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

Company

Cost Basis

Shares

Yield

Total Value

Return

Southern $39.71 25.0818 4.3% $1,140.72 14.5%
Exelon $41.36 23.818 5.5% $1,091.91 (8.4%)
National Grid $48.90 20.3693 5.3% $1,075.70 8.0%
Philip Morris International $68.49 14.5429 3.7% $1,225.97 23.1%
Annaly Capital $17.92 65.5 13.6% $1,057.83 (9.9%)
Frontier Communications $7.88 126.4243 12.4% $407.21 (59.1%)
Plum Creek Timber $38.42 26 4.6% $946.14 (5.3%)
Brookfield Infrastructure Partners $26.12 38.2825 4.9% $1,166.85 16.7%
Vodafone $26.52 37.5566 4.9% $980.23 (1.6%)
Seaspan $14.90 76 6.4% $1,180.28 4.2%
Cash       $7.97  
Dividends Receivable       $34.14  
Original Investment       $9,986.58  
Total Portfolio       $10,314.95 3.3%
Investment in SPY (including dividends)         2.5%
Relative Performance (percentage points)         0.8

Source: S&P Capital IQ.

It was a rough week for our portfolio. Our total gain declined from 7.8% to 3.3%. But as rough as that was, it was even more difficult for the S&P. We actually improved our performance on the index, moving from last week's 0.4 percentage-point outperformance to 0.8 points this week. That's exactly what I expected when I started the portfolio nearly a year ago -- outperformance in down markets. Plus, we have a blended dividend yield of 6.1%, compared with the S&P's 1.9%. The total portfolio would be substantially improved if not for the truly awful performance of Frontier Communications (NYSE: FTR  ) , which has suffered mightily since its recent earnings report and the expectation that free cash flow would fall to $900 million-$1 billion.

If markets continue to be stagnant or down, we should probably outperform. And I don't see a whole lot that is positive in the next few months. Growth is slowing in various places across the globe, and Europe is a mess that is not being fixed yet.

Dividends and other announcements
We're at the end of earnings season, and we have a few bits of dividend news.

  • Seaspan (NYSE: SSW  ) reported earnings last week, and the adjusted net income of $0.30 per share topped analysts' estimates while revenue climbed 26%. But the number dividend investors want to keep an eye on is cash available for distribution, since that figure determines how much the company can pay to us. That number climbed 28% -- healthy growth. The company promised a dividend of $1 per share for this year. At that rate, it's paying out just a quarter of its cash available for distribution. Plus, the company has a $50 million buyback authorized. Good numbers all around.
  • Our favorite U.K.-based utility, National Grid (NYSE: NGG  ) , reported results last week. Total revenue was off 3.5% while operating profit climbed 5%. The company confirmed its 8% dividend growth for the next dividend (to be paid in August), and it stated its intention to grow the payout another 4% for next year. It will be announcing its future dividend policy shortly. Fool Roland Head has more details on National Grid's quarter.

Dividend news:

  • Southern (NYSE: SO  ) went ex-dividend on May 7 and pays out $0.49 per share on June 6.
  • Exelon (NYSE: EXC  ) 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, as part of its recent acquisition of Constellation.
  • Plum Creek went 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 likely have stocks plunging again, and if they do, I'll be inclined to pick up more shares.

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, 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. To get instant access to the names of these dominant dividend stocks, simply click here -- 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. The Fool owns shares of 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 may not 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 21, 2012, at 11:40 AM, BFatConservative wrote:

    It would be interesting to know what the return would have been minus the frontier performance. It could lend tremendous credibility to your analysis, as you could create a very real case that this approach (with some initial discretion, not just high yielders) could be a valid pathway for the next year to three years.

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