This High-Yield Dividend Portfolio Will Beat the Market

Twenty-five 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 (NYSE: MO  )

$24.86

40

$24.54

$981.60

(1.29%)

Philip Morris (NYSE: PM  )

$61.83

16

$66.27

$1,060.32

7.18%

National Grid (NYSE: NGG  )

$45.63

22

$46.35

$1,019.70

1.58%

Annaly Capital Management (NYSE: NLY  )

$17.55

57

$16.34

$931.38

(6.89%)

Frontier Communications (NYSE: FTR  )

$9.14

125

$6.37

$796.25

(30.33%)

Southern Co.

$37.87

26

$38.33

$996.58

1.21%

France Telecom (NYSE: FTE  )

$22.23

45

$18.35

$825.75

(17.45%)

Vodafone Group (NYSE: VOD  )

$28.88

34

$25.89

$880.26

(10.35%)

Eli Lilly

$34.48

29

$34.80

$1,009.20

0.93%

Bristol-Myers Squibb

$25.37

39

$26.38

$1,028.82

3.98%

Cash

 

201.82

 

201.82

0%

Dividends Receivable

 

54.10

 

54.10

0%

Total Portfolio

     

$9,785.78

(2.14%)

Investment In SPY

       

(14.05%)

Return vs SPY

       

11.91%

Source: Capital IQ, a division of Standard & Poor's, as of Aug 9.

Over the past week, the S&P 500 crashed 13.4%. As the market fell, our portfolio outperformance rose from 7.99% to 11.91%, showing the strength of solid dividend stocks versus the general market. 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 twenty-five weeks. I firmly believe the results will bear us out.

Movers and shakers
Of our stocks, the biggest mover in the portfolio the past week was Frontier Communications, which fell 14.6%. The next largest drop in the portfolio was France Telecom at 9.5%. Vodafone, which two weeks ago finally announced it will receive its long-expected dividend from Verizon Wireless, also fell 6.8%.

Money!
There are five upcoming dividends for the portfolio:

  1. National Grid will pay a dividend of $1.9005 on Aug. 17. The ex-dividend date was June 3.
  2. Southern Co. will pay a dividend of $0.4725 on Sept. 6. The ex-dividend date was July 28.
  3. Eli Lilly will pay a dividend of $0.49 on Sept. 9. The ex-dividend date is Aug. 11.
  4. Frontier Communications will pay a dividend of $0.1875 on Sept. 30. The ex-dividend date is Sept. 7.
  5. France Telecom will pay a dividend of $0.85 on Sept. 8. The ex-dividend date is Sept. 5.

Frontier Communications
Frontier's earnings were below expectations, but earnings aren't the story we are interested in. As fellow Fool Anders Bylund noted:

I don't quite see why you'd hate this report. CEO Maggie Wilderotter noted that cost savings from the integration of Old Verizon and New Frontier is running ahead of schedule, and she increased her annualized savings target from $550 million to $600 million. With $231 million of free cash flow in the quarter, the dividend payout ratio landed at 77% -- within spitting distance of last quarter's 74% payout. Let me remind you here that the astronomical payouts are expected to trail off in coming quarters as capital expense needs decrease.

Frontier's integration is moving along better than expected. Once Frontier no longer needs to invest considerable amounts into upgrading Old Verizon's territory, the company will be able to return more cash to shareholders as dividends.

Reinvesting dividends
Unfortunately, I do not have a crystal ball and am unable to time travel. Because of these limitations, I have decided it's best to not try to time the market. All our stocks could fall further, but at these prices I am happy investing our earned dividends in Frontier and Vodafone. With $200 in cash in the portfolio, on Friday at noon, I plan on buying four shares of Vodafone and investing the rest in Frontier.

The thesis behind investing in Frontier has not changed since we first invested in it nearly six months ago. What has changed is that we can now buy the same company for 30% less than before. The thesis for Vodafone also has not changed. The risk has actually lessened somewhat, as we now know when Verizon Wireless will begin paying dividends to Vodafone and how those will flow through to shareholders. All this and we get to buy the stock for 10% less than when we first invested in it.

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.

Consider the ten tickers above along with the 13 names from a free report from Motley Fool's expert analysts called "13 High-Yielding Stocks to Buy Today," including one named by a senior retail analyst as "the dividend play of a lifetime." Tens of thousands have requested access to this report and today I invite you to download it at no cost to you. To get instant access to the names of these 13 high-yielders, simply click here -- it's free.

Dan Dzombak can currently be found at the beach in Norfolk or on his Twitter account: @DanDzombak. He really is enjoying reading and watching F-18s fly by. He owns shares of Altria, Philip Morris, National Grid, Annaly Capital, Frontier, Southern Co, France Telecom, Vodafone, Eli Lilly, and Bristol-Myers Squibb.

The Motley Fool owns shares of Altria Group, Chimera Investment, Philip Morris International, and Annaly Capital Management. Motley Fool newsletter services have recommended buying shares of Southern, France Telecom, Philip Morris International, Vodafone Group, and National Grid. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 09, 2011, at 10:18 PM, mm5525 wrote:

    Just a friendly fast-forward dividend forecast by a month, on September 14, PM will declare their next dividend for the October payout. Look for them to raise by @$0.06 at that time. They raised last Fall by that amount, and PM's EPS and guidance have been far better in 2011 than they were in 2010.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1536129, ~/Articles/ArticleHandler.aspx, 10/25/2014 4:51:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement