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

Exelon

$41.36

28.818

4%

$893.36

(25%)

National Grid (NYSE: NGG  )

$48.90

20.3693

5.5%

$1,155.75

16%

Philip Morris International (NYSE: PM  )

$78.05

25.5429

3.9%

$2,235.26

12.1%

Ryman Hospitality (NYSE: RHP  )

$40.96

39.3

5.3%

$1,494.19

(7.2%)

Plum Creek Timber

$38.42

26

3.8%

$1,210.82

21.2%

Brookfield Infrastructure Partners

$26.12

38.2825

4.8%

$1,386.21

38.6%

Vodafone (NASDAQ: VOD  )

$27.26

74

5.5%

$2,124.54

5.3%

Seaspan

$15.24

95

6.4%

$1,939.89

34%

Retail Opportunity Investments

$12.20

81.95

4.3%

$1,127.63

12.8%

Annaly Preferred D (NYSE: NLY  )

$25.50

38.9

7.6%

$959.27

(3.3%)

Gramercy Property Trust

$4.48

223

0%

$992.35

(0.7%)

Cash

     

$526.22

 

Dividends Receivable

     

$158.57

 

Original Investment

     

$13,983.01

 

Total Portfolio

     

$16,204.06

15.9%

Investment in SPY (Including Dividends)

       

21.7%

Relative Performance (Percentage Points)

       

5.8

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

There has been quite the switch in portfolio performance in the past couple weeks, and it appears that investors were switching out of dividend stocks. The total portfolio is now up 15.9%. That's down from recent weeks for a couple reasons -- first, just because of adding new money to the portfolio that hasn't had time to work. Second and the bigger reason, investors really have shifted out of dividend stocks for the moment, but we've found some great deals in Ryman Hospitality and Gramercy.

So that all leads us to underperformance on the S&P of 5.8 percentage points. Someday, investors will get over their short-term dislike for dividend stocks, and we'll narrow the gap. The blended yield is 4.8%.

The news that the Federal Reserve 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 who trade 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 before, I've added $1,000 in shares of Gramercy to the portfolio. While it doesn't pay a dividend now, I expect one in the near future and for shares to appreciate meaningfully.

I haven't yet added $1,000 in new money to Sprott Resource, but I'll look to do that in the next week. Sprott has really been hit hard as gold prices have plummeted, though less than 25% of its assets are actually gold. In fact, more than 50% are in energy, which I expect to do well as the economy improves.

With more than $500 in cash in the account now, I'm tempted to buy more Ryman, which is quite cheap for a quality franchise. On the last conference call, management was talking about taking on some debt to buy back shares -- a very shareholder-focused move. I hope they pursue this avenue further.

We finally got word on dividends from our two U.K. companies. National Grid will pay out about $2.09 per share on Aug. 21, while Vodafone distributes about $1.05 per share on Aug. 7. Those dividends contribute meaningfully to the nearly $160 in payouts that are owed to the portfolio.

Shares of Annaly common stock continue to get hammered. With the declining interest-rate spread, I thought it was a good time to sell the stock in March. I sold at $15.32 per share, but I also added the preferred stock around the same time. While the preferred has gotten hit in recent weeks because of the sell-off in all things REIT, it's down nowhere close to what the common stock has seen. The Series D now has an attractive 7.6% yield and trades below par, and it doesn't have nearly the downside that the common still has.

Philip Morris is having a tough time in Europe, as the euro malaise continues. But tobacco is a resilient business, and the company has other fast-growing areas to cultivate. And trading at less than 16 times this year's earnings and 14 times next year's, the stock should be a good long-term investment regardless of what happens this year in euro-land. While Philip Morris is facing more regulatory threats across the globe, take a look at what fellow Fool Austin Smith thinks about the company in this video.

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

Dividend news:

  • 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 28.
  • Ryman went ex-dividend on June 26 and pays outs $0.50 per share on July 14.

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 The 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 9 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 29, 2013, at 3:05 PM, WWJCPD wrote:

    Since I've recently thought of buying Annaly (NLY) common I was taken aback by reports that the US Congress is talking about doing Fannie and FreddieMac in. Would like to hear comments from those who read this.

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