Three weeks ago, I invested my cold, hard cash into 10 high-yield dividend stocks I believe will beat the market. Let's see the results so far:
|
Company |
Average Cost |
Shares |
Recent Price |
Total Value |
Return |
|---|---|---|---|---|---|
|
Altria |
$24.86 | 40 | $24.29 | $971.60 | (2.29%) |
|
Philip Morris |
$61.83 | 16 | $61.87 | $989.92 | 0.06% |
| National Grid | $45.63 | 22 | $43.75 | $962.50 | (4.12%) |
|
Annaly Capital Management |
$17.55 | 57 | $17.77 | $1,012.89 | 1.25% |
|
Frontier Communications |
$9.36 | 106 | $7.95 | $842.70 | (15.06%) |
| Southern Co | $37.87 | 26 | $36.80 | $956.80 | (2.83%) |
|
France Telecom |
$22.23 | 45 | $20.31 | $913.95 | (8.64%) |
|
Vodafone Group |
$28.88 | 34 | $26.78 | $910.52 | (7.27%) |
|
Eli Lilly |
$34.48 | 29 | $33.63 | $975.27 | (2.47%) |
| Bristol-Myers Squibb | $25.37 | 39 | $24.97 | $973.83 | (1.58%) |
| Cash | 53.71 | $53.71 | 0% | ||
| Dividends Receivable | 35.07 | $35.07 | 0% | ||
| Total Portfolio | $9,598.76 | (4.01%) | |||
| Investment In SPY | (4.29%) | ||||
| Return vs SPY | 0.28% |
Source: Capital IQ, a division of Standard and Poor's. Data as of March 16.
The past two weeks, the disaster in Japan has taken a toll on the market with the S&P falling 3.8%. When people panic, all assets get sold off. Our portfolio proved more stable than the markets and moved from underperforming the market by 0.3% two weeks ago to beating it by 0.3% now. While outperformance is always good, it should be taken with a grain of salt. We're investing for the long term, and it's only been 3 weeks. I firmly believe the results will bear us out.
Movers & shakers
Of our stocks, the biggest movers in the portfolio the past two weeks were France Telecom (-7.7%) and Vodafone (-6.9%), which dropped more than the S&P 500's -3.8%. However, these losses were both less than the European market's large drop of 8.8% as measured by the euro Stoxx 50.
Money!
There are 4 upcoming dividends for the portfolio.
- Philip Morris International will pay a dividend of $0.64 per share on April 11. The ex-dividend date is March 22.
- Bristol-Myers Squibb will pay a dividend of $0.33 per share on May 2. The ex-dividend date is March 30.
- Altria will pay a dividend of $0.38 per share on April 11. The ex-dividend date was March 11.
- Frontier Communications will pay a dividend of $0.1875 per share on March 31. The ex-dividend date was March 7.
News
Not much company-specific news over the past two weeks. Eli Lilly is purchasing Johnson & Johnson's animal-health business, which has roughly 50 animal-health products. This deal gives Eli Lilly's existing sales force more products to offer clients and strengthens the unit against Merck and sanofi-aventis' animal health joint venture.
Buffett on dividends
Superinvestor Warren Buffett recently released his annual letter to shareholders. In it, he talked about his investment in Coca-Cola and the power of dividends:
Coca-Cola paid us $88 million in 1995, the year after we finished purchasing the stock. Every year since, Coke has increased its dividend. In 2011, we will almost certainly receive $376 million from Coke, up $24 million from last year. Within ten years, I would expect that $376 million to double. By the end of that period, I wouldn't be surprised to see our share of Coke's annual earnings exceed 100% of what we paid for the investment. Time is the friend of the wonderful business.
So how does Buffett define a wonderful business?
Some businesses enjoy terrific economics, measured by earnings on unleveraged net tangible assets that run from 25% after-tax to more than 100%. Others produce good returns in the area of 12%-20%.
Here are our businesses' earnings on unleveraged net tangible assets
|
Company |
Earnings on Unleveraged Net Tangible Assets |
|---|---|
| Altria | 2836.04% |
| Philip Morris | 88.25% |
| National Grid | 3.54% |
| Annaly Capital Management | 1.61% |
| Frontier Communications | 1.88% |
| Southern Co | 3.52% |
| France Telecom | 13.52% |
| Vodafone Group | 19.37% |
| Eli Lilly | 26.04% |
| Bristol-Myers Squibb | 15.94% |
By Buffett's measure, 30% of our companies are great businesses, another 30% are good businesses, and the rest are mediocre. That's OK, though; each of our mediocre businesses smartly uses debt to increase their returns, putting them on par with good businesses.
My Foolish bottom line
I'm highly confident in this portfolio's ability to crush the market over the next decade, and that's why I put $10,000 of my personal cash into these stocks. My strategy is simple. I'm buying strong companies with outsized dividends, reinvesting those dividends, and holding them for the long run. Over the coming year, I'll track my performance, update you on when I'm going to reinvest all my dividends, and keep you abreast of news affecting these companies.
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