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. Now let's check out the results so far.

Company

Cost Basis

Shares

Yield

Total Value

Return

Southern (NYSE: SO  ) $39.71 25.0818 4.2% $1,165.30 17%
Exelon $41.36 23.818 5.7% $1,061.08 (11%)
National Grid (NYSE: NGG  ) $48.90 20.3693 5.7% $1,038.83 4.3%
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.5% $1,244.87 25%
Annaly Capital (NYSE: NLY  ) $17.92 65.5 13% $1,110.88 (5.4%)
Frontier Communications $7.88 126.4243 10.3% $495.58 (50.3%)
Plum Creek Timber $38.42 26 4.4% $989.04 (1%)
Brookfield Infrastructure Partners (NYSE: BIP  ) $26.12 38.2825 4.6% $1,231.93 23.2%
Vodafone $26.52 37.5566 5% $1,037.69 4.2%
Seaspan $14.90 76 5.9% $1,295.04 14.4%
Cash       $61.11  
Dividends Receivable       $106.20  
Original Investment       $9,986.58  
Total Portfolio       $10,837.57 8.5%
Investment in SPY (Including Dividends)         5.2%
Relative Performance (Percentage Points)         3.3

Source: S&P Capital IQ.

Our portfolio outperformed again this week and saw performance grow to an 8.5% cumulative return, up from 8.2% last week. And did you see the rocky performance of the S&P? The S&P index declined to 5.2%, meaning we're up by 3.3 percentage points on our benchmark. So after nearly a year, we're beating the index and have a substantially better blended yield -- 5.9% -- than the index, at 1.9%. The past few weeks show, in miniature, how dividend stocks outperform in stagnant markets. And there looks to be plenty of pain on the horizon yet, both in China and Europe.

Investors in Annaly got some good news and bad news. First, the bad news. The Federal Reserve said it will continue Operation Twist, in which it buys longer-term debt to flatten the yield curve. That makes Annaly -- which borrows short term to lend long term -- less profitable. And now the good news. Annaly maintained its upcoming dividend at $0.55 per share, the same rate as the prior quarter. Annaly's dividend has slipped sequentially for several quarters, and it's good to see a respite from that trend.

Philip Morris lowered its dividend for the second time this year. It took down its EPS forecast by $0.10 to a range of $5.10 to $5.20. The company expects exchange rates to hurt earnings by about $0.25 per share this share, compared with a benefit of $0.19 last year.

Southern has had a nice run of late. In our portfolio, it's up 17% since our purchase a year ago, and it has risen 35% over the past five years, beating one of our other stocks, Exelon. Given that strong run, I'm not as sanguine about the future, though Southern is now benefiting from much lower natural gas prices. And compared with some other peers, Southern does look pricy, as fellow Fool Sean Williams explains.

Dividends and other announcements
We're between earnings seasons, and we have mainly dividend news for the moment.

Dividend news:

  • National Grid went ex-dividend on May 30 and pays out $2.017 per share on Aug. 15.
  • Vodafone went ex-dividend on June 6 and pays out $1.015 per share on Aug. 1.
  • Frontier went ex-dividend on June 6 and pays out $0.10 per share on June 28.
  • Brookfield Infrastructure went ex-dividend on May 31 and pays out $0.375 per share on June 29.

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 probably have stocks plunging again. 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 that 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." Get instant access to the names of these dominant dividend stocks -- 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 and has 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, as well as 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 don't 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 (5) | Recommend This Article (7)

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 June 23, 2012, at 10:49 AM, Valarr wrote:

    "Philip Morris lowered its dividend for the second time this year. It took down its EPS forecast by $0.10 to a range of $5.10 to $5.20."

    I presume you meant to say the EPS expectation was guided down. As the dividend has not been cut this year.

  • Report this Comment On June 24, 2012, at 1:55 AM, lanceim59 wrote:

    You have Frontier Communications in "The World's Best Dividend Portfolio"? What a joke!

  • Report this Comment On June 28, 2012, at 9:58 PM, TMFRoyal wrote:

    Hi, Valarr,

    You're right. Just a small oversight on my part. I'm fully expecting PM to raise its dividend later this year (September, I believe).

    Jim

  • Report this Comment On June 29, 2012, at 10:56 PM, mattryan wrote:

    Hey Jim,

    Big fan of the ongoing article and appreciate the commitment of your updates. I have been following the portfolio since you started it a year ago. There has been one suggestion among many fools, once you have crossed your benchmark of one year, and that is to replace some old stocks with new. At this time I don't want to offer any suggestions I will leave that to you. But I do like the idea of keeping the number the same.

    Thanks

  • Report this Comment On June 29, 2012, at 11:07 PM, SuntanIronMan wrote:

    I was just about to make a similar comment, hanktmoon.

    Jim, do you plan on updating your portfolio now that your self-imposed time restriction is over? I honestly wouldn't be surprised Frontier cut their dividend again relatively soon.

    Love the series. Looking forward to another year of it.

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