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%

$1,137.96

14.3%

Exelon

$41.36

28.818

6.5%

$936.01

(21.5%)

National Grid

$48.90

20.3693

5.7%

$1,139.87

14.4%

Philip Morris International (NYSE: PM  )

$68.49

14.5429

3.8%

$1,327.91

33.3%

Ryman Hospitality

$44.93

24.7

4.4%

$1,131.26

1.9%

Plum Creek Timber

$38.42

26

3.4%

$1,296.88

29.8%

Brookfield Infrastructure Partners

$26.12

38.2825

4.6%

$1,470.05

47%

Vodafone (NASDAQ: VOD  )

$26.75

56.7566

5.6%

$1,577.83

3.9%

Seaspan

$15.24

95

6.5%

$1,904.75

31.6%

AT&T

$35.20

28.4

4.9%

$1,046.82

4.7%

Retail Opportunity Investments

$12.20

81.95

4.6%

$1,080.10

8%

Annaly Preferred C

$25.98

38.5

7.5%

$980.21

(1.8%)

Cash

     

$231.79

 

Dividends Receivable

     

$59.74

 

Original Investment

     

$12,983.97

 

Total Portfolio

     

$15,321.19

18%

Investment in SPY (Including Dividends)

       

20.2%

Relative Performance (Percentage Points)

       

(2.2)

Source: Capital IQ, a division of Standard & Poor's.

The portfolio is up 18% since we began this experiment, and we're trailing the S&P by 2.2 percentage points. We lost about 0.5 percentage points on the S&P from last week as the index raced out to a 2.2 percentage point lead. That's what we expect -- slight underperformance in a rising market and outperformance in poor markets. So far this year, the S&P has been on fire, but that won't continue forever. We have a load of cash in our pocket and more on the way, plus after a couple of buys and sells, the portfolio yields a very healthy 5.2%.

As I discussed last week, I sold the stake in Frontier Communications (NASDAQ: FTR  ) for $4.13 per share and rolled those funds into Vodafone at $27.19. Frontier continues to experience shrinking free cash flow, and while the dividend should be covered amply for 2013, cash flow just continues to shrivel. In contrast, Vodafone owns a very attractive asset in its 45% stake in Verizon Wireless and has survived Verizon's (NYSE: VZ  ) attempt to force Vodafone out of its stake. The market is pricing Vodafone at only a little above what its stake could fetch from Verizon, and there's a lot of speculation that this might finally be the year that Verizon, because of dwindling cash flow and the need to cover its own dividend, will make a bid on the wireless unit. But one fund manager thinks Vodafone would be insane to sell out. Stay tuned.

In addition, I sold my stake in Annaly Capital (NYSE: NLY  ) for $15.32 per share and rolled those funds into a new stake in Ryman Hospitality Properties at $44.93. Ryman is very attractively placed and should do well over the coming year. It yields 4.4% now -- well above its lodging peers -- yet is valued below most of them. It owns some of the best convention hotels in the U.S. and is well positioned. I strongly encourage you to read my details on the company here.

Unfortunately, I wasn't able to switch my stake in Annaly Series to Annaly Series D, since the spread closed too quickly. I'll keep an eye on those two and switch the stake when a $0.40 differential looks possible. While the dividend on Annaly's common stock continues to crumble, all those dividends would have to be wiped out before dividends on the preferreds would be cut.

Philip Morris has a new CEO, and its former COO, Andre Calantzopoulos, who's taking the reins at the world's largest tobacco company. He takes over for Louis Camilleri, who remains chairman but cedes the CEO role. Calantzopoulos has worked for the company since 1985, and I expect there to be no transition issues.

Dividends and earnings announcements
Here is the recent news on earnings and dividends:

Dividend news: 

  • Frontier went ex-dividend on March 6 and pays out $0.10 per share on March 28.
  • Brookfield Infrastructure went ex-dividend on Feb. 26 and pays out $0.43 per share on March 29.
  • Annaly Series C went ex-dividend on Feb. 27 and pays out almost $0.48 per share on April 1.
  • ROIC went ex-dividend on March 13 and pays out almost $0.15 per share on March 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 continue to track and report on the portfolio's progress, including news on these companies.

If you like dividends, consider these 12 tickers along with the nine names from a brand-new, 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.


Read/Post Comments (5) | Recommend This Article (12)

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 March 16, 2013, at 11:09 AM, bestwaytoriches wrote:

    Jim I've seen to many investor get false hopes with dividend stocks. Dividend stock are less safe than growth stocks in my view. If the one thing holding them up stops the house of cards drop fast.

    All time highs are the time to sell unless something is so very different with there business model which would be considered very undervalued this would put the next leg up. If not sell.

    On the other hand RAD is very undervalued. Current Price is 1/10 that of it's peers and there model has changed greatly they are now profitable.

    2014 profits will come in $ 300 million RAD will be debt free by 2020

    This puts RAD Price target $ 3.20 Dec 2013 and Dec 2014 $ 7.5 and Dec 2015 $11.50

  • Report this Comment On March 17, 2013, at 10:24 AM, valueinvesting12 wrote:

    I would like to know how Jim Royal can magically trade stocks without paying commissions.

    The problem is that he's not subtracting trading costs when he compares his returns with the S&P 500 ETF. If he were subtracting out those fees and making it a true apples-to-apples comparison, the amount of underperformance would be worse than 2.2%.

  • Report this Comment On March 17, 2013, at 2:34 PM, ejazz2095 wrote:

    I'm not sure how this can be called the world's best dividend portfolio without LNCO. It pays a great dividend which is much higher than several stocks in this portfolio. The dividend is stable and is expected to grow unlike several stocks the author holds or has sold.

  • Report this Comment On March 19, 2013, at 9:01 PM, NewAlchemist wrote:

    Some of these companies might have big dividend yields but they also have big payout ratios too. Many dividend investors look for that sweet spot payout ratio where a company can balance growth and payment to shareholders. The world's best dividend portfolio isn't necessarily the highest yielding portfolio. Dividends are "hot" right now yet this portfolio still trailed the broad market.

  • Report this Comment On March 20, 2013, at 12:31 PM, BlueDevil05 wrote:

    An ETF such as iShares High Dividend Yield (HDV) has grown in value 31% since June 2011, not including dividend payout. You could have had greater return without the fees associated with buying multiple stocks by investing in an ETF.

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10/23/2014 11:41 AM
FTR $6.22 Down -0.04 -0.56%
Frontier Communica… CAPS Rating: ***
NLY $11.33 Down +0.00 +0.00%
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PM $87.80 Up +0.20 +0.23%
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VOD $31.48 Up +0.49 +1.58%
Vodafone CAPS Rating: ****
VZ $48.21 Down -0.10 -0.21%
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