Three Income Buckets, $9,750 a Month, and a Portfolio That Never Has to Sell a Share

Generating $9,750 a month from a portfolio adds up to $117,000 a year in income without selling shares. How much you need to invest depends on your portfolio’s yield. Here’s the capital required at three yield levels, followed by an example portfolio of eight holdings across three income categories.

This sample portfolio targets a yield of about 6.5%, so you’d need roughly $1.81 million to generate the desired income. Each group of holdings serves a different purpose. One focuses on growing dividends over time, another provides rental and preferred-stock income, and the third prioritizes higher payouts today.

How Much Capital $117,000 a Year Requires

Divide the income target by the yield. The answer swings by millions depending on portfolio composition.

• At 3.5%: $117,000 divided by 0.035 equals about $3,342,857. This range includes dividend-growth funds and broad-market payers. Income is the least likely to be interrupted, and the principal tends to appreciate.
• At 6%: $117,000 divided by 0.06 equals $1,950,000. REITs, preferreds, and covered call funds make up most here. Dividend growth slows, and upside is often limited.
• At 10%: $117,000 divided by 0.10 equals $1,170,000. Business development companies (BDCs), option-heavy funds, and junk bonds fill this range. Distributions can be cut, and principal often shrinks.

Category One: Growing Dividends at About 3%

Two funds make up 30% of the portfolio, about $544,186. Together they yield roughly 3.3% and generate about $17,700 annually. The first fund, iShares Core Dividend Growth ETF (NYSEARCA:DGRO) yields about 2.0% and charges 0.08%. Its annual payout rose from about $0.66 per share in 2016 to $1.49 over the trailing twelve months. The second fund, SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA:SPYD), yields about 4.5% and holds an equal-weighted mix tilted toward REITs, utilities, and banks.

Rent, Preferreds and Option Premiums Fill the Middle

The middle categories hold 45%, about $816,279, at a forward yield near 7.0%. The portfolio generates about $57,300 annually and includes VICI Properties (NYSE:VICI), which yields about 8.1% after shares fell 22% over the past year. The gaming landlord reports 100% occupancy, a 39.6-year weighted-average lease term, and 2% annual increases. It raised its quarterly dividend to $0.46 from $0.45. STAG Industrial (NYSE:STAG) yields about 4.3%, with cash rents on new warehouse leases up 20%.

iShares Preferred and Income Securities ETF (NASDAQ:PFF) yields about 6.5% and charges 0.45%. Global X S&P 500 Covered Call ETF (NYSEARCA:XYLD) paid $4.32 per share over the past year, with a current monthly run rate annualizing to $3.56, or about 8.5%.

Venture Loans and Junk Bonds Supply the Top Yields

The high-yield categories hold 25%, about $453,488, at roughly 9.0%. Holdings in Hercules Capital (NYSE:HTGC), which lends to venture-backed technology and life sciences companies, add about $40,800 annually and yield about 11.4%. In the second quarter, net investment income covered 125% of its base distribution, but because 98% of its loans carry floating rates, falling interest rates would reduce income. iShares Broad USD High Yield Corporate Bond ETF (CBOE:USHY) yields about 7.4% from below-investment-grade corporate bonds.

At current forward rates, the three categories produce about $115,800, roughly $1,200 short of target. A plan built at about 6.5% leaves little room for a payout cut, which is the whole case for building a dividend ladder that keeps the shares intact while the checks do the work.

Why a 2% Yielder Can Outrun an 8% Yielder

Income growing 8% a year doubles in about nine years. At that pace, $117,000 would reach about $233,900. A flat 10% payer still sends $117,000 a decade later, while inflation erodes purchasing power.

Over 10 years on a dividend-adjusted basis, DGRO returned about 253%, compared with 127% for XYLD and 32% for PFF. USHY has returned about 48% since late 2017. Hercules is the exception at 248%. VICI’s quarterly dividend has grown from $0.2875 in 2019 to $0.46, a 60% increase.

Three Steps Before Funding the Buckets

1. Calculate actual annual spending. Retirement contributions, payroll taxes, and commuting costs end when the paycheck stops, so the real income gap may be smaller than $117,000.
2. Run a 10-year total return comparison of DGRO against XYLD or USHY on a fund screener. Compare the income each produced in the final year alongside its starting yield.
3. Model taxes by category. Most REIT dividends, BDC distributions, and bond fund interest are taxed as ordinary income, while much of DGRO’s payout typically qualifies for lower dividend rates. Holding the two higher-yield buckets in an IRA protects more of the $9,750.

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