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 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% $1,153.01 15.8%
Exelon $41.36 23.818 5.9% $1,039.18 (12.8%)
National Grid $48.90 20.3693 5.4% $1,150.25 15.5%
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.7% $1,357.00 36.2%
Annaly Capital (NYSE: NLY  ) $17.79 72.5 11.8% $1,206.40 (6.5%)
Frontier Communications $7.88 126.4243 8.8% $601.15 (39.7%)
Plum Creek Timber $38.42 26 4% $1,102.14 10.3%
Brookfield Infrastructure Partners (NYSE: BIP  ) $26.12 38.2825 4.3% $1,337.21 33.7%
Vodafone (Nasdaq: VOD  ) $26.52 37.5566 5.4% $1,085.76 9%
Seaspan (NYSE: SSW  ) $14.90 76 6.3% $1,307.08 5.9%
AT&T $35.20 28.4 4.6% $1,088.86 8.9%
Retail Opportunity Investments $12.20 81.95 4.3% $1,060.84 6.1%
Annaly Preferred C $25.92 38.5 7.4% $989.45 (1.1%)
Cash       $112.70  
Dividends Receivable       $61.11  
Original Investment       $12,983.97  
Total Portfolio       $14,652.13 12.8%
Investment in SPY (including dividends)         12.1%
Relative Performance (percentage points)         0.7

Source: S&P Capital IQ.

Our portfolio was even for the week, staying at 12.8% over the week. But the S&P moved up, narrowing our lead from 1.8 percentage points to 0.7. Our blended yield remained at 5.7%. Earlier this week we received our first dividend from Annaly's Series C stock, and we have three cash dividends coming into the portfolio in the next month. I'm confident in the long-run performance of this dividend portfolio, and I expect time will bear us out.

With over $100 now in the portfolio's till, I'm going to reinvest that cash. And the company I've decided on is Seaspan. I've laid out the reasons before in this column, but I've provided a longer case in the following article. The short form: Dividends could drastically increase in February. So as soon as the Fool's rules permit next week, I'll be putting our cash to work in Seaspan.

Sergio Marchionne, CEO of Fiat and board member at Philip Morris, continues to buy shares. He acquired another 1,000 shares in late August at $88.50 apiece. That follows 1,000-share buys in July, April, and February as well as seven different purchases of at least 1,050 shares in 2011. The stock has done almost nothing but go up over that time period. It's a reminder that insider buying is one of the best signals of future stock appreciation.

Is it time to buy Vodafone? That's the question fellow Fool Harvey Jones asks, and he answers affirmatively in this article, noting the company's strong dividend and attractive price, at just 11 times forward earnings.

Fool Dan Caplinger asks a question that has been on the minds of investors of mortgage REITs such as Annaly for a while: When will their dividends bottom out? He notes that while Annaly's dividend is now $0.50 per quarter, it has been as low as $0.10 in recent history. I'm keeping a close eye on Annaly these days.

Brookfield Infrastructure is issuing $400 million in five-year bonds at a very cheap 3.455%. I love to see the company take advantage of the low-rate environment, and Brookfield remains one of the sharpest investors out there. The company will use the proceeds to refinance existing debt.

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 paid out $0.10 per share on Sept. 28.
  • Annaly Preferred C went ex-dividend on Aug. 31 and paid $0.47 per share on Oct. 1.
  • Brookfield Infrastructure went ex-dividend on Aug. 29 and paid $0.375 per share on Sept. 27.
  • Philip Morris went ex-dividend on Sept. 25 and pays outs $0.85 per share on Oct. 11.
  • Annaly went ex-dividend on Sept. 27 and pays out $0.50 per share on Oct. 29.
  • AT&T went ex-dividend on Oct. 5 and pays out $0.44 per share on Nov. 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 likely have stocks plunging again, and 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 the 13 tickers above along with the nine names from a free report from 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. To get instant access to the names of these nine high-yielders, simply click here -- 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. Motley Fool newsletter services have recommended 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 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.


Read/Post Comments (3) | Recommend This Article (16)

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 October 05, 2012, at 11:09 AM, jonkai wrote:

    it doesn't seem like your chart is reflecting your cost basis if you are reinvesting dividends? nor is it in your "return"...

    it looks like the return is strictly price, and has no dividends in the return...

    why do you not have a total return?

    and why are your cost basis not adjusting?

    or have you (for instance) not reinvested NLY dividends in NLY stock?

  • Report this Comment On October 05, 2012, at 2:52 PM, TMFRoyal wrote:

    Hi, jonkai,

    Yes, I do not necessarily reinvest in the stock that paid the dividends. I'll accumulate about $100 or so, then reinvest in the stock that I think has the best reward-to-risk. I do adjust the cost basis for the stocks that I've reinvested in.

    Foolish best,

    Jim

  • Report this Comment On October 08, 2012, at 1:45 PM, theo621 wrote:

    Jim,

    What are your transaction costs for reinvesting? For someone like me, paying $4 for each reinvestment would be prohibitively expensive, while automatic reinvestment in the same stock is free.

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