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% $1,150.00 15.5%
Exelon (NYSE: EXC  ) $41.82 23.818 5.4% $1,114.39 (6.5%)
National Grid (NYSE: NGG  ) $48.90 20.3693 5.5% $1,100.17 10.5%
Philip Morris International $68.49 14.5429 3.5% $1,305.95 31.1%
Annaly Capital (NYSE: NLY  ) $18.24 65.5 13.5% $1,070.66 (8.8%)
Frontier Communications $7.88 126.4243 9.8% $512.02 (48.6%)
Plum Creek Timber $38.42 26 4% $1,089.14 9%
Brookfield Infrastructure Partners $26.12 38.2825 4.7% $1,223.13 22.3%
Vodafone (Nasdaq: VOD  ) $26.52 37.5566 4.9% $1,042.95 4.7%
Seaspan $14.61 69 4.3% $1,177.83 16.8%
Cash       $128.02  
Dividends Receivable       $0  
Original Investment       $9,986.58  
Total Portfolio       $10,914.25 9.3%
Investment in SPY
(Including Dividends)
        10.7%
Relative Performance
(Percentage Points)
        (1.4)

Source: S&P Capital IQ.

In the past week, our total portfolio performance had a shocking jump, climbing from 6.5% to 9.3%. We're still down on the dividend-adjusted S&P, but we've narrowed the gap, from 2.8 percentage points last week to 1.4 now. 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. And I'm happy to continue to hold this high-yielding portfolio.

We now have more than $100 in the portfolio, and I'll be adding that amount to one of the existing stocks. Given its sluggish performance over the past nine months, I'm leaning strongly toward Exelon. The stock now yields 5.4% and is one of the largest utilities in the United States. A few other Fools also like the stock. But we have a similarly strong yield at National Grid, and I want to delve into which offers the better value.

I'm anxiously looking forward to the next quarterly numbers from Annaly Capital, and they should be out any day now. I continue to be cautious on this stock and other mortgage REIT peers, as I explain in this video. Annaly saw a reduced interest-rate spread in its last quarter, and I'd love to see that number increase, or at least hold steady, in future quarters.

Dividends and other announcements

  • Southern reported a 13% decline in its earnings for the latest quarter, blaming mild winter weather for lower demand. Earnings came to $368 million, or $0.42 per share. That fell below the Street's estimates of $0.45 per share. The company also announced that it will cut coal use by 20% and boost natural gas use by 40% this year, as the fuel continues to sit at historically low prices.
  • Vodafone announced earlier this week that it's buying the U.K.'s Cable & Wireless Worldwide for $1.7 billion. The acquisition makes Vodafone the second largest telecom player in the U.K., doubling its size, and provides it good exposure to enterprise customers.

Dividend news:

  • Annaly went ex-dividend on March 28 and paid out $0.55 per share on April 26.
  • Southern goes ex-dividend on May 7 and pays out $0.49 per share on June 6.

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." 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 28, 2012, at 10:49 PM, GW1000 wrote:

    NLY is really hurting the performance of your portfolio. Without NLY, it would be doing well. Have you considering swapping NLY for some other opportunities?

  • Report this Comment On May 02, 2012, at 7:58 AM, D0min0 wrote:

    Frontier Communications is really, really hurting you. Why did you buy into a 19th century technology?

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