How Peter Thornhill Retired On $400K In Yearly Dividends

Peter is an investing legend. Dude collects $400,000 per year in dividend income.

He retired at age 53, by the way. From the finance industry, naturally. Peter wrote a book and cruised around as a public speaker.

The speaking fees and book royalties were gravy, no doubt. With $33,000 in dividend income coming in each month, I’m sure Peter does not sweat his bills.

Now what can we contrarian income investors learn from master dividend investor “Payout” Peter Thornhill?

Not much.

The guy has an $11 million portfolio. Of course his dividend cash flow is going to rock. It may only be 4%, but that’s more than enough when this is the pile he’s deploying!

A simpler investor can do just as well with a similar war chest. Payout Peter, meet Vanilla Vance.

Vance is a rich guy who doesn’t like to think. He doesn’t read Contrarian Outlook. Vance takes his $11 million and buys the world’s most popular dividend ETF, Schwab US Dividend Equity ETF (SCHD).

We warned him not to. After all, SCHD doesn’t even own Exxon Mobil (XOM), which is the dividend stock to own this decade. Check out the ETF’s holdings, a bit plain for us:

But Vance doesn’t care about XOM. Remember, lazy rich guy. His one-click buy nets him $352,000 in annual dividend income. That’s 3.52% and plenty good enough for t-shirt-and-backwards-cap Vance.

$352K is almost as much as Peter banks yearly. Peter is smart, but Vance… not so much. And he’s doing darn well, too.

We wouldn’t complain with either of these cash rivers. Humble “blue collar” investors like you and me will make do without $350,000 to $400,000 in yearly dividend income. After all, we don’t have an $11 million nest egg ready to deploy.

That said, we can do better than Peter (a real-life smart person) and Vance (a fictional character who, let’s face it, we can all picture too well.) on a percentage basis. Easily.

If we had an $11 million nest egg, we’d be pulling $847,000 in yearly dividend income.

Our secret as contrarians is that we seek out yields in the 7% to 8% range—double that of Peter and Vance! We typically don’t see these stocks discussed on mainstream financial sites, but they are around for the advanced income students.

Of course, there are plenty of dividend dogs that have high stated yields, but they are admittedly “cheap for a reason”—the dividends are in trouble. Our analysis separates the high yield heroes from the high yield hobos to generate our extra income above and beyond an ETF like SCHD.

A lazy approach will get us SCHD’s 3.2% yield and keep us out of trouble. But a more thoughtful approach can secure us 7.7% average yields and let us sleep at night. Sounds high, I know, but the top dozen yields in our Contrarian Income Report pay this today. And 7.7% will turn a “humble” million bucks into a $77,000 income stream:

XOM is a CIR holding, in fact, but it has “graduated” beyond our yield needs. When we discussed XOM in these pages last year, the oil baron paid 6.1%. Not quite 7.7%, but about as high as we ever see from a blue-chip like XOM.

The Schwab ETF managers slept on the deal. We contrarians did not. We bought, so we are still collecting that 6%+ yield on our initial capital and sitting on total returns of 84% in a short 17 months!

Which, by the way, is how we’ll eventually catch up with the Peters and the Vances of the world: by collecting dividend income while enjoying price gains!

Brett Owens is chief investment strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: Your Early Retirement Portfolio: Huge Dividends—Every Month—Forever.

Disclosure: none