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 $39.71 25.0818 4.3% $1,133.45 13.8%
Exelon (NYSE: EXC  ) $41.36 23.818 5.3% $1,118.71 (6.1%)
National Grid $48.90 20.3693 5.5% $1,100.55 10.5%
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.4% $1,308.28 31.3%
Annaly Capital (NYSE: NLY  ) $17.92 65.5 13.5% $1,081.41 (7.9%)
Frontier Communications $7.88 126.4243 10% $498.11 (50%)
Plum Creek Timber (NYSE: PCL  ) $38.42 26 4.3% $1,017.12 1.8%
Brookfield Infrastructure Partners $26.12 38.2825 4.8% $1,196.71 19.7%
Vodafone $26.52 37.5566 4.9% $1,053.09 5.7%
Seaspan (NYSE: SSW  ) $14.90 76 4.2% $1,302.64 15%
Cash       $7.97  
Dividends Receivable       $0  
Original Investment       $9,986.58  
Total Portfolio       $10,818.04 8.3%
Investment in SPY (Including Dividends)         10%
Relative Performance (Percentage Points)         (1.7)

Source: S&P Capital IQ.

In the past week, our total portfolio performance declined by a percentage point, to 8.3%. We're still down on the dividend-adjusted S&P, but the gap increased slightly to 1.7 percentage points from 1.4. 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.

On Wednesday, I reinvested most of the portfolio's cash into Seaspan, snapping up seven shares of the container-ship company. The company has been making some good moves, including doubling its dividend to $0.25 quarterly over the past 15 months, with plenty more to come, it seems. In its latest earnings release in February, Seaspan also announced a $50 million share-repurchase authorization. Management has made a lot of value-creating moves here, and I'm confident in the long-term growth prospects as the dividend ramps up. This longtime pick of Motley Fool Hidden Gems should do well.

We just got Annaly's latest earnings, and I'm neutral on the results. Adjusted operating profit came in at $0.54 per share, just as it did in the fourth quarter, so I don't expect dividends to be out of line with what we saw in the most recent quarter, at $0.55 per share. Similarly the interest-rate spread was 1.71%, in line with the fourth quarter, though down 46 basis points year over year. Leverage ticked up to 5.8 times, from 5.4 times in the fourth quarter, so Annaly put on more leverage to earn an equivalent earnings-per-share figure.

Fellow Fool Austin Smith continues to see risks to Philip Morris, but they're coming from a small country, Australia, because of its plain-packaging law. Get Austin's take on this threat.

Dividends and other announcements
We're in the midst of earnings season, and we have limited dividend news for the moment.

  • Plum Creek reported earnings this week that came in below analysts' estimates at $0.18 per share, compared with $0.23 in the year-ago period. The decline was largely attributable to lower income from its real estate segment. Still, revenue was up 23% and EBITDA climbed 39%, to $139 million. The company stuck to its prior earnings guidance of $1.00 to $1.25 per share.

Dividend news:

  • Southern goes ex-dividend on May 7 and pays out $0.49 per share on June 6.
  • Exelon goes ex-dividend on May 11 and pays out $0.37925 per share on June 8. Exelon also paid out a $0.14575-per-share dividend in early April, to keep its total quarterly dividend at $0.525, as part of its recent acquisition of Constellation.

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 May 10, 2012, at 10:38 AM, fluffheadsr wrote:

    good stuff, i'm looking at a mind set for a portfolio that basically is, if they're not paying me, i don't want it. If they're not paying me < 4.5%, I don't want it.

    Thanks for some ideas.

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