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% $1,109.62 11.4%
Exelon $41.82 23.818 5.4% $929.38 (6.7%)
National Grid $48.90 20.3693 5.8% $1,036.59 4.1%
Philip Morris International $68.49 14.5429 3.7% $1,194.99 20.0%
Annaly Capital $18.24 65.5 13.8% $1,089.27 (7.2%)
Frontier Communications $7.88 126.4243 8.7% $577.76 (42.0%)
Plum Creek Timber $38.42 26 4.4% $1,011.92 1.3%
Brookfield Infrastructure Partners $26.12 38.2825 4.7% $1,147.33 14.7%
Vodafone $26.52 37.5566 4.9% $1,028.30 3.2%
Seaspan $14.61 69 4.7% $1,170.93 16.2%
Cash       $214.28  
Dividends Receivable       $35.28  
Total Portfolio       $10,545.63 3.8%

Investment in SPY

(including dividends)

        7.4%

Relative Performance

(percentage points)

        (3.6)

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

Our total portfolio performance improved overall from the previous week, moving from 2.7% to 3.8% this week.  We ended up gaining 1.1% on the S&P even as it moved ahead, but this still left our portfolio underperforming by 3.6%. We have four 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, I think we'll again quickly gain the upper hand. Stocks have been rallying furiously for months, and I don't think that type of performance can go on for much longer. We may be seeing some early signs of this shift, with our portfolio clearly doing better than the S&P over the past week.

In its latest earnings report, we got some dubious news from Annaly Capital (NYSE: NLY  ) , one of the most popular dividend stocks due to its massive payout. In this video article, "Bad News for the Market's Hottest Dividends," I explain why investors should be cautious on the mortgage REITs going forward. Frontier's (NYSE: FTR  ) abysmal performance continues to hurt the portfolio, and now we don't even have the consolation of a $0.75 annual dividend to salve our wounds, since the company recently cut its quarterly payouts to just $0.10.

With over $200 in the account, I'll be deploying the cash shortly, subject to the Fool's trading restrictions.

Dividends and other announcements
We're just about through earnings seasons, and there are a bunch of companies going ex-dividend in the next couple weeks:

  • Philip Morris (NYSE: PM  ) re-affirmed its 2012 adjusted earnings guidance at $5.25 - $5.35 per share, straddling the consensus view of $5.29. The midpoint of guidance would give the company a P/E of 15.5 -- not exactly cheap, but definitely not too much to pay for a steady performer like Philip Morris. 
  • The U.S. Nuclear Regulatory Commission recently proposed three rules to improve safety at the nation's nuclear energy facilities. The proposed rules require plant operators to establish plans to deal with a catastrophe scenario, improve instrumentation in pools storing spent fuel, and respond to containment structure issues similar to those at the failed Japanese nuclear plant. If the rules are enacted, they would add millions in dollars of costs to nuclear plant operators such as Exelon (NYSE: EXC  ) and Southern (NYSE: SO  ) .

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 paid 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 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, 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, as well as 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 (4) | Recommend This Article (8)

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 24, 2012, at 6:42 PM, Hawmps wrote:

    Jim, I'm always a fan of this series of articles. Since (I think) it is a point of the series to not only beat the market, but to also be a learning exercise at the expense of your money, not ours; I am curious as to the premis of choosing FTR for this portfolio back in June? Obviously FTR looked good at the time for one reason or another, and so as a learning experience, I am curious as to why FTR was the choice for a domestic telecom versus, some other domestic telecom.

    Regards.

  • Report this Comment On February 24, 2012, at 7:08 PM, Quovartos2 wrote:

    Just another note on FTR. The board dropped the dividend down from 75 cents per share to 40 cents per share - a 46.7 percent haircut on the dividend. Since the stock price has tanked on FTR as well as the dividend, it is a lot poorer of a choice for a high dividend stock now.

  • Report this Comment On February 25, 2012, at 11:48 AM, Merlin186 wrote:

    I too look forward to your conversation on this particular portfolio. After living through the FTR situation, you have demonstrated the great value of a diversified portfolio. Yes, FTR experienced some head winds, but overall your portfolio is still in the green, which is very impressive. I too own FTR, my average cost per share is less than yours, but my overall portfolio is slightly in the red because of FTR, your isn't. Well done!

  • Report this Comment On February 25, 2012, at 12:07 PM, Merlin186 wrote:

    Still FTR is this highest dividend in the portfolio. 8.62% at a closing of $4.64. Not too shabby. Now management can use some of that cash to clean up their balance sheet.

    There is a lot of talk of people giving up their land lines and going wireless, mobile, etc. I personally am one of those that is ready to give up my cell phone and just use my land-line. There are no drops, delays or echoes on my land line and it isn't a distraction while I drive. Not to mention, my land-line with internet is over 25% cheaper than my cell phone. It will be interesting to see where the line gets drawn for the "die-hards." Cheers!

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