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 4.3% $1,151.76 15.6%
Exelon $41.36 23.818 6% $1,025.06 (14%)
National Grid $48.90 20.3693 5.4% $1,130.70 13.5%
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.6% $1,311.04 31.6%
Annaly Capital (NYSE: NLY  ) $17.79 72.5 12.4% $1,270.20 (1.5%)
Frontier Communications $7.88 126.4243 8.2% $604.94 (39.3%)
Plum Creek Timber $38.42 26 4% $1,108.90 11%
Brookfield Infrastructure Partners (NYSE: BIP  ) $26.12 38.2825 4.2% $1,363.24 36.3%
Vodafone $26.52 37.5566 5% $1,080.13 8.4%
Seaspan $14.90 76 6% $1,365.30 10.6%
AT&T $35.20 28.4 4.7% $1,083.46 8.4%
Retail Opportunity Investments $12.20 81.95 4.4% $1,044.86 4.5%
Annaly Preferred C $25.92 38.5 7.5% $981.75 (1.8%)
Cash       $67.24  
Dividends Receivable       $45.46  
Original Investment       $12,983.97  
Total Portfolio       $14,634.04 12.7%
Investment in SPY
(Including Dividends)
        14.8%
Relative Performance
(Percentage Points)
        (2.1)

Source: S&P Capital IQ.

Our portfolio was up nicely for the week, moving from 11.8% to 12.7%. But we lost significant ground on the S&P, moving from 0.8 percentage points down to 2.1 down. Our blended yield remains at 5.8%, and we have quite a few dividends coming into the portfolio in the next few weeks. Here was another example of underperformance when the S&P races ahead -- just what we should expect. The market seems to have positively anticipated the Federal Reserve's announcement of a third round of quantitative easing. Still, I'm confident in the long-run nature of this dividend portfolio, and I expect that time will bear us out.

The recent round of quantitative easing also seeks to lower long-term rates, meaning that its goal is to lower the interest-rate spread earned by mortgage REITs such as Annaly as well as peers American Capital Agency (Nasdaq: AGNC  ) and Armour Residential (NYSE: ARR  ) . The good news for mREIT investors is that funding costs should remain low. The Fed announced that it will hold interest rates at near zero until at least mid-2015. So we should continue to see shrinking rate spreads from these players and therefore shrinking dividends.

Earlier this week, Philip Morris announced that it's raising its quarterly dividend by more than 10%, from $0.77 to $0.85 per share. That's fabulous news for us income investors and validates our investment thesis. While the company derives much of its revenue from sluggish Europe, this dividend increase suggests that the company continues to see a robust business.

Dividends and other announcements
We're through earnings season and have lots of dividend news for the moment.

Dividend news:

  • Frontier went ex-dividend on Sept. 5 and pays out $0.10 per share on Sept. 28.
  • Exelon went ex-dividend on Aug. 13 and paid out $0.525 per share on Sept. 10.
  • Annaly Preferred C went ex-dividend on Aug. 31 and pays $0.47 per share on Oct. 1.
  • Brookfield Infrastructure went ex-dividend on Aug. 29 and pays $0.375 per share on Sept. 27.

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 continue to track and report on the portfolio's progress, 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." I invite you to download it at no cost to you. Get instant access to the names of these nine high-yielders.

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 on 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 (1) | Recommend This Article (10)

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 September 17, 2012, at 10:29 AM, definer wrote:

    I beat this portfolio with a smaller groups of stocks (AGD, AOD, ARR, EAD, FHY, HMH, IGD, IID, KHI, PHK). A 10K investments has grown more than $11,695 for a total return of 17.43%. All of the stocks have at least returned their original investment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2018273, ~/Articles/ArticleHandler.aspx, 9/1/2014 4:04:37 AM

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