The World's Best Dividend Portfolio

In June 2011, 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% $1,143.73 14.8%
Exelon $41.36 23.818 5.7% $1,062.23 (10.9%)
National Grid $48.90 20.3693 5.4% $1,076.92 8.1%
Philip Morris International $68.49 14.5429 3.7% $1,241.09 24.6%
Annaly Capital $17.92 65.5 13.3% $1,087.30 (7.4%)
Frontier Communications $7.88 126.4243 11.4% $433.64 (56.5%)
Plum Creek Timber $38.42 26 4.5% $962.52 (3.6%)
Brookfield Infrastructure Partners $26.12 38.2825 4.8% $1,202.07 20.2%
Vodafone $26.52 37.5566 4.9% $1,017.78 2.2%
Seaspan $14.90 76 6.2% $1,250.20 10.4%
Cash       $7.97  
Dividends Receivable       $53.14  
Original Investment       $9,986.58  
Total Portfolio       $10,538.60 5.5%
Investment in SPY (including dividends)         4.7%
Relative Performance (percentage points)         0.8

Source: S&P Capital IQ.

After a rough week, the portfolio rebounded this week. Our total gain is now 5.5%, up from 3.3% last week. We held ground on the S&P, remaining 0.8 points ahead of the index. So after nearly a year, we're beating the index and have a substantially better blended yield -- 6% -- than the index, at 1.9%.

The total portfolio would be substantially improved if not for the truly awful performance of Frontier Communications (NYSE: FTR  ) , which has suffered mightily since its recent earnings report and expectation that free cash flow would fall to $900 million-$1 billion. And what's going on with Exelon (NYSE: EXC  ) ? This producer of nuclear power has been hit as natural gas prices have fallen off a cliff, but the company still offers a 5.7% yield and has one of the lowest debt ratios of major utilities. Fool Sean Williams breaks it down further in this article.

If markets continue to be stagnant or down, we should probably outperform. And I don't see a whole lot that is positive in the next few months. Growth is slowing in various places across the globe, and Europe is a mess that is not being fixed yet.

Within the next couple weeks, I'll publish an article that details how the portfolio will operate for year two. I anticipate adding a few more stocks, eliminating at least one, and adding more cash (to help simulate an investor who keeps adding to the portfolio). Again, I'll detail all that in an upcoming Fool.com article. It's been a really fun year with this portfolio, and I look forward to more.

Dividends and other announcements
Earnings season is just about over, and we have a few bits of news for the moment.

  • Annaly's (NYSE: NLY  ) Michael Farrell is back on the job. The company reported that his treatment program is complete and that his cancer is in remission.
  • Vodafone (Nasdaq: VOD  ) is exposed to the ongoing euro crisis, but an analyst at the Wall Street Journal thinks the company can manage the situation well, despite a $6.3 billion writedown of its southern European operations earlier this week. It now estimates annual cash flow at $8.3-$9 billion, down from 2011's $9.5 billion. But the Journal notes that Spain, Portugal, and Greece comprise just 6% of the company's enterprise value, and that with its historically low Debt/EBITDA of 1.7, Vodafone could take on debt should it need help meeting its 7% dividend growth target for the year.

Dividend news:

  • Southern (NYSE: SO  ) went ex-dividend on May 7 and pays out $0.49 per share on June 6.
  • Exelon went ex-dividend on May 11 and pays out $0.37925 per share on June 8. Previously, Exelon paid out a $0.14575 per share dividend in early April, to keep its total quarterly dividend per share at $0.525, as part of its recent acquisition of Constellation.
  • Plum Creek goes ex-dividend on May 18 and pays out $0.42 per share on May 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 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're craving more dividend payers, I invite you to read the free report from the Motley Fool titled "3 American Companies Set to Dominate the World." Today I invite you to download it at no cost to you. To get instant access to the names of these dominant dividend stocks, 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 Annaly, Seaspan, Plum Creek, and Brookfield Infrastructure, as well as having created a covered strangle position in Plum Creek. Motley Fool newsletter services have recommended buying shares of Exelon, Philip Morris, Annaly, Southern, National Grid, Vodafone, and Brookfield Infrastructure, along with writing a covered strangle position in Exelon and a covered straddle position in 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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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 May 28, 2012, at 12:18 AM, CDNGuru wrote:

    Jim,

    You should add O "realty income corp". Pays 4.5% monthly! Hasn't missed a single payment ever. It does nothing but go up and is very stable. I've owned it for years.

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