The World’s Best Dividend Portfolio

The latest news on these dividend dynamos.

Jan 24, 2014 at 2:07PM

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

4.4%

$816.13

(31.5%)

National Grid

$48.90

20.3693

5.5%

$1,342.13

34.7%

Philip Morris International

$78.05

25.5429

4.5%

$2,133.85

7%

Extendicare

$6.51

548

6.9%

$3,507.20

(1.7%)

Ryman Hospitality

$40.96

39.3

4.6%

$1,712.69

6.4%

Plum Creek Timber

$38.42

26

4%

$1,134.12

13.5%

Brookfield Infrastructure Partners (NYSE:BIP)

$26.12

38.2825

4.6%

$1,414.54

41.5%

Seaspan (NYSE:SSW)

$17.17

136.5

5.5%

$3,091.73

31.9%

Retail Opportunity Investments

$12.20

81.95

4.1%

$1,198.93

19.9%

Annaly Preferred D

$25.50

38.9

8.2%

$891.98

(10.1%)

Gramercy Property Trust (NYSE:GPT)

$4.48

223

0%

$1,366.99

36.8%

Cash

     

$45.61

 

Dividends Receivable

     

$41.59

 

Original Investment

     

$14,983.36

 

Total Portfolio

     

$18,697.49

24.8%

Investment in SPY (including dividends)

       

36.5%

Relative Performance (percentage points)

       

(11.7)

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

The total portfolio is now up 24.8% after gaining 0.7 percentage points since the last report. We gained on the index since the last report, moving up 2.1 percentage points, to lag by 11.7 points overall. It was a bit of a miserable week for the index, and as I've been saying since the start of this portfolio in June 2011, we will outperform when the market is not skyrocketing, as it has done over most of the past year. In the meantime, we'll collect our dividends. The blended yield remained at 5%.

I expect that yield to climb in the near future, when Gramercy Property Trust announces the restart of its dividend after years on hiatus. This REIT still has significant upside as it begins its payouts and gets on the radar screens of dividend investors. As yet, because it doesn't pay dividends, it's largely invisible. The company is now current on its preferred-stock dividend, and in the next few weeks I expect to see an announcement on the new common-stock dividend. With its small portfolio, Gramercy should be able to grow very quickly, and management has promised little incremental operating expense from doubling the size of the portfolio.

We'll have no less than five stocks going ex-dividend next month, including Plum Creek Timber, Exelon, Brookfield Infrastructure, Seaspan, and Annaly Series D. That will mean more money coming into the portfolio, regardless of what the market does. If it's lower we'll always be able to reinvest those dividends in attractive stocks. I expect Brookfield Infrastructure will bump its dividend for the quarter.

One of my favorites is Seaspan, and I'm a bit puzzled by its drop on Wednesday. This is a company that's sticking to its progressive dividend policy. Seaspan continues to build out its fleet with enormous ships, which will drive huge cash-flow growth in the next few years. And so I expect it could continue to grow its dividend at 20% per year for at least several more years. With the next dividend bump likely in late February or early March, I'm surprised the market hasn't moved the stock closer to $25 -- my estimate of value with a 20% dividend increase. Recall that the stock was there just a few months ago -- but it usually goes through these regular cycles.

That yield's up from 4.5% last week, due almost entirely to the addition of Extendicare, as I announced then. The Canadian/American health care company pays nearly 7%, but I've purchased it because it also has significant upside as it divests its American unit, either as a sale or a spinoff. How much could that be worth to the company? Think triple digit gain. That's why I've called Extendicare my stock of 2014. I go into more specifics here.

Dividends and earnings announcements
Dividend news:

  • Vodafone went ex-dividend on Nov. 20 and pays out $0.562 per share on Feb. 5.
  • National Grid went ex-dividend on Dec. 6 and paid 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, 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.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That’s beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor’s portfolio. To see our free report on these stocks, just click here now.

Jim Royal owns shares of all 11 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, Retail Opportunity Investments, Ryman Hospitality Properties, and Seaspan 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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