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The World's Best Dividend Portfolio

By Jim Royal - Apr 6, 2013 at 7:45AM

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The latest news on these dividend dynamos.

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. 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 (SO 0.00%)

$39.71

25.0818

4.2%

$1,184.61

18.9%

Exelon

$41.36

28.818

3.6%

$1,000.56

(16%)

National Grid

$48.90

20.3693

5.7%

$1,211.36

21.6%

Philip Morris International (PM 1.83%)

$68.49

14.5429

3.6%

$1,374.74

38%

Ryman Hospitality

$44.93

24.7

4.6%

$1,086.06

(2.1%)

Plum Creek Timber

$38.42

26

3.3%

$1,341.60

34.3%

Brookfield Infrastructure Partners

$26.12

38.2825

4.6%

$1,448.99

44.9%

Vodafone (VOD 0.97%)

$26.75

56.7566

5.3%

$1,598.83

5.3%

Seaspan

$15.24

95

6.6%

$1,900.00

31.3%

AT&T (T 0.66%)

$35.20

28.4

4.8%

$1,076.64

7.7%

Retail Opportunity Investments

$12.20

81.95

4.3%

$1,148.12

14.8%

Annaly Preferred C

$25.98

38.5

7.4%

$990.99

(0.7%)

Cash

     

$291.53

 

Dividends Receivable

     

$24.71

 

Original Investment

     

$12,983.97

 

Total Portfolio

     

$15,678.76

20.8%

Investment in SPY (Including Dividends)

       

19.6%

Relative Performance (Percentage Points)

       

1.2

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

The portfolio continued to perform strongly, despite the gyrating markets. We now stand at a 20.8% gain, and we're leading the S&P benchmark by 1.2 percentage points -- up 0.3 percentage points since the last report. When our portfolio outperforms for a while, I usually take it as a sign that the markets are getting a bit more cautious and deciding to move to dividend stocks, which are traditionally seen as safer.

The blended yield is still a robust 4.9%, and we have nearly $300 in cash in the portfolio, with almost $25 more on the way in the next 10 days.

Things looked cheery for Vodafone earlier this week, as it was rumored from "usually reliable sources" that AT&T and Verizon were tag-teaming for a bid on the U.K.-based telecom. But Verizon busted those rumors later, saying that it was not "currently" looking at a deal for Vodafone in whole or in part.

I'm pretty skeptical of Verizon's dismissal, especially with the use of the word "currently." We know the telecom has been sniffing around Vodafone for a while, and with its wireline business generating little profit, the company needs Verizon Wireless if it wants to pay its dividend from cash flow and not go increasingly into debt. Vodafone, on the other hand, is in a different boat, since it has paid out its regular dividend for years without disbursements from Verizon Wireless. A deal will happen sooner or later -- the only question is how favorable it will be to Vodafone shareholders. The rumored deal price would put Vodafone's shares near $40. The prospect of a buyout is also why my Special Situations portfolio acquired options in Vodafone.

Southern experienced at an explosion at Plant Bowen, north of Atlanta. The coal-fired plant is one of the largest power generators in the United States. All workers were accounted for shortly after the incident.

Fellow Fool Dan Caplinger grades Philip Morris and gives the tobacco giant a middling score. Though he (rightly) doesn't ding the company for its lack of equity and therefore immeasurable return on equity, the score of 4 out of 8 looks worse for those omissions. In this company's case, it's less vital to have equity because it's such a steady cash generator. In fact, many of the best cash generators run with little equity on their balance sheet. They just don't need to retain their earnings. Dan also notes the increasing legal pressure on Philip Morris in overseas markets.

Annaly Capital (NLY -1.08%) has