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

Company

Cost Basis

Shares

Yield

Total Value

Return

Southern $39.71 25.0818 4.1% $1,194.40 19.9%
Exelon (NYSE: EXC  ) $41.36 23.818 5.6% $1,089.03 (8.6%)
National Grid (NYSE: NGG  ) $48.90 20.3693 5.7% $1,049.63 5.4%
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.6% $1,270.18 27.5%
Annaly Capital $17.92 65.5 13.1% $1,106.30 (5.7%)
Frontier Communications (Nasdaq: FTR  ) $7.88 126.4243 10.7% $470.30 (52.8%)
Plum Creek Timber $38.42 26 4.5% $972.40 (2.7%)
Brookfield Infrastructure Partners (NYSE: BIP  ) $26.12 38.2825 4.5% $1,256.05 25.6%
Vodafone $26.52 37.5566 5% $1,030.55 3.5%
Seaspan $14.90 76 6.3% $1,200.80 6%
Cash       $61.11  
Dividends Receivable       $106.20  
Original Investment       $9,986.58  
Total Portfolio       $10,806.95 8.2%
Investment in SPY
(Including Dividends)
        5.5%
Relative Performance
(Percentage Points)
        2.7

Source: S&P Capital IQ.

Our portfolio outperformed again this week and saw performance grow to an 8.2% cumulative return, up from 6.6% last week. Meanwhile, the S&P index climbed less, to 5.5%, meaning we're up by 2.7 percentage points on our benchmark. So after nearly a year, we're beating the index and have a substantially better blended yield -- 6% -- than the index, at 1.9%. 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. There's now talk of a global recession, and Europe is a mess that isn't being fixed.

Exelon announced that it had issued $775 million in new debt, in part to refinance existing debt. That's part of Exelon's overall plan to issue debt worth $1,325 million and retire old debt of $1,075 million in 2012. The company continues to be a good place for dividend investors, with its 5.6% yield. The company expects earnings of $2.55 to $2.85 per share this year and is trading at about 14 times the midpoint of those earnings.

There's little to excite shareholders of Frontier Communications, but misery does love company. So it's nice to see institutional investor Avenir add to its stake in the beleaguered telecom. But the market has punished this stock mercilessly, such that its yield still looks high despite the recent cut from $0.1875 per share quarterly to $0.10.

More good news for Philip Morris bulls. The company announced that it will repurchase $18 billion in shares over the next three years, beginning around August. The company is almost finished with a three-year program that saw it buy back $12 billion of shares ahead of schedule. The $18 billion in shares represents about 12% of the company's outstanding stock. It's just another example of how Philip Morris is rewarding shareholders.

Dividends and other announcements
We're past earnings season, and we have mainly dividend news for the moment.

Dividend news:

  • Southern went ex-dividend on May 7 and paid out $0.49 per share on June 6.
  • Exelon went ex-dividend on May 11 and paid out $0.37925 per share on June 8. Previously, Exelon paid out a $0.14575 dividend in early April, to keep its total quarterly dividend at $0.525, as part of its recent acquisition of Constellation.
  • National Grid went ex-dividend on May 30 and pays out $2.017 per share on Aug. 15.
  • Vodafone went ex-dividend on June 6 and pays out $1.015 per share on Aug. 1.
  • Frontier went ex-dividend on June 6 and pays out $0.10 per share on June 28.
  • Brookfield Infrastructure went ex-dividend on May 31 and pays out $0.375 per share on June 29.

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, as well as having 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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