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

Awilco Drilling

$23.25

56

19.6%

$1,314.32

0.9%

CorEnergy Infrastructure

$6.93

144

6.6%

$1,123.20

12.6%

Philip Morris International

$78.05

25.5429

4.4%

$2,188.77

9.8%

Extendicare (TSX: EXE.TO) (NASDAQOTH: EXETF  )

$6.51

548

6.4%

$3,775.72

5.8%

Ryman Hospitality

$40.96

39.3

4.5%

$1,917.45

19.1%

Plum Creek Timber  

$38.42

26

3.9%

$1,166.62

16.8%

Brookfield Infrastructure Partners

$26.12

38.2825

4.7%

$1,571.50

57.2%

Seaspan

$17.17

136.5

5.8%

$3,215.94

37.2%

Retail Opportunity Investments

$12.20

81.95

4.1%

$1,287.43

28.8%

Gramercy Property Trust

$4.48

223

2.2%

$1,393.75

39.5%

Cash

     

$1,687.43

 

Dividends receivable

     

$73.27

 

Original investment

     

$14,983.36

 

Total portfolio

     

$20,715.40

38.3%

Investment in SPY (including dividends)

       

48.1%

Relative performance (percentage points)

       

(9.9)

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

The total portfolio is now up 38.3% after gaining a modest 0.4 percentage points since the last report. We're now down on the index by 9.9 percentage points cumulatively. The market has really revived itself in the past few weeks, and that usually means our stocks underperform during that period. But dividend stocks remain a great investment over the long term. The blended yield climbed to 6.1%.

I've decided to make a couple portfolio changes. As I announced in the prior column:

We've had a nice run in Retail Opportunity Investments Corp, and I think it may be time to take the funds allocated there and invest them in another great opportunity. The thing about REITs is that their growth tends to be slow and steady, unless they're small and in high-growth mode, as is Gramercy. ROIC has really swollen in the last few years, and while it's ably run under CEO Stuart Tanz, I'm questioning if it can achieve the kind of growth I want to see.

So later this week I'm going to sell the position in ROIC. With those proceeds and the cash already in the account -- nearly $1,700 -- I'm going to buy shares of NorthStar Realty Finance (NYSE: NRF  ) , probably later this week, as the Fool's Rules permit.

As a well-diversified commercial REIT, NorthStar offers an attractive opportunity. Fresh off a split from its external manager, the REIT should yield somewhere in the neighborhood of 9%. Management has projected funds from operations of $1.58-$1.70 for 2014, and at the recent payout ratio of 90%, that would put the dividend around $1.50 annually, or about 9% at current prices. I explain my rationale for NorthStar in the most recent issue of Income Investor (and you can take a 100% free trial and read it).

The largest determinant of the portfolio's performance over the last month has been the gain in the stock of Extendicare. Nevertheless, Mr. Market continues to severely discount the value of the American unit here and is taking a wait-and-see approach to its divestiture. And whether it's sold or spun off, the unit will be separated from the Canadian operations. On the last conference call management insisted that a resolution to an ongoing investigation -- what is holding up the sale -- would be resolved by the end of June. We should hear something soon, I expect.

Dividend announcements

  • Brookfield Infrastructure went ex-dividend on May 28 and paid out $0.48 per share on June 30.
  • Awilco went ex-dividend on May 19 and paid out $1.15 per share on June 20.
  • Extendicare went ex-dividend on June 26 and pays out $0.0362 per share on July 15.
  • Gramercy went ex-dividend on June 26 and pays out $0.035 per share on July 15.
  • Ryman went ex-dividend on June 25 and pays out $0.55 per share on July 15.
  • Philip Morris went ex-dividend on June 24 and pays out $0.94 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. 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 those 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.


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