This High-Yield Dividend Portfolio Will Beat the Market

Thirty-nine 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 $27.62 $1,104.80 11.10%
Philip Morris (NYSE: PM  ) $61.83 17 $71.21 $1,210.57 14.28%
National Grid (NYSE: NGG  ) $45.63 22 $49.68 $1,092.96 8.88%
Annaly Capital Management (NYSE: NLY  ) $17.55 57 $16.32 $930.24 (7.01%)
Frontier Communications (NYSE: FTR  ) $8.71 149 $5.56 $828.44 (36.17%)
Southern Co (NYSE: SO  ) $37.87 26 $43.55 $1,132.30 15.00%
France Telecom $22.23 45 $17.10 $769.50 (23.08%)
Vodafone Group (NYSE: VOD  ) $28.69 38 $29.07 $1,104.66 1.32%
Eli Lilly $34.48 29 $37.65 $1,091.85 9.19%
Bristol-Myers Squibb $25.37 39 $31.51 $1,228.89 24.20%
Cash       $20.01  
Dividends Receivable       $26.50  
Total Portfolio       $10,540.72 5.41%
Investment In SPY         (3.45%)
Return vs SPY (percentage points)         +8.85

Source: S&P Capital IQ, as of Nov 14.

Since my last report, the SPDR S&P 500 rose 2.77%. Our portfolio did not rise as much, with our outperformance moving from beating the market by 11.74 percentage points to an 8.85-point advantage. 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 nine months.

Movers and shakers
Of our stocks, the biggest mover in the portfolio was Frontier Communications, which fell nearly 8%. The company reported earnings that missed analyst expectations by $0.01, while revenue also fell a tiny amount short. Frontier's integration of its game-changing acquisition is still moving along as expected. Maintaining its dividend, the company has a free cash flow payout ratio of 71%.

Vodafone
On the brighter side, Vodafone also reported earnings. Due to better-than-expected results in its emerging markets, the company raised its profit guidance for the year. It also announced it will pay a 3.05 pence interim dividend in February, a 7% increase from last year's interim dividend. Vodafone also announced the size of the special dividend from its previously announced Verizon Wireless dividend. The Verizon Wireless special dividend will be 4 pence! Translated into American Depository Receipts (10 shares to 1 ADR) and dollars, this means each ADR holder will receive roughly $1.12 for the combined interim and special dividend! As dividends from Verizon Wireless keep coming, you can expect more special dividends will follow along.

Money!
There are four upcoming dividends for the portfolio:

  • Eli Lilly will pay a dividend of $0.49 per share on Dec. 9. The ex-dividend date was Nov. 10.
  • Southern will pay a dividend of $0.4725 per share on Dec. 6. The ex-dividend date was Nov. 3.
  • Frontier will pay a dividend of $0.1875 on Dec. 30. The ex-dividend date is Dec. 7.
  • Vodafone will pay a dividend of 0.705 pence (roughly $1.12) on Feb. 3, 2012. The ex-dividend date is Nov. 16.

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 10 tickers above along with the 11 names from a brand-new free report from Motley Fool's expert analysts called "11 Rock-Solid Dividend Stocks." To get instant access to the names of these 11 dividend stocks, click here -- it's free.

Dan Dzombak can be found on his Twitter account: @DanDzombak. 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 (5) | Recommend This Article (6)

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 November 15, 2011, at 12:11 PM, nontechie wrote:

    You guys keep recycling this article but I'll repost what I said before. Rather than Frontier, consider Windstream--better management, more growth. Rather than France Telecom, the brave might look at Telefonica--severely depressed because it is a Spanish company but in fact it isn't as Eurocentric as France Telecom, getting most of its profits and growth from Latin America. Rather than Lilly, I own Roche, another European stock but not, in fact from the "Euro Zone" but rather Switzerland, home of the solid Swiss Franc (OTC ADRs trade in the US).

  • Report this Comment On November 15, 2011, at 2:15 PM, Easybeans wrote:

    Changing the stocks would defeat the purpose of this portfolio.

  • Report this Comment On November 15, 2011, at 2:34 PM, Hawmps wrote:

    ^

    It's a weekly followup on the portfolio performance. The point is... this is a portfolio that was hand picked and committed to (not to be changed) and keeping it for a specific period of time to show the power of dividends over time beating the S&P hence the link at the top of the page to the first article back in February. I agree Frontier is looking like a dog now, but that was the commitment for this real money $10,000 exercise.

  • Report this Comment On November 16, 2011, at 10:44 AM, sheldonross wrote:

    Nontechie must find these articles, post comments without thinking, and never check back on the responses. This is not the first time it's been explained to him/her.

  • Report this Comment On November 19, 2011, at 10:21 AM, shmcdonnell wrote:

    New investors might be better off avoiding FTR, I agree. Try some Dividend Aristocrats instead: http://www.dividend.co.nr

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