.
• If the market falls, he plans to reduce withdrawals and weekly purchases rather than automatically sell holdings. For a hypothetical 30% market decline, he discusses planning for distributions to fall by a similar amount, while using the spending buffer and reserves to manage the shortfall.
• He refers to using a Guyton-Klinger approach to adjust withdrawals during downturns.
• He wants stock funds to become the main focus of portfolio growth over the next five years. By the end of 2031, he is considering stopping new investments and letting cash, CSHI, or Treasury bills accumulate as a larger spending reserve.

He expects covered-call funds to be a bridge rather than a permanent allocation. If other holdings—especially SCHD—grow enough to cover more of his needs, he may gradually reduce covered-call exposure, potentially aiming to move toward a more traditional portfolio by around age 60.

Key cautions and context

• Trevor says covered-call funds may offer substantial cash flow but may have limited long-term share-price appreciation. He estimates that share-price returns could be around 1–2% annually for these funds over time, with much of the return distributed.
• He wants to avoid putting 100% of his money into covered-call funds and describes his approach in terms of income, growth, and cash- or bond-like sleeves.
• His portfolio remains substantially exposed to U.S. equities, particularly the S&P 500 and Nasdaq-100. He says he has no international holdings and has increased cash exposure for safety.
• Trevor discusses the tax treatment of covered-call distributions, including return of capital. He says his effective tax rate on the portfolio is about 9.3%; including compensation for the year, he estimates his effective rate at nearly 50%. His explanation of how distributions would be taxed as cost basis declines is uncertain in the interview and should not be taken as tax guidance.
• His earlier investing lessons included not moving 401(k) investments into cash during the 2008 financial crisis and trying to remain invested through market declines.
• He attributes part of his ability to retire to a firm merger that created a liquidity event, alongside saving, career income, and some luck.
• He says most of his investable assets are in a taxable brokerage account. He converted a former 401(k) to a Roth account, which he says he cannot access until age 59½.

Assets and instruments mentioned

ETFs: TSPY, TDAC, SCHD, QQQI, CSHI, SPYI, VOO, VTI, VUG, SPMO, XQQQI, XSPI, and DFUS.

Other instruments and exposures: Cash, money-market funds, Treasury bills, covered-call options, the S&P 500, Nasdaq-100, and Magnificent Seven stocks.

Individual company mentioned: SanDisk. Trevor recounts buying and selling it: he says an analyst raised a consensus estimate to $2,300; he sold an initial position for about $1,500 and a reported 40% gain, then re-entered, later sold at a loss, and says the overall net impact was approximately zero.

Disclosures

The video states that it is for educational and informational purposes only, is not investment, financial, or tax advice, and that the host is not a financial advisor. Viewers are urged to do their own research.

The Tap Alpha sponsor segment also warns that investing involves risk, including loss of principal, and directs investors to read the ETF prospectuses and consider objectives, risks, fees, and expenses.

Presenters and sources

• Marcos Milla — host/interviewer
• Trevor — guest investor; no surname is given in the subtitles
• Tap Alpha — sponsor, discussing its ETF lineup
• Trevor also mentions using Gemini for portfolio analysis and modeling, and Excel for his distribution forecasts.