The World's Best Dividend Portfolio

The latest news on these dividend dynamos.

Feb 24, 2014 at 5:18PM

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

4.1%

$876.64

(26.4%)

National Grid

$48.90

20.3693

5.2%

$1,404.26

41%

Philip Morris International (NYSE:PM)

$78.05

25.5429

4.8%

$2,017.12

1.2%

Extendicare (NASDAQOTH:EXETF)(TSX:EXE)

$6.51

548

6.7%

$3,589.40

0.6%

Ryman Hospitality

$40.96

39.3

4.8%

$1,640.78

1.9%

Plum Creek Timber

$38.42

26

4.2%

$1,102.14

10.3%

Brookfield Infrastructure Partners

$26.12

38.2825

5.2%

$1,419.13

41.9%

Seaspan

$17.17

136.5

5.5%

$3,079.44

31.4%

Retail Opportunity Investments

$12.20

81.95

4.1%

$1,194.83

19.5%

Annaly Preferred D

$25.50

38.9

7.9%

$918.43

(7.4%)

Gramercy Property Trust

$4.48

223

0%

$1,257.72

25.9%

Cash

     

$107.04

 

Dividends Receivable

     

$63.03

 

Original Investment

     

$14,983.36

 

Total Portfolio

     

$18,669.96

24.6%

Investment in SPY

(including dividends)

       

37.3%

Relative Performance

(percentage points)

       

(12.7)

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

The total portfolio is now up 24.6%, after declining 1.1 percentage points from the last report. We lost on the index, by a full percentage point, to lag by 12.7 points. The blended yield ticked up to 5.1%. Dividends and dividends receivable continued to flow into the account, and there's plenty more on the way.

I've decided to break down the stock weighting in the portfolio by percent, since it's clearer than the dollar-based calculations in the table above. So here's how the stocks in the portfolio stand today:

Company

Percent

Exelon

4.7%

National Grid

7.5%

Philip Morris International

10.8%

Extendicare

19.2%

Ryman Hospitality

8.8%

Plum Creek Timber

5.9%

Brookfield Infrastructure Partners

7.6%

Seaspan

16.5%

Retail Opportunity Investments

6.4%

Annaly Preferred D

4.9%

Gramercy Property Trust

6.7%

As you can see, the portfolio is heavily weighted toward three stocks -- Philip Morris, Extendicare, and Seaspan. From this point I think those have excellent odds to outperform. The latest addition to the portfolio is Extendicare. I've given my rational for purchasing the Canadian health care provider in previous articles. I also own it in my Special Situations portfolio.

Extendicare pays a very healthy 6.7% yield and has a ton of hidden value in the American unit, which it is seeking to divest, either through a sale or spinoff. In this article I run through some numbers and calculate that buyers of the stock in the low $6s could be getting the business for free. That's my type of value proposition. You can read the whole article here.

As for Philip Morris, you might be concerned about the sustainability of its high dividend. But fellow Fool Rupert Hargreaves breaks down in this article how the company can keep paying out its dividend. The short answer: it still can. Have a look at the numbers yourself.

I expect the yield to rise in the near future, as two of my favorite stocks, Seaspan and Gramercy, announce dividend increases.

We own the high-yield Annaly preferred in this portfolio, so why not the high-yield Seaspan preferred? The switch to Annaly's preferred was motivated by the desire for a high-yield security while the common stock's dividend and price continued to wither. I think that's still the case for Annaly. I own Seaspan common for nearly the exact opposite reason: there the dividend on the common should grow quickly.

The shipping company just came out with a new preferred stock series that yields 8.25% at par. And obviously that's more than we're getting with the common stock, now at 5.5%. The reason is that the common stock dividend has the potential for significant growth over the next few years. Seaspan raised cash from that preferred stock in order to build out its fleet, a move that allows the company to continue to increase its dividend over the next 4-5 years. I think 20% a year over that period is still possible. So we'll end up with a much higher yield on cost by sticking to the common.

Dividend announcements

Dividend news:

  • Plum Creek went ex-dividend on Feb. 12 and pays out $0.44 per share on Feb. 28.
  • Extendicare goes ex-dividend on Feb. 26 and pays out $0.0362 per share on March 17.
  • Exelon went ex-dividend on Feb. 12 and pays out $0.31 per share on Mar 10.
  • Seaspan went ex-dividend on Feb. 13 and pays out $0.3125 per share on Feb. 26.
  • Brookfield Infrastructure goes ex-dividend on Feb. 26 and pays out $0.48 per share on Mar 10.
  • Annaly Series D goes ex-dividend on Feb. 27 and pays out nearly $0.47 per share on Mar 31.

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.

If you like dividends, consider the 11 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 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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