Is it truly feasible to fully cover one’s living expenses solely through dividends from long-term stock holdings?

Let’s start with U.S. equities. As I’m currently based in the U.S., the high-dividend segment here is relatively mature. Two types of assets stand out: first, quality dividend ETFs—such as SCHD—which imposes a strict requirement: companies must have raised dividends for at least 10 consecutive years, and must meet thresholds for cash flow and return on equity. SCHD holds around 100 dividend-paying stocks and has delivered a total return of 229% over the past decade. Second, broad-based dividend ETFs—like VYM—which takes a more relaxed approach: it holds roughly 400–500 stocks with above-average dividend yields, with minimal quality filters. Remarkably, VYM has outperformed SCHD over the past five years. Yet even if you convert RMB 1 million into dollars and invest it, SCHD’s dividend yield hovers only between 3.4% and 3.8%, generating just RMB 30,000–40,000 annually in dividends. In the U.S., that amount falls far short—even several times over—of covering basic living expenses. In China’s A-share market, the Dividend Low-Volatility Index posted a dividend yield of approximately 4.87% over the past year, while the CSI Dividend ETF achieved over 6%. On yield alone, A-share dividend strategies significantly outpace their U.S. counterparts. However, A-shares’ dividend strategy suffers from a ‘bull-market curse’: in 2025, growth-style stocks surged 30%, while value-style stocks rose only 10.5%; dividend-focused ETFs peaked mid-year and then weakened. Watching others profit while your own holdings decline is an agonizing experience everyone has endured—and the real test lies in whether you can hold on. If your goal is to ‘cover living expenses entirely via dividends,’ the biggest variable isn’t dividend yield—it’s the scale of your principal. I ran the numbers: assuming annual living expenses of RMB 50,000 and a 4% dividend yield, you’d need RMB 1.25 million in principal. For RMB 100,000 in annual expenses, you’d need RMB 2.5 million. Given U.S. equities’ more conservative yields, the required principal is even larger. For a beginner investor starting with RMB 61,000, reaching that threshold remains a long journey. This isn’t to dismiss the path—but rather to clarify that covering living costs via dividends should be viewed as a long-term objective, not something achievable within three to five years. Now, let’s talk about mindset. Many go through exactly what you described: watching tech stocks soar while your high-dividend holdings sit idle—leaving you restless and frustrated. A few years ago, U.S. mega-cap tech stocks surged wildly, while my consumer staples and utilities holdings lagged the broader market significantly—a cold-seat experience I still vividly recall. Over time, I realized something crucial: the greatest value of a high-dividend strategy lies not in its ranking for annual returns, but in its ability to let you sleep soundly. The U.S. ‘Dividend Kings’ list includes Lowe’s (62 consecutive years of dividend increases), PepsiCo (52 years), and Emerson Electric (68 years)—companies that have weathered countless bull and bear markets, yet kept raising dividends steadily.

A simple method to identify companies capable of increasing dividends

Another screening criterion is a debt-to-equity ratio no higher than 50%. The rationale: as interest rates rise, highly leveraged companies may struggle not only to maintain—but especially to raise—their dividends. The screen also considers the dividend payout ratio—the percentage of earnings paid out as dividends. Barron’s selected companies with payout ratios below 55%, a notably conservative threshold that preserves ample flexibility for future dividend growth. The table below lists the seven companies that passed this screen. All are S&P 500 constituents whose free cash flow yields exceed their dividend yields—indicating both dividend safety and room for growth. Data as of July 29. PFG (Principal Financial Group), an asset management firm serving retirement investors, shows the largest gap between its free cash flow yield (16.6%) and dividend yield (3.8%), as of the July 29 closing price. Including dividends, the stock returned –6% year-to-date. By comparison, the S&P 500 fell 13%. Regions Financial (RF), a regional bank headquartered in Birmingham, Alabama, boasts a free cash flow yield near 14%—well above its recent 3.8% dividend yield. Last month, Regions announced plans to raise its quarterly dividend from $0.17 to $0.20 per share—an increase of $0.03, or nearly 18%. Two major global energy firms—ExxonMobil (XOM) and Chevron (CVX)—also made the list, both benefiting from rising oil and gas prices. Though doubts surfaced early in the pandemic about ExxonMobil’s ability to sustain its dividend, the company ultimately raised its quarterly payout by $0.01 last autumn—to $0.88 per share—allowing it to retain its place in the S&P 500 Dividend Aristocrats Index, which includes only companies that have increased dividends for at least 25 consecutive years. On July 29, Exxon reported $16.9 billion in second-quarter free cash flow—up from roughly $7 billion a year earlier—and paid $3.7 billion in dividends during the most recent quarter. Chevron reported $10.6 billion in second-quarter free cash flow—up from $5.2 billion year-on-year—with a quarterly dividend of $1.42 per share. Pharmaceutical giant Pfizer (PFE) also appears on the list. In the first half of this year, it paid $4.5 billion in dividends, with a quarterly payout of $0.40 per share. In 2021, Pfizer’s free cash flow totaled $29.9 billion—up from $10.5 billion in 2019—and stood at approximately $6 billion in Q1 this year. Pfizer defines free cash flow under U.S. GAAP as net operating cash flow minus capital expenditures for property, plant, and equipment. Cisco Systems (CSCO) is the sole technology company on the list, with a 7.1% free cash flow yield—more than double its 3.4% dividend yield.

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