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, and then more again in 2013. 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 (NYSE: EXC  )

$41.36

28.818

4.1%

$866.85

(27.3%)

National Grid (NYSE: NGG  )

$48.90

20.3693

5.5%

$1,153.31

15.8%

Philip Morris International

$78.05

25.5429

3.9%

$2,241.39

12.4%

Ryman Hospitality (NYSE: RHP  )

$40.96

39.3

5.3%

$1,484.75

(7.8%)

Plum Creek Timber

$38.42

26

3.8%

$1,206.14

20.7%

Brookfield Infrastructure Partners (NYSE: BIP  )

$26.12

38.2825

4.7%

$1,395.78

39.6%

Vodafone

$27.26

74

5.5%

$2,125.28

5.4%

Seaspan (NYSE: SSW  )

$15.24

95

6.5%

$1,905.70

31.7%

Retail Opportunity Investments

$12.20

81.95

4.4%

$1,105.51

10.6%

Annaly Preferred D (NYSE: NLY  )

$25.50

38.9

7.7%

$951.49

(4.1%)

Gramercy Property Trust

$4.48

223

0%

$1,054.79

5.6%

Cash

     

$544.76

 

Dividends Receivable

     

$161.74

 

Original Investment

     

$13,983.01

 

Total Portfolio

     

$16,197.48

15.8%

Investment in SPY (Including Dividends)

       

22.1%

Relative Performance (Percentage Points)

       

6.3

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

There has been quite the switch in portfolio performance in the past couple of weeks, and it looks like investors were switching out of dividend stocks. The total portfolio is now up 15.8% -- down 0.1 points since last week. 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 6.3 percentage points. Some day investors will get over their short-term dislike for dividend stocks, and we'll narrow the gap. The blended yield remains at 4.8%.

I'm not worried over these short-term issues, and I've been preparing for them by saving up dividends in the approach of a good buying opportunity. The portfolio now has more than $500 in accumulated dividends, with more than $140 in accrued payouts. All that will be reinvested in what I think is the best idea in the portfolio.

Brookfield Infrastructure sold off its 42% stake in Powerco, New Zealand's second-largest utility, for $408 million to AMP Capital. This is part of Brookfield's typical strategy of harvesting assets and then recycling that capital into higher-returning assets.

Shares of Annaly common stock continue to plumb the depths. The stock reached a new 52-week low earlier this week and continues a downward trend since March or so. If you buy the stock based on the trailing yield, it looks appealing, but you should expect that dividend to shrink in good times, as it has in the past. The portfolio sold out at prices above $15 per share and moved into the much less volatile Series D preferred stock.

Ryman Hospitality repurchased nearly $55 million of its 3.75% convertible debt due 2014 last week. I like the move, though over $304 million more in converts remain outstanding. I continue to like Ryman a lot. On the most recent conference call, management spoke of potentially using debt to buy back more stock, a move that I like a lot at these prices. With such premier assets, this company deserves a much higher valuation.

What does President Obama's climate change policy mean for our investment in Exelon? Fellow Fool Justin Loiseau says things look positive for our nuclear-heavy utility, and you can read his detailed thoughts in this article.

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.

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.
  • Philip Morris went ex-dividend on June 25 and pays outs $0.85 per share on July 11.

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 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 9 high yielders, simply click here -- it's free.

Jim Royal, Ph.D., owns shares of the 12 portfolio stocks mentioned in the table as well as Sprott. The Motley Fool recommends Brookfield Infrastructure, Exelon, National Grid, Retail Opportunity Investments, Seaspan, Southern, and Vodafone and owns shares of Gramercy Property, Brookfield Infrastructure, Philip Morris, Retail Opportunity Investments, Ryman Hospitality, Sprott, and Seaspan. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.


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