The World's Best Dividend Portfolio

In June 2011, I invested my money equally in a selection of 10 high-yield dividend stocks. With a year of success behind me, in July 2012, I added even more money to the portfolio, and then more again in 2013. 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

Exelon (NYSE: EXC  )

$41.36

28.818

4%

$894.51

(24.9%)

National Grid (NYSE: NGG  )

$48.90

20.3693

5.5%

$1,175.51

18%

Philip Morris International (NYSE: PM  )

$78.05

25.5429

3.8%

$2,291.20

14.9%

Ryman Hospitality

$40.96

39.3

5.3%

$1,485.54

(7.7%)

Plum Creek Timber

$38.42

26

3.6%

$1,260.48

26.2%

Brookfield Infrastructure Partners

$26.12

38.2825

4.7%

$1,408.41

40.8%

Vodafone (NASDAQ: VOD  )

$27.26

74

5.5%

$2,183.00

8.2%

Seaspan

$15.24

95

6.1%

$2,039.65

40.9%

Retail Opportunity Investments

$12.20

81.95

4.3%

$1,152.22

15.2%

Annaly Preferred D (NYSE: NLY  )

$25.50

38.9

7.8%

$929.71

(6.3%)

Gramercy Property Trust

$4.48

223

0%

$1,041.41

4.2%

Cash

     

$586.12

 

Dividends Receivable

     

$120.38

 

Original Investment

     

$13,983.01

 

Total Portfolio

     

$16,568.14

18.5%

Investment in SPY (including dividends)

       

26.8%

Relative Performance (percentage points)

       

8.3

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

There has been quite the switch in portfolio performance in the past couple of weeks, and it looks like investors were switching out of dividend stocks. The total portfolio is now up 18.5% -- up 2.7 points since last week. Investors really have shifted out of dividend stocks for the moment, while the S&P was up even more on the week. So that all leads us to underperformance on the S&P of 8.3 percentage points. Some day investors will get over their short-term dislike for dividend stocks, and we'll narrow the gap. The blended yield is 4.7%.

If these dividend stocks remain at these levels for a while, I'll be tempted to deploy some of the nearly $600 in accumulated dividends, and there's still more than $100 in accrued payouts. All that will be reinvested in what I think is the best idea in the portfolio.

Fellow Fool John Maxfield has a few choice words for Annaly's plan to become an externally managed REIT, and it looks like a compelling case. One major problem, he explains, is that the plan for managers to own Annaly stock in order to align their interest requires just a pittance of their compensation. In short, they'll make much more money from their employment contracts than they will from their stock ownership, and that is bad for common stock owners, he argues. You can read the full article here.

Wait, might new carbon controls spell opportunity for electric companies? That's what Fool Sara Murphy suggests in this video. National Grid was one of several utilities that affirmed that greenhouse gas emissions targets could be achieved cost-effectively. But what does President Obama's climate change policy mean for our investment in Exelon? Fool Justin Loiseau says things look positive for our nuclear-heavy utility, and you can read his detailed thoughts in this article.

While I typically think of the core Vodafone business (excluding the stake in Verizon Wireless) as all European, the U.K. telecom has a significant presence in emerging markets as well. Vodafone is looking to expand in Africa, planning to add two new hubs to double its coverage on that continent. "Vodafone has also been growing strongly in other emerging markets, notably India, where group service revenues rose 10.7% in 2012, and Turkey, up 17.7%," explain Fool Harvey Jones in this article.

The low implied valuation on Vodafone's 45% stake in Verizon Wireless encouraged me to pick up call options in my Special Situations portfolio. If Verizon buys out Vodafone, as I think will happen, those calls could rapidly appreciate.

Philip Morris continues to undergo regulatory challenges around the world, though it got something of a respite from the U.K. recently. The U.K. government decided to postpone plans to ban company branding on cigarette packages. Instead, regulators are waiting to see what effects a similar ban in Australia has. Britain had looked to be the first European country to follow Australia's model, which requires packs to be a dark brown with no logos and a uniform font.

We got word on dividends from our two U.K. companies. National Grid will pay out about $2.09 per share on Aug. 21, while Vodafone distributes about $1.05 per share on August 7. Those dividends contribute meaningfully to the $120 in payouts that are owed to the portfolio.

Dividends and earnings announcements
Here is the recent news on earnings and dividends:

Dividend news:

  • Annaly Series D went ex-dividend on May 30 and paid out almost $0.48 per share on June 30.
  • Brookfield went ex-dividend on May 29 and paid outs $0.43 per share on June 28.
  • Ryman went ex-dividend on June 26 and paid outs $0.50 per share on July 14.
  • Philip Morris went ex-dividend on June 25 and paid outs $0.85 per share on July 11.

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 continue to track and report on the portfolio's progress, including news on these companies.

If you like dividends, consider these 11 tickers along with the nine names from a free report from Motley Fool's expert analysts called "Secure Your Future With 9 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 9 high yielders, simply click here -- it's free.

Jim Royal, Ph.D., owns shares of the 11 portfolio stocks mentioned in the table, as well as Sprott. The Motley Fool recommends Brookfield Infrastructure, Exelon, National Grid, Retail Opportunity Investments, Seaspan, Southern, and Vodafone and owns shares of Gramercy Property, Brookfield Infrastructure, Philip Morris, Retail Opportunity Investments, Ryman Hospitality, Sprott, and 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.


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