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% $1,155.52 16%
Exelon $41.36 23.818 5.6% $1,080.10 (9.4%)
National Grid (NYSE: NGG  ) $48.90 20.3693 5.4% $1,123.77 12.8%
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.3% $1,356.71 36.2%
Annaly Capital (NYSE: NLY  ) $17.79 72.5 12.8% $1,224.53 (5.1%)
Frontier Communications (Nasdaq: FTR  ) $7.88 126.4243 8.4% $589.14 (40.9%)
Plum Creek Timber $38.42 26 4.2% $1,050.40 5.2%
Brookfield Infrastructure Partners $26.12 38.2825 4.1% $1,396.55 39.7%
Vodafone $26.52 37.5566 5% $1,099.28 10.4%
Seaspan (NYSE: SSW  ) $14.90 76 5.8% $1,400.56 13.5%
AT&T $35.20 28.4 4.7% $1,057.62 5.8%
Retail Opportunity Investments $12.20 81.95 4.5% $1,032.57 3.3%
Annaly Preferred C $25.92 38.5 7.4% $997.15 (0.3%)
Cash       $0.18  
Dividends Receivable       $68.81  
Original Investment       $12,983.97  
Total Portfolio       $14,632.88 12.7%
Investment in SPY (Including Dividends)         11.2%
Relative Performance (Percentage Points)         1.5

Source: S&P Capital IQ.

Our portfolio gained again in the past week, moving from an 11.6% cumulative gain to 12.7%. Despite the move up, we lost 0.1 percentage points on the S&P. Investors have really been hunting for yield, and our portfolio has been the beneficiary. But if panic breaks out, we could see all stocks take a hit. However, I still expect our stocks to outperform our benchmark. Our blended yield is 5.7%.

As I mentioned last week, I invested about $116 in Annaly Capital, because I see it as a way to hedge our portfolio if the market does poorly. But I continue to watch it closely, as its net interest margin continues to steadily decline. As I suggested last week, I also bought shares in Seaspan, which I think will be a huge performer over the next few years. It currently pays a 5.8% yield that I expect to grow mightily in the near term.

We have a slew of dividends coming in the next couple of weeks, and it won't be long before we have another $100 to reinvest in our picks. That's the minimum I want to use to reinvest.

Australia's high court approved the nation's plan to require cigarette packages to have plain packaging and most of their surface covered with graphic warning labels. Philip Morris is pursuing a suit against the government for the loss of its trademarks. Also worrisome for the tobacco company is that the U.K., New Zealand, and others may copy Australia's no-trademark law.

Frontier has made a nice run in the past few weeks, moving from the low $3s to the high $4s. Of course, that's after a huge downturn from the high single digits in the last few years. The move back up seems to have been presaged by acquisitions from top management, including Executive Vice President Cecilia McKenney, who snapped up $116,000 in Frontier over the preceding six months. As I said last month, I expect to unload shares of Frontier when it reaches what I think is a fair price. To learn more about Frontier's prospects, be sure to take a look at the Fool's latest premium report on the company.

National Grid is discussing with U.K. regulators potential increased investment in infrastructure. The pair is at odds over how much National Grid should receive for its investment (no bonus points for guessing that National Grid wants more than regulators are offering). I'll be keeping an eye on this development, since the company may need to raise more capital.

Dividends and other announcements
Dividend news:

  • National Grid went ex-dividend on May 30 and paid 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 went ex-dividend on Aug. 15 and pays out $0.42 per share on Aug. 31.
  • Exelon went ex-dividend on Aug. 13 and pays out $0.525 per share on Sept. 10.
  • ROIC went ex-dividend on Aug. 14 and pays out $0.14 per share on Aug. 31.
  • Annaly's Class C preferred shares go ex-dividend on Aug. 31 and pay $0.47 per share on Oct. 1.

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'll continue to track the portfolio over the course of the year, including news on these companies.

If you like dividends, consider these 13 tickers 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 13 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, as well as writing covered straddle positions in Exelon and 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 (17)

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 August 20, 2012, at 10:30 AM, JF125780 wrote:

    Thanks Jim, I enjoyed reading your honest informative article.

    Danny Kowkabany

  • Report this Comment On August 20, 2012, at 1:39 PM, MattDVT wrote:

    Hey Jim,

    I just read a snippet from a Morningstar newsletter about the Canadian housing market beginning to reach "bubble" territory. I'm wondering if you have any insight into Annaly's exposure to the Canadian housing market? Thanks.

    Matt

  • Report this Comment On August 20, 2012, at 6:19 PM, alesserph wrote:

    Hi Jim,

    What is the fair price for FTR when you are ready to unload shares of FTR? Thnx.

    May

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