The World's Best Dividend Portfolio

The latest news on these dividend dynamos

Jan 7, 2014 at 5:15PM

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

$41.36

28.818

4.7%

$767.14

(35.6%)

National Grid

$48.90

20.3693

5.5%

$1,318.10

32.3%

Philip Morris International

$78.05

25.5429

4.4%

$2,184.68

9.6%

Ryman Hospitality

$40.96

39.3

4.7%

$1,656.50

2.9%

Plum Creek Timber

$38.42

26

3.8%

$1,204.84

20.6%

Brookfield Infrastructure Partners

$26.12

38.2825

4.4%

$1,489.57

49%

Seaspan (NYSE:SSW)

$17.17

136.5

5.5%

$3,097.19

32.1%

Retail Opportunity Investments

$12.20

81.95

4.1%

$1,207.12

20.7%

Annaly Preferred D

$25.50

38.9

8.3%

$878.36

(11.5%)

Gramercy Property Trust (NYSE:GPT)

$4.48

223

0%

$1,324.62

32.6%

Cash

     

$3,545.61

 
           

Dividends Receivable

     

$109.07

 

Original Investment

     

$14,983.36

 

Total Portfolio

     

$18,233.31

25.4%

Investment in SPDR S&P 500 (including dividends)

       

36.6%

Relative Performance (percentage points)

       

(11.2)

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

The total portfolio is now up 25.4%. We gained on the index since the last report, moving up 2.1 percentage points to lag by 11.2 points overall. The blended yield fell to 4.5%.

The S&P is on a tear, and you can find megacaps trading at 20 times earnings -- a pretty incredible figure. But this is a dividend portfolio, and we expect to underperform the market in flush times and outperform when the market goes lower. The year 2013 was almost nothing but an up market. But I've hoarded dividends and closed a couple of positions, and I'll tell you where I'm going to deploy the new proceeds below.

Since the last report in early Dec., I used up the cash balance of nearly $900 on more Seaspan common stock. Seaspan has been one of my best-performing stocks thus far, and I think the good times will continue. I expect the company to increase its dividend at the end of February or start of March, and I think it will bump it by 20%, helping to move the stock to $25 per share. That would put its free-cash payout ratio around 50% as it continues to build out its fleet. This is still a great pick.

I closed out the Vodafone (NASDAQ:VOD) position for a nice gain -- it's up 43%, not including its substantial dividend. Not bad, but it's nothing like the near-300% I made in eight months owning Vodafone calls in my Special Situations portfolio -- but a gain is a gain (again). So thank you, Vodafone. I also closed out the Sprott position for a significant loss. While Sprott is significantly undervalued now, this is a dividend portfolio, and I couldn't justify continuing to hold it unless a dividend was in the offing.

The cash from these divestitures was rolled into the total cash balance above. I'll be investing the proceeds in another interesting special situation that I think will do well this year. More below.

Gramercy has continued to perform very well, and the company announced that a common dividend would be on the way for the first quarter. We should hear the details of that soon. I expect something in the 4% to 6% range, depending on how much cash flow the company wants to continue to hold. The management team has done an excellent job keeping investors informed of their plans and then sticking to those plans and even over-delivering. I wouldn't be surprised to see the stock continue to rise significantly this year.

So here's where I'm going to spend the rest of my cash balance: I'm going to buy shares of Extendicare (NASDAQOTH:EXETF). This health care company pays a robust 7% yield, and there's a promising special situation going on that could unlock significant value. The company is planning to sell or spin off its American business unit. It's a stock I already own in my Special Situations portfolio, and you can read the write-up here. That article gives plenty of the details on the company, but click on through to my discussion board and you can see how well I think it can perform this year (hint: three-digit gain).

I'll make the trade as soon as the Fool's Rules permit.

Dividends and earnings announcements
Dividend news:

  • Vodafone went ex-dividend on Nov. 20 and pays out $0.562 per share on Feb. 5.
  • Exelon went ex-dividend on Nov. 15 and paid out $0.31 per share on Dec. 10.
  • Brookfield Infrastructure went ex-dividend on Nov. 26 and paid out $0.43 per share on Dec. 31.
  • Retail Opportunity Investments went ex-dividend on Dec. 16 and paid out $0.15 per share on Dec. 30.
  • Annaly Series D went ex-dividend on Nov. 27 and paid out about $0.47 per share on Dec. 31.
  • Ryman went ex-dividend on Dec. 24 and pays out $0.50 per share on Jan. 15.
  • Philip Morris went ex-dividend on Dec. 23 and pays out $0.94 per share on Jan. 10.
  • National Grid went ex-dividend on Dec. 6 and pays out about $1.17 per share on Jan. 22.

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 10 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.

Jim Royal owns shares of all 10 companies listed in the table and Extendicare and has the following options: long May 2014 $22 calls on Seaspan and short May 2014 $30 calls on Seaspan.The Motley Fool owns shares of Extendicare, Gramercy Property Trust, Philip Morris International, Retail Opportunity Investments, Ryman Hospitality Properties, Seaspan, and Sprott Resource and has the following options: long May 2014 $22 calls on Seaspan and short May 2014 $25 calls on Seaspan. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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