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

4.6%

$1,106.86

11.1%

Exelon

$41.36

28.818

3.9%

$907.77

(23.8%)

National Grid (NYSE: NGG  )

$48.90

20.3693

4.9%

$1,220.53

22.5%

Philip Morris International (NYSE: PM  )

$68.49

14.5429

3.7%

$1,344.05

34.9%

Ryman Hospitality (NYSE: RHP  )

$44.93

24.7

5.2%

$943.05

(15%)

Plum Creek Timber

$38.42

26

3.6%

$1,242.02

24.3%

Brookfield Infrastructure Partners

$26.12

38.2825

4.7%

$1,393.87

39.4%

Vodafone (NASDAQ: VOD  )

$26.75

56.7566

5.3%

$1,672.62

10.2%

Seaspan

$15.24

95

5.8%

$2,166.95

49.7%

AT&T

$35.20

28.4

5%

$1,008.20

0.9%

Retail Opportunity Investments

$12.20

81.95

4.2%

$1,164.51

16.5%

Annaly Preferred D (NYSE: NLY  )

$25.98

38.9

7.5%

$978.34

(1.4%)

Cash

     

$371.50

 

Dividends Receivable

     

$56.66

 

Original Investment

     

$12,983.97

 

Total Portfolio

     

$15,576.92

20%

Investment in SPY

(including dividends)

       

27.2%

Relative Performance

(percentage points)

       

(7.2)

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

There has been quite the switch in portfolio performance in the last couple of weeks, and it looks like investors were switching out of dividend stocks. The last week has been harrowing for the portfolio. It's down four percentage points in a week! Not only that, but the S&P actually went up, 0.2 percentage points, leaving the portfolio down by 7.2 percentage points in total. The blended yield climbed to 4.9%.

The news that the Fed might slow quantitative easing seems to have spooked the market, especially for dividend stocks. The reasoning is that as interest rates rise, investors will switch out of dividend stocks and into bonds. Am I worried? Not at all. The historical evidence on dividend stocks suggests that they outperform over time. So why worry about some short-termers trading out of them as interest rates might rise? Let's remember all the fear that attended the tax-rate increase on dividends at the end of last year. That led to some decent buying opportunities for people who were thinking longer term. So now is not the time to panic.

As I mentioned last week, I'll be making a few changes to the portfolio. I'm adding $1,000 to each of Gramercy Property Trust and Sprott Resource Corp. In addition, I'm selling my stakes in Southern and AT&T. With the cash raised from selling, I'm going to buy more Philip Morris International, Vodafone, and Ryman Hospitality, with $1,000 in the first, and $500 in each of the other two. You can read all my rationale in last week's article.

The decline in Ryman now has that stock offering better than a 5% yield, so I'm excited to add more to the position. As I noted in my original buy of Ryman, I think the stock could trade for $60 per share or more, and I like getting a 5% yield while I wait. I discussed the stock on Boston radio station WRKO this week, and you can listen here.

No word yet on the specific dividends we should see from National Grid and Vodafone. Both U.K. stocks go ex-dividend in the next couple of weeks, and they're paying their final dividends for the year, which are typically about twice as large as their interim dividends. But, while the stocks go ex-dividend in early June, we won't see the actual cash in the account until August.

Annaly got hammered hard in recent weeks, spooked by rising interest rates and the potential end of quantitative easing. That fear also hit the company's preferred stocks, though not nearly as hard. I'm still not convinced that interest rates are going much higher for a while yet, so I think the preferreds are a good place to stay for yield. In addition, they are among the highest-yielding preferreds that still have call protection, so if they go below par, it shouldn't be too much. At less than 1% above par now, the Series D has low downside, especially relative to the common stock.

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

Dividend news:

  • Southern went ex-dividend on May 2, and pays out $0.5075 per share on June 6.
  • Exelon went ex-dividend on May 13, and pays out $0.31 per share on June 10.
  • Seaspan went ex-dividend on May 16, and paid out $0.3125 per share on May 30.
  • Plum Creek went ex-dividend on May 15, and paid out $0.44 per share on May 31.
  • Annaly Series D went ex-dividend on May 30, and pays out almost $0.48 per share on June 30.
  • Brookfield went ex-dividend on May 29, and pays outs $0.43 per share on June 30.

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. If they do, I'll be inclined to pick up more shares.

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 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.


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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 June 01, 2013, at 2:05 PM, mtspace wrote:

    Oh My!

    I just looked up five of these and notice that as of 01Jun13 most of them had dipped below their 200 day moving averages. Could we be approaching a buying opportunity? Or will businesses with a P/E of 112 like BIP fall a bit before they start going up again?

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