The World's Best Dividend Portfolio

In June I invested my money equally in a selection of 10 high-yield dividend stocks. 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

Southern $39.71 25.0818 4.3% $1,114.13 11.9%
Exelon $41.82 23.818 5.4% $940.81 (5.5%)
National Grid $48.90 20.3693 5.8% $1,039.85 4.4%
Philip Morris International $68.49 14.5429 3.8% $1,191.65 19.6%
Annaly Capital $18.24 65.5 13.8% $1,085.34 (7.5%)
Frontier Communications $7.88 126.4243 17.4% $563.85 (43.4%)
Plum Creek Timber $38.42 26 4.4% $1,010.10 1.1%
Brookfield Infrastructure Partners $26.12 38.2825 4.8% $1,130.48 13.1%
Vodafone $26.52 37.5566 4.9% $1,035.25 3.9%
Seaspan $14.61 69 4.9% $1,070.19 6.2%
Cash       $201.34  
Dividends Receivable       $48.21  
Total Portfolio       $10,431.20 2.7%

Investment in SPY

(including dividends)

        7.0%

Relative Performance

(percentage points)

        (4.7)

Source: S&P Capital IQ.

Our total portfolio performance improved overall from the previous week, moving from 2.1% to 2.7% this week. Still, we ended up losing some on the S&P, as it moved head, leaving our portfolio underperforming by 4.7%. We have three stocks outperforming the index. I'm still confident in the long-run nature of this portfolio, and I fully expect it to outperform. Lately we're seeing a lot of overconfidence and bullish sentiment in the market. If we see a downward move in the S&P, we'll quickly gain the upper hand again, I think. Stocks have been rallying furiously for months, and I don't think that type of performance can go on for much longer.

With $200 in the account, I'll look to deploy the cash in the next week, subject to the Fool's trading restrictions.

Dividends and other announcements
We had one company reporting this week, and we'll have a bunch of companies going ex-dividend in the next couple weeks:

  • The Australian government and Philip Morris (NYSE: PM  ) are still at each other's throats. The attorney general has accused the company of purposely transferring ownership of its Australian division to a Hong Kong subsidiary so that it could proceed legally -- and more favorably -- under a 1993 agreement between Hong Kong and Australia.
  • Frontier (NYSE: FTR  ) reported earnings this week, and there was little good news for us dividend investors. The company reported $1.1 billion in free cash flow for 2011, but estimates that free cash flow will fall from $1 billion to $900 million for 2012. It also cut its quarterly dividend to $0.10 per share, giving shares an annualized forward yield of about 9%. Color me unimpressed.
  • Annaly (NYSE: NLY  ) reported a declining interest rate spread for its most recent quarter. Its spread moved from 2.08% to 1.71% in the fourth quarter, and that's my largest worry about the mortgage REIT. We also saw the rate spread at peer American Capital Agency (Nasdaq: AGNC  ) slip from 2.14% to 1.9% sequentially, and I wouldn't be surprised to see a similar event at Chimera when that company reports shortly. But the tandem move in spreads between Annaly and American Capital suggests this is sector-wide, and that's something to be very concerned about. I still need to dig in further.

Dividend news:

  • Southern went ex-dividend on Feb. 2 and pays out a dividend of $0.4725 per share on Mar. 5.
  • Seaspan went ex-dividend on Feb. 9 and pays out a dividend of $0.1875 per share on Feb. 21.
  • Exelon went ex-dividend on Feb. 13 and pays out $0.525 per share on Mar. 8.
  • Plum Creek (NYSE: PCL  ) went ex-dividend on Feb. 15 and pays out $0.42 per share on Mar. 2.

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 be holding these stocks for at least a year and will continue to track the portfolio over the course of the year, including news on these companies.

If you like dividends, consider the 10 tickers above along with the 11 names from a brand-new, free report from Motley Fool's expert analysts called "Secure Your Future With 11 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 11 high yielders, simply click here -- it's free.

Jim Royal, Ph.D., owns shares of the 10 portfolio stocks mentioned in the table. The Motley Fool owns shares of Seaspan, Brookfield Infrastructure, Annaly, Plum Creek, Chimera, and Philip Morris, and has created a covered strangle position on Plum Creek. Motley Fool newsletter services have recommended buying shares of Exelon, National Grid, Philip Morris, Vodafone, Southern, and Brookfield Infrastructure, along with writing a covered straddle position in Seaspan and a covered strangle position in Exelon. 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.


Read/Post Comments (8) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 17, 2012, at 7:47 PM, whowong wrote:

    I just wanted to confirm, it looks like you aren't using drip and just taking from dividends then reinvesting at a certain point. If so do you recommend this over drips? I always thought drips would be better so that you don't accrue trading costs.

  • Report this Comment On February 17, 2012, at 8:33 PM, valari25 wrote:

    If you allow the dividends to accrue enough, the trading costs are neglible. I wait until I have at least $1000 before making a purchase @ $7/trade through Scottrade.

  • Report this Comment On February 17, 2012, at 8:44 PM, GW1000 wrote:

    I use BuyandHold.com and there is no charge for dividend reinvestment. If there was a charge, I would probably opt to allow the dividends to accumulate before making a purchase.

  • Report this Comment On February 18, 2012, at 12:18 AM, whowong wrote:

    Is there a reason you do this valari25? Has it been better to focus your dividends back to certain stocks vs equally across the board?

  • Report this Comment On February 18, 2012, at 2:23 PM, sheldonross wrote:

    I use drip at optionshouse for 2 reasons. One, it doesn't change my cost basis when they add shares, essentially lowing the per share cost. That way I can easily tell what stocks are actually making money, rather than having to track how much cash I've got from each one.

    Two, I just kinda like the hands off premise of investing. I just sit back and watch the shares accumulate.

    Of course the other school of thought is you can decide best what way to allocate your dividends rather than just letting them blindly reinvest.

  • Report this Comment On February 18, 2012, at 2:27 PM, tshk1221 wrote:

    You guys are truly making your portfolio motley. I concentrated my new investment in KO in June, last year. My total return is 7.4% as of yesterday with automatic dividend reinvestment. I'm expecting KO to reach about $75 by this year end, which will get me about 18.5% total return. Had you judged that PM was the best of the bunch (it is.) and concentrated your money in PM , you would have outperformed S&P by 12%.

    Your portfolio will lead small investors astray, having them lose their previous money.

  • Report this Comment On February 18, 2012, at 2:59 PM, HarryCaraysGhost wrote:

    @ TheGMaster

    There is a charge $6.99 pr mnth.

  • Report this Comment On February 20, 2012, at 8:59 AM, gcdavis03 wrote:

    The high yields from companies like AGNC look really tempting, but as the interest rate spread narrows the yields will drop, but does anyone have an idea of how far those high yields will drop?

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