The World's Best Dividend Portfolio

In June 2011, 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% $1,144.98 15%
Exelon (NYSE: EXC  ) $41.36 23.818 5.5% $1,122.17 (5.8%)
National Grid $48.90 20.3693 5.5% $1,106.26 11.1%
Philip Morris International $68.49 14.5429 3.6% $1,253.02 25.8%
Annaly Capital (NYSE: NLY  ) $17.92 65.5 13.3% $1,093.20 (6.9%)
Frontier Communications (NYSE: FTR  ) $7.88 126.4243 11.9% $442.49 (55.6%)
Plum Creek Timber $38.42 26 4.3% $1,005.42 0.7%
Brookfield Infrastructure Partners (NYSE: BIP  ) $26.12 38.2825 4.8% $1,189.05 18.9%
Vodafone $26.52 37.5566 4.9% $1,044.82 4.9%
Seaspan $14.90 76 4.3% $1,330.00 17.5%
Cash       $7.97  
Dividends Receivable       $23.22  
Original Investment       $9,986.58  
Total Portfolio       $10,762.60 7.8%
Investment in SPY (Including Dividends)         7.4%
Relative Performance (Percentage Points)         0.4

Source: S&P Capital IQ.

In the past week, our total portfolio performance declined by a half-percentage point, to 7.8%. But we climbed substantially on the S&P, moving from 1.7 points down to 0.4 points above the index. So we're back to outperforming, and we're sporting a blended yield of 5.8%, versus the 1.9% of the S&P. The recent lackluster performance in the broader market has certainly improved the relative performance of our dividend portfolio, notwithstanding the brutal performance of Frontier Communications this past week. Europe continues to founder, China continues to slow, and equities are sinking -- so I'm happy to continue to hold this portfolio.

I went over Annaly's results last week and talked about how I was neutral on them, given stagnant earnings per share yet higher leverage. The stock and that of peer American Capital Agency (Nasdaq: AGNC  ) have been moving up in recent weeks, as investors move to safer investments. As agency mortgage REITs, their mortgages are backed by the U.S. government. For those who are concerned about declining dividends in either stock, one alternative that could work for the longer term is recently announced preferred stock. Annaly is issuing Series C preferred stock that provides a 7.6% yield at par. American Capital Agency also has a new 8% Series A issue out there.

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

  • Frontier's quarter was less than impressive. The company's quarterly revenue declined 5.8%, to $1.26 billion. Even worse, access lines declined 7.9% -- a huge level of attrition. Still, the company grew its video and broadband customers at low-single-digit rates. The company is still predicting $900 million to $1 billion in free cash flow for the year, but my confidence in management is pretty nearly at an end, so who knows how well the year will shake out.
  • Brookfield Infrastructure also reported its quarterly numbers this past week. The company grew funds from operations (FFO) from $98 million to $108 million, but per-share FFO actually declined, from $0.62 to $0.58. That decline was caused by an equity issuance to fund its railroad investment, but the revenue from the railroad should ramp up as the year continues. The company also declared its next dividend: $0.375 per unit.

Dividend news:

  • Southern went ex-dividend on May 7 and pays out $0.49 per share on June 6.
  • Exelon went ex-dividend on May 11 and pays out $0.37925 per share on June 8. Previously, Exelon paid out a $0.14575 per share dividend in early April, to keep its total quarterly dividend at $0.525 per share, as part of its recent acquisition of Constellation.
  • Plum Creek goes ex-dividend on May 18 and pays out $0.42 per share on May 31.

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.


Read/Post Comments (3) | Recommend This Article (11)

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 May 11, 2012, at 9:25 PM, DelKlingon wrote:

    Okay. Where am I not understanding the data? Dividends Receiveable by my calcualtions since June 2011 should be a lot higher than a mere $23.22.

  • Report this Comment On May 13, 2012, at 4:25 PM, DelKlingon wrote:

    Nevermind. Friday was an exhausting day and I misunderstood what I read. I get it, those are dividends still due in by the end of the one year cycle for this portfolio.

  • Report this Comment On May 16, 2012, at 5:37 PM, DividendsBoom wrote:

    I don't think he^ gets it. Div. Rec. are dividends that are ex-div date but not received yet.

Add your comment.

DocumentId: 1885841, ~/Articles/ArticleHandler.aspx, 4/20/2014 6:30:39 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