The World's Best Dividend Portfolio

Last 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. Now let's check out the results so far.

Company

Cost Basis

Shares

Yield

Total Value

Return

Southern $39.71 25.0818 4.2% $1,127.18 13.2%
Exelon $41.82 23.818 5.1% $982.49 (1.4%)
National Grid $48.90 20.3693 5.8% $972.63 (2.4%)
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.9% $1,137.40 14.2%
Annaly Capital (NYSE: NLY  ) $18.24 65.5 14.2% $1,044.73 (11%)
Frontier Communications (NYSE: FTR  ) $7.88 126.4243 14.6% $634.65 (36.3%)
Plum Creek Timber $38.42 26 4.6% $972.14 (2.7%)
Brookfield Infrastructure Partners (NYSE: BIP  ) $26.12 38.2825 4.9% $1,090.67 9.1%
Vodafone $26.52 37.5566 4.9% $1,042.57 4.7%
Seaspan (NYSE: SSW  ) $14.61 69 5.4% $951.51 (5.6%)
Cash       $88.37  
Dividends Receivable       $112.97  
Total Portfolio       $10,157.31 0%
Investment in SPY
(Including Dividends)
        0.7%
Relative Performance
(Percentage Points)
        (0.7)

Source: S&P Capital IQ.

Our total portfolio performance slipped back to flat overall, moving from 0.5% last week to 0% this week. That's rough, but when combined with the solid move up in the S&P, it added up to underperformance, one of the few times since the portfolio began. We have four stocks outperforming the index. But I'm confident in the long-run nature of this portfolio, and I fully expect it to outperform.

With some $200 in cash that should be in the portfolio by the start of February, I'm trying to determine what my next dividend reinvestment should be. Given the massive decline in Frontier and its high yield, I'm strongly leaning toward reinvesting my capital there. But I may make two purchases. Thanks for all your suggestions so far. And remember, I'm reinvesting only in what's in the portfolio so far. So, Fools, what should I buy?

As we head into a tenuous and uncertain 2012, I'm glad to be in dividend stocks because of their lower downside volatility. We should still see good performance from mortgage REITs, including Annaly, which thrive in poor conditions. You can see my latest thoughts on Annaly and explore 2011's Top 10 Mortgage REITs. I like the steady all-weather performance from Philip Morris, which keeps massively outperforming because of the stickiness of its products. If we could only get a little cooperation from Frontier, we'd be thrashing the S&P, but investors seem very wary of a possible dividend cut, judging by the shares' performance of late. The stock just keeps getting pummeled.

Here's to a prosperous and even better new year!

Dividends and other announcements
Going into the new year, the news has been pretty light. But there have been a few developments and some year-end recaps:

  • 2011 was a record year for fundraising for REITs, with the trusts raising $37.5 billion in equity -- the largest since the sector was founded more than a half-century ago. Annaly got its piece of the pie, too, issuing hundreds of millions of new shares for capital to deploy into the market. Now some investors are worried about the potential for a new mortgage-refinance program, which could hurt the profitability of REITs such as Annaly.
  • Brookfield Infrastructure had a solid year, with a stock that climbed more than 30% for the year. Like Annaly, the company issued shares, in order to pick up new assets. In Brookfield's case, those were two Chilean toll roads. You can read more about Brookfield's appeal.
  • Seaspan announced a big repurchase authorization, up to 10 million shares, or 15% of shares outstanding, in a tender offer. The shocker was the 43% premium the company was willing to pay over Monday's closing price. Shareholders can tender their shares for $15 by Jan. 11. The company also said it would spend $54 million in stock to buy its management company, helping to eliminate conflicts of interest. That tender probably means that another dividend raise is off the table for a few quarters yet.

Dividend news:

  • Brookfield Infrastructure paid out $0.35 a share on Dec. 30.
  • National Grid went ex-dividend on Dec. 2 and pays out $1.0967 per share on Jan. 18.
  • Frontier paid out $0.1875 per share on Dec. 29.
  • Vodafone announced a special dividend of 4 pence on top of its 3.05 pence interim payout. The stock traded ex-div on Nov. 16, and the money will be paid out on Feb. 3. In dollars, the total payout comes to about $1.12 per U.S. share at current exchange rates.
  • Philip Morris went ex-div on Dec. 20 and pays out $0.77 a share on Jan. 10.
  • Annaly went ex-dividend on Dec. 27 and pays out $0.57 per share on Jan. 26.

