The World's Best Dividend Portfolio

In June 2011, I invested my money equally in a selection of 10 high-yield dividend stocks. With a year of success behind me, in July 2012, I added even more money to the portfolio. 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 4.2% $1,174.08 17.9%
Exelon (NYSE: EXC  ) $41.36 23.818 5.5% $1,111.80 (6.7%)
National Grid (NYSE: NGG  ) $48.90 20.3693 5.7% $1,095.05 9.9%
Philip Morris International $68.49 14.5429 3.4% $1,328.93 33.4%
Annaly Capital (NYSE: NLY  ) $17.79 72.5 13.2% $1,217.28 (5.6%)
Frontier Communications (NYSE: FTR  ) $7.88 126.4243 8.8% $595.46 (40.2%)
Plum Creek Timber $38.42 26 4.2% $1,043.90 4.5%
Brookfield Infrastructure Partners (NYSE: BIP  ) $26.12 38.2825 4.3% $1,354.43 35.5%
Vodafone $26.52 37.5566 5% $1,116.56 12.1%
Seaspan $14.90 76 6% $1,250.20 10.4%
AT&T $35.20 28.4 4.7% $1,057.33 5.8%
Retail Opportunity Investments $12.20 81.95 4.5% $1,013.72 1.4%
Annaly Preferred C $25.92 38.5 7.4% $996.38 (0.2%)
Cash       $61.04  
Dividends Receivable       $72.37  
Original Investment       $12,983.97  
Total Portfolio       $14,488.53 11.6%
Investment in SPY (Including Dividends)         10%
Relative Performance (Percentage Points)         1.6

Source: S&P Capital IQ.

Our portfolio raised its outperformance since last week, moving from a 9.9% cumulative gain to 11.6%. But our lead on the S&P declined, from 3 percentage points to 1.6 points. As we've seen for the past year, when the S&P goes up a lot, our portfolio goes up, but by less. Our blended yield is 5.8%.

As I discussed last week, I invested more in Annaly Capital. I used about $116 in cash to buy seven shares of the mortgage REIT. While I think there are bumps on the horizon, I like having the stock as a hedge against the rest of the portfolio, since it tends to perform well when the market is doing poorly. Annaly recently announced earnings -- more on that in a moment.

Exelon agreed to sell three Maryland power plants for $400 million to investment firm Riverstone Holdings. The deal was required as part of the company's takeover of Constellation Energy. Exelon will book a pre-tax loss on the sale of about $275 million.

Frontier reported revenue last week that beat the street, and shares have moved up nicely in recent weeks. The company also just increased the size of its 2023 bond offering from $500 million to $600 million -- and a move like that is usually a good sign. But I'm continuing to watch the results of its integration of acquired phone lines. Fellow Fool Brenton Flynn discuss these issues further.

Dividends and other announcements
Earnings news:

  • Annaly reported second-quarter earnings, and things continue to tighten for the mortgage REIT. Its interest-rate spread declined to 1.54% -- a 91 basis-point decline from last year and 17 points sequentially. That decline should be concerning long-term for those of us in Annaly for the dividend. The company could increase leverage to maintain its dividend, but it did so only modestly this quarter, up to 6.0 from 5.7 last year. This is something to keep an eye on.
  • Brookfield Infrastructure reported its earnings, notching a loss of $0.14 per unit compared with a $0.17 gain last year. However, revenue increased 15%, to $493 million, and funds from operations climbed nearly 9%, to $111 million. The company continues on its quest for great infrastructure assets, acquiring an interest in a Brazilian toll road. The next quarterly dividend is $0.375 and is payable on Sept. 28.

Dividend news:

  • National Grid went ex-dividend on May 30 and pays out $2.017 per share on Aug. 15.
  • Seaspan went ex-dividend on Aug. 10 and pays out $0.25 per share on Aug. 22.
  • Southern went ex-dividend on Aug. 2 and pays out $0.49 per share on Sept. 5.
  • Plum Creek goes ex-dividend on Aug. 15 and pays out $0.42 per share on Aug. 31.
  • Exelon goes ex-dividend on Aug. 13 and pays out $0.525 per share on Sept. 10.
  • ROIC goes ex-dividend on Aug. 14 and pays out $0.14 per share on Aug. 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. I will continue to track the portfolio, including news on these companies.

If you like dividends, consider the 10 tickers here along with the nine names from a brand-new, free report from The Motley Fool's expert analysts called "Secure Your Future With 9 Rock-Solid Dividend Stocks." Today I invite you to download it at no cost to you. Get instant access to the names of these nine high-yielders -- it's free.

Jim Royal, Ph.D., owns shares of the 10 portfolio stocks mentioned in the table. The Motley Fool owns shares of Seaspan, Brookfield Infrastructure, ROIC, and Annaly. Motley Fool newsletter services have recommended buying shares of Vodafone, ROIC, National Grid, Brookfield Infrastructure, Exelon, Annaly, and Southern, creating a write covered straddle position in Exelon, and creating 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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