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%

$1,139.47

14.4%

Exelon

$41.36

28.818

3.6%

$971.17

(18.5%)

National Grid

$48.90

20.3693

5.7%

$1,146.59

15.1%

Philip Morris International

$68.49

14.5429

3.7%

$1,324.13

32.9%

Ryman Hospitality

$44.93

24.7

4.3%

$1,124.34

1.3%

Plum Creek Timber

$38.42

26

3.4%

$1,304.94

30.6%

Brookfield Infrastructure Partners

$26.12

38.2825

4.5%

$1,430.62

43.1%

Vodafone

$26.75

56.7566

5.6%

$1,580.10

4.1%

Seaspan

$15.24

95

6.6%

$1,886.70

30.4%

AT&T

$35.20

28.4

5.0%

$1,026.66

2.7%

Retail Opportunity Investments

$12.20

81.95

4.4%

$1,120.26

12.0%

Annaly Preferred C

$25.98

38.5

7.4%

$992.53

(0.5%)

Cash

     

$231.79

 

Dividends Receivable

     

$59.74

 

Original Investment

     

$12,983.97

 

Total Portfolio

     

$15,339.03

18.1%

Investment in SPY
(including dividends)

       

18.4%

Relative Performance
(percentage points)

       

(0.3)

Source: S&P Capital IQ.

The portfolio is up 18.1% since we began this experiment, a modest gain of 0.1% from last week. But we made a substantial gain on the S&P, moving from 2.2% points back to just 0.3. That's an example of the kind of outperformance we expect in rough markets.

Over the next week, w'’ll receive more dividends, bringing the total cash in the account to nearly $300. For the moment I'm content to sit on that cash, but I'm continuing to think about the best place to put it. One interesting possibility for that cash is Plum Creek (NYSE: PCL  ) . Lumber prices have gone up markedly in the last year and now stand at levels seen in 2004 and 2005. That's largely a question of supply, since demand has plummeted since the crisis. But a return of demand, as we've seen recently, could propel lumber prices higher, and shares of Plum Creek, too.

Fellow Fool John Maxfield had an intriguing take on Annaly's (NYSE: NLY  ) proposal to convert its management structure from internal to external. He sees that as a way for executives to move their very high salaries away from public scrutiny. As a holder of the preferred stock, I'm less concerned about this than a common-stock shareholder should be.

Two weeks ago, I traded this portfolio's Annaly common for shares in Ryman Hospitality (NYSE: RHP  ) , a very attractively placed REIT with a solid yield of more than 4%. It compares very favorably to lodging peers but its valuation doesn't reflect it yet. Management is buying back $100 million in stock and will keep buying until the stock is valued near its peers. You can read more on this fascinating special situation here. I'm continuing to look for a favorable spread -- at least $0.40 -- between the Series C and Series D preferreds, and then I’ll switch my ownership position to the Series D.

The rumors continue to swirl around some type of Verizon-Vodafone (NASDAQ: VOD  ) deal, whether that takes the form of a buyout or perhaps just the purchase of Vodafone’s 45% stake of their joint wireless venture. We know Verizon has been trying to acquire this asset for the past couple of years, and negotiations have been at different levels of depth. With Verizon in serious need of income to pay its dividend, I think this deal will happen sooner rather than later. Hedge fund titan David Einhorn owns a stake in Vodafone and thinks it is cheap.

Philip Morris (NYSE: PM  ) is developing a trio of products for its existing brands, including one product that heats tobacco instead of burning it, ostensibly a safer innovation. These products wouldn't be on the shelves until 2016-2017, but the company is deciding now where to place the manufacturing facility. The move comes amid increased global scrutiny on smoking, even in traditionally tobacco-friendly places such as Russia.

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 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 12 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.


Read/Post Comments (3) | Recommend This Article (13)

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 23, 2013, at 12:28 AM, DividendsBoom wrote:

    I disagree on the deal happening with Verizon-Vodafone. Vodafone holds all the cards and I dont believe they will sell, at least not at a price that Verizon will pay. When you look at the numbers, I think it bears that out.

    But, you never know. I mean look at the crap HP has bought at the prices they have bought it at. At least VZW is upper-echelon quality.

    As a VOD shareholder I just hope management doesnt give it up to appease short-term investors and the noise that comes with it.

  • Report this Comment On March 26, 2013, at 7:35 AM, sagitarius84 wrote:

    I find it very interesting that your high-yield portfolio has managed to closely match the performance of the S&P 500, despite the strong run-up in prices. Also, your portfolio included a company that cut distributions - EXC

    If the market is flat for the next year or two, your lead would probably increase.

  • Report this Comment On March 26, 2013, at 8:29 AM, sagitarius84 wrote:

    In addition, I found the following diversified portfolio of 30 income stocks below:

    http://www.dividendgrowthinvestor.com/2013/02/the-worlds-bes...

    What do you think about it? It has diversification, exposure to different sectors and the dividends are stable?

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