The World's Best Dividend Portfolio

In June, I invested my money equally in a selection of 10 high-yield dividend stocks. Those names offer triple the yield of the average S&P 500 stock. You can read all the details here. Now let's check out the results so far.

Company

Cost Basis

Shares

Recent Price

Total Value

Return

Southern (NYSE: SO  ) $39.71 25.0818 $43.27 $1,085.29 9.0%
Exelon (NYSE: EXC  ) $41.82 23.818 $42.72 $1,017.50 2.2%
National Grid (NYSE: NGG  ) $48.90 20.3693 $50.55 $1,029.67 3.4%
Philip Morris International (NYSE: PM  ) $68.49 14.5429 $68.19 $991.68 (0.4%)
Annaly Capital (NYSE: NLY  ) $18.24 55 $16.11 $886.05 (11.7%)
Frontier Communications (NYSE: FTR  ) $7.88 126.4243 $6.07 $767.40 (23.0%)
Plum Creek Timber $38.42 26 $35.22 $915.72 (8.3%)
Brookfield Infrastructure Partners (NYSE: BIP  ) $26.12 38.2825 $25.35 $970.46 (2.9%)
Vodafone $26.52 37.5566 $27.64 $1,038.06 4.2%
Seaspan $14.61 69 $13.92 $960.48 (4.7%)
Cash       $141.57  
Dividends Receivable       $33.00  
Total Portfolio       $9,836.89 (1.5%)
Investment in SPY (including dividends)         (5%)
Relative Performance (percentage points)         +3.5

Source: S&P Capital IQ. 

The portfolio remains in negative territory but has climbed back nicely in the last few weeks. Over the past week, it's kept up with the S&P, and the portfolio is still outperforming by 3.5%, just like last week. We have seven stocks outperforming the S&P from their buy dates. That performance is also a reminder of the stability of dividend payers over time -- good downside protection and continued income but also less upside volatility. And while the market decides which way it's going, we're still pumping out those dividends, while the dividend-less investors have to hope for capital gains!

Because of the Fool's trading restrictions, I still haven't added to my Annaly position, but I still plan to reinvest all $140 of my available cash. The stock has been hurt hard recently, but I still think it's a great place to be, as I explain here. Fellow Fool Dan Dzombak also argues that mortgage REITs are oversold. Because of upcoming articles, I may not be able to make this trade until early November. I hope the price remains as attractive.

Also, a shout-out to a sharp reader who noted that I hadn't mentioned or included dividends on the S&P section of the scorecard above. I've made that change for this scorecard and future ones, so dividends will be reflected in the benchmark from now on. The extra dividends boosted the S&P side of the ledger by about 0.5 percentage point.

Dividends and earnings announcements
We're moving out of dividend season, and we have a few bits of news:

  • Philip Morris reported stellar numbers. Earnings were up 31% for the quarter, and the company raised the lower end of its annual earnings forecast. The company also spent $1.4 billion to buy back 21.2 million shares. Those numbers follow in the wake of the company's massive 20% dividend hike recently.
  • Brookfield Infrastructure has filed to raise hundreds of millions of dollars in new capital. The company will use $150 million from the offering to snap up two Chilean toll roads and another $150 million to fund capital expenditures at its Australian railroad, with the remainder to go toward paying down debt. In the past the company has acquired some premier assets at less than fair value, and hopefully this is yet another example.

Dividend news:

  • Southern Co. goes ex-div on Nov. 7 and distributes $0.4725 per share on Dec. 6.
  • And everyone's favorite dividend play, Annaly, went ex-div on Sept. 28 and pays its dividend of $0.60 on Oct. 27.

Following this dividend news, there will be little in the way of money coming into the portfolio for a few weeks.

It's fun to sit back and get paid, and with the market volatility, we might have a good chance to reinvest those dividends at good prices. Europe continues to be an absolute mess, and continued bad news will likely have stocks plunging again, and if they do, I'll be inclined to pick more shares up.

Foolish bottom line
I've been a fan of big dividends for a while, and I think this portfolio will outperform the market over time through the power of dividends. As I promised in the original article, I'll be holding these stocks for at least a year and will continue to track the portfolio over the course of the year, including news on these companies.

If you like dividends, consider the 10 stocks above along with the 11 names from a brand new free report from Motley Fool's expert analysts called "Secure Your Future With 11 Rock-Solid Dividend Stocks." Today I invite you to download it at no cost to you. To get instant access to the names of these 11 high yielders, simply click here -- it's free.

Jim Royal, Ph.D., owns shares of the 10 portfolio stocks mentioned in the table. The Motley Fool owns shares of Annaly, Seaspan, Philip Morris, Plum Creek, and Brookfield Infrastructure, and has written puts on Plum Creek. Motley Fool newsletter services have recommended buying shares of Vodafone, National Grid, Brookfield Infrastructure, Philip Morris, Exelon, and Southern, as well as writing a covered strangle position in Exelon and a covered straddle position in Seaspan. 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 (5) | Recommend This Article (16)

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 October 21, 2011, at 1:10 PM, dbtheonly wrote:

    NLY pays out on the 27th. Would buying on the dip make sense?

  • Report this Comment On October 21, 2011, at 7:25 PM, Hawmps wrote:

    I too am a fan of the dividends... What does it matter if the value of the holding goes down as long as the cash still flows into my pocket? Just buy more I say. Oh, the market is up? great, pay me. Market took a nose dive? That's nice... pay me. And may the dividends grow over time and eventually replace my "sweat income".

  • Report this Comment On October 22, 2011, at 10:38 AM, dbtheonly wrote:

    Hawumps,

    I'll give you that a stock price doesn't have to rise to keep me happy with a sizable (5%+) dividend. But dropping 5% per year & paying me 5% per year is just treading water. I have my stops, it's just that the stops are looser with the higher dividend stocks.

    Dr. Royal,

    I pulled the trigger on NLY yesterday @ 15.93.

    Now, what do you & Mr. Dzombak have riding on the competing portfolios? You're only 4 stocks different.

  • Report this Comment On October 24, 2011, at 4:29 AM, karenjmp wrote:

    If a stock price is falling down, it might have a (big) impact on the company itself. The impact might be a dividend cut or a stop on paying dividend altogether. So while a dividend may compensate for a drop in stock price, I would not keep throwing money at a stock that is rapidly losing value...

    What I usually do, is use http://goo.gl/3y8uz to check dividend yields. I don't go for the highest yields (which usually aren't sustainable, or just caused by a low stock price), but I look in the 6-8% range. I try to find the stocks that have taken a hit, but where the future seems to be more positive.

  • Report this Comment On October 24, 2011, at 6:33 PM, Hawmps wrote:

    @ db.......

    Your comment implies that I would buy some asset that is losing value into perpetuity; and that's just silly. The meaning behind my comment is that market volitility matters little to me (and my current holdings) because I am a long term thinker and a decline in value is a potential buying oportunity and if the price keeps dropping, then the current income stream costs less, does it not? Personally, I like the idea that MY dividends (be it from stocks, bonds, funds, or real estate investments) will eventually replace my ordinary sweat income and just maybe I can quit working so hard before "retirement age". Obviously the trick is to find the assets that keep paying me all the while the market is going up down up down up down. It's passive income that drives me... pay me for the privilege of putting my money to work for your business. Yes, those are happy thoughts... I like many, many happy thoughts. Cash flow (into my pocket) is king... and a very happy thought.

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