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 for yourself. Now let's check out the results so far.

Company

Cost Basis

Shares

Yield

Total Value

Return

Southern (NYSE: SO  ) $39.71 25.0818 4.3% $1,141.22 14.6%
Exelon (NYSE: EXC  ) $41.82 23.818 5.6% $1,083.84 (9.1%)
National Grid $48.90 20.3693 5.8% $1,057.57 6.2%
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.5% $1,261.60 26.7%
Annaly Capital (NYSE: NLY  ) $18.24 65.5 13.8% $1,042.11 (11.2%)
Frontier Communications $7.88 126.4243 9.5% $522.13 (47.6%)
Plum Creek Timber $38.42 26 4.1% $1,066.78 6.8%
Brookfield Infrastructure Partners $26.12 38.2825 4.9% $1,163.02 16.3%
Vodafone $26.52 37.5566 4.9% $1,040.13 4.4%
Seaspan $14.61 69 4.7% $1,125.39 11.6%
Cash       $92.00  
Dividends Receivable       $36.03  
Original Investment       $9,986.58  
Total Portfolio       $10,631.82 6.5%
Investment in SPY
(Including Dividends)
        8.8%
Relative Performance
(Percentage Points)
        (2.3)

Source: S&P Capital IQ.

In the past week, our total portfolio performance decreased, moving down 0.3 percentage points to 6.5%. But we gained relative to the dividend-adjusted S&P and are down now by 2.3 percentage points, from 2.8 last week. We have seven of 10 stocks in positive territory. With all the talk of Europe, slowing Chinese growth, and a six-month rally in equities, a dividend-heavy portfolio should be one of the safer ports in a storm.

We'll soon have more than $100 in the portfolio, and I'll be adding that amount to one of those stocks I already own. Given its sluggish performance over the past nine months, I'm considering Exelon. The stock now yields 5.6% and is one of the largest utilities in the United States. A few other Fools also like the stock.

I'm looking forward to the next quarterly numbers from Annaly Capital, though I continue to be cautious on this stock and peer Chimera (NYSE: CIM  ) . Both have cut their dividends sequentially for the first quarter. Annaly saw a reduced interest-rate spread, and we don't yet know the numbers for Chimera, though I think it's better to assume a declining spread there, as many of its peers (such as American Capital Agency and Armour Residential) have experienced.

Dividends and other announcements

  • Philip Morris released earnings earlier this week, and the company continues to perform well. Beating expectations, the company announced per-share profit of $1.25 -- up from a $1.06 in the year-ago period. Revenue rose 10%, to $7.45 billion, though that figure was well below analysts' estimates of $8.15 billion. Shipments, meanwhile, climbed 5.4%. Blaming the rising U.S. dollar, the company trimmed its annual EPS outlook to a range of $5.20-5.30 per share, down from $5.25-$5.35. The new range, however, still includes analysts' expectations of $5.28 per share.
  • Southern approved a 3.7% dividend increase, to $0.49 per share. This is the 11th straight year the company has bumped up the dividend.

Dividend news:

  • Annaly went ex-dividend on March 28 and pays out $0.55 per share on April 26.
  • Philip Morris went ex-dividend on March 29 and paid out $0.77 per share on April 12.

All that, of course, means more money coming into our pockets.

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're craving more dividend payers, I invite you to read the free report from The Motley Fool titled "3 American Companies Set to Dominate the World." Today I invite you to download it at no cost to you. Get instant access to the names of these dominant dividend stocks -- 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, Plum Creek, and Brookfield Infrastructure and has created a covered strangle position in Plum Creek. Motley Fool newsletter services have recommended buying shares of Exelon, Philip Morris, Annaly, Southern, National Grid, Vodafone, and Brookfield Infrastructure, 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 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.


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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 April 21, 2012, at 4:52 AM, InvestWhatWorks wrote:

    Dr. Royal,

    If I may, I have a suggestion/comment for when your full-year is up and you can make changes:

    Maybe one of the new stipulations you can impose on yourself is for more diversification. Obviously some of the highest yields you can find are in the utilities, mortgage-REITs and telcos, which is why you have so many. And something like the tech sector in general isn't exactly known for its high-yielding companies. But maybe the next World's Best Dividend Portfolio could be The World's Best Diversified Dividend Portfolio. I'd like to see your progress tracking the best high-yield stocks among many different sectors. Picking the best out of the sectors that maybe don't yield as high as others.

    Great update as always. Big fan of dividends and a big fan of your articles.

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