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 offered 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 4.2% $1,170.32 17.5%
Exelon $41.36 23.818 5.6% $1,077.79 (9.6%)
National Grid $48.90 20.3693 5.7% $1,070.20 7.4%
Philip Morris International $68.49 14.5429 3.6% $1,245.16 25.0%
Annaly Capital $17.92 65.5 13.2% $1,089.92 (7.1%)
Frontier Communications $7.88 126.4243 10.6% $479.15 (51.9%)
Plum Creek Timber $38.42 26 4.4% $1,010.88 1.2%
Brookfield Infrastructure Partners $26.12 38.2825 4.5% $1,274.81 27.5%
Vodafone $26.52 37.5566 5.0% $1,059.47 6.4%
Seaspan $14.90 76 5.7% $1,340.64 18.4%
Cash       $88.11  
Dividends Receivable       $90.40  
Original Investment       $9,986.58  
Total Portfolio       $11,032.88 10.5%

Investment in SPY

(including dividends)

        5.5%

Relative Performance

(percentage points)

        5
Source: Capital IQ, a division of Standard & Poor’s.

In what’s becoming a trend, our portfolio outperformed again this week, and saw performance grow to a 10.5% cumulative return, up from 8.5% last week.  Meanwhile, the S&P index climbed a meager 0.3 percentage points, to end at 5.5%. We’re up on the benchmark by 5 percentage points – a very healthy margin. We continue to have a better blended dividend yield than the index, 5.9% to 1.9%. So we’re seeing a shift to dividend stocks in this market, and we may continue to see outperformance if the global economy worsens.

Investors are waiting to see how Exelon (NYSE: EXC  ) fares, as it attempts to divest three Maryland plants it acquired as part of its takeover of Constellation Energy earlier this year. The company may have to take a 40% discount on the coal-fired plants, which have plunged in price following a decline in natural gas prices (a competing fuel), and new legislation that seeks to limit coal pollution, making further investment in the plants uneconomic. Utility companies are starting to retire 33,000 megawatts of coal-fired capacity, following the introduction of the new rules.  Southern (NYSE: SO  ) , too, has been taking advantage of low natural gas prices to shift from coal to natgas.

Fellow Fool Dan Caplinger has a good review of Annaly (NYSE: NLY  ) so far in 2012.The stock is up 11% year-to-date, and promises a double-digit yield, at least for the near future. The company sustained its $0.55 dividend for a second straight quarter, though it had declined for quite a few quarters before that. The million dollar question for Annaly and its mortgage REIT peers is, when will interest rates rise? You can read Dan’s whole article here.

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

Dividend news:

  • National Grid (NYSE: NGG  ) went ex-dividend on May 30 and pays out $2.017 per share on August 15.
  • Philip Morris (NYSE: PM  ) went ex-dividend on June 25 and pays out $0.77 per share on July 12.
  • Vodafone went ex-dividend on June 6 and pays out $1.015 per share on August 1.
  • Frontier went ex-dividend on June 6 and paid out $0.10 per share on June 28.
  • Brookfield Infrastructure went ex-dividend on May 31 and paid out $0.375 per share on June 29.
  • Annaly went ex-dividend on June 27 and pays out $0.55 per share on July 26.

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. 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 tra ck 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 June 29, 2012, at 11:02 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 July 03, 2012, at 2:03 PM, TMFRoyal wrote:

    Hi, hanktmoon,

    I should have what the plans up for next year shortly. Keep your eyes peeled and thanks for reading!

    Jim

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