All that, of course, means more money coming into our pockets shortly and more money to reinvest.

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 probably have stocks plunging again. 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 these 10 stocks along with the 11 names from a brand-new free report from The 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. Get instant access to the names of these 11 high yielders -- it's free.

Jim Royal, Ph.D., owns shares of the 10 portfolio stocks mentioned in the table. The Motley Fool owns shares of Seaspan, Brookfield Infrastructure, Annaly, Plum Creek, and Philip Morris and has created a covered strangle position on Plum Creek. Motley Fool newsletter services have recommended buying shares of Exelon, National Grid, Philip Morris, Vodafone, Southern, and Brookfield Infrastructure, as well as writing a covered straddle position in Seaspan and a covered strangle position in Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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 (8) | Recommend This Article (10)

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 January 07, 2012, at 1:16 AM, chaseriley wrote:

    Your Return column is only valid if you sell at a gain or a loss.

    How about comparing your initial yield to VIG, SDY, or another dividend index, and then seeing where you stand over time with Total Income received?

    SPY only paid 2% in dividends last year, didn't you crush this number?

    Great job!

    You seem to have taken the biggest risk with FTR. I would do more due diligence on it and either invest my dividends in FTR or sell and move on.

    Good luck.

  • Report this Comment On January 07, 2012, at 4:27 AM, webmind wrote:

    "We should still see good performance from mortgage REITs, including Annaly, which thrive in poor conditions."

    NLY is down 11%. That's good? Maybe we can try better or best?

  • Report this Comment On January 07, 2012, at 11:06 AM, moatfrog wrote:

    Not at all impressed with what this did. High dividends often mean poor or mediocre returns. NLY can be expected to trade lower over the course of 2012 (do your own due diligence). The Fool seems to have an answer regarding most any security -- few pan out.

  • Report this Comment On January 07, 2012, at 1:08 PM, Teacherman1 wrote:

    You asked for suggestions, so here is one.

    DCIX

    It is still low enough to benefit from appreciation, and the dividend is good for at least a year, and probably longer.

    JMO and worth exactly what I am charging for it.

  • Report this Comment On January 07, 2012, at 1:35 PM, reddingrunner wrote:

    sell PM (it's blood money anyway) and hang on to your cash for another quarter.

    (I own BIP and am bullish on emerging market utilities for safety, dividends and growth).

  • Report this Comment On January 07, 2012, at 1:35 PM, burnaka wrote:

    Follow this:

    Maggie Ceo of ftr said dividend will get to 50% of free cash flow on 12/05 CC.

    Shares 995 million, times .75 equals 746.25 million

    Since this is her internal number for 50% of fcf

    fcf internal number is no less than 1.4925 billion dollars. There are 20 savings initiatives that cannot start until after the final territories purchased from VZ are finalized. She has refused to give an estimate on that savings number. She did spill the beans however when she gave her projected FCF number.

    She is anticipating 4-500 million unannounced savings. The dividend will stay safe, and eps. ramp up. So if stock price follows eps., I would put my money in ftr.

  • Report this Comment On January 07, 2012, at 6:04 PM, stallis wrote:

    Jim,

    I see NLY and FTR as ATMs. I don't think you should sell them but I also don't think the associated risks justify adding beyond your initial position; just enjoy the cash they generate and use it to fund purchases of better prospects.

    SO is a great company but I am skeptical that 2012 will produce another return of 13%+ and NGG, which I have owned for a while, has been steadily leaking value.

    SSW's recent actions should limit it's upside in the near term, and I'm not familiar enough with timber to select Plum Creek.

    That leaves PM, which I own, VOD, BIP and Exelon. I would be comfortable adding to any one of these four but I would probably lean towards BIP and PM.

  • Report this Comment On January 08, 2012, at 12:57 AM, Chris829 wrote:

    If I were you, I would consider reinvesting the dividends in SO, EXC, PM, or VOD.

    With that being said, this is what I would do to realign the portfolio for 2012

    -Sell SSW and avoid shipping like the plague

    -Sell one of the utilities

    -Sell FTR

    -Buying two or so large cap, dividend paying, low beta multi-nationals like JNJ, NVS, NSRGY, etc...

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: 1753948, ~/Articles/ArticleHandler.aspx, 11/25/2014 10:30:33 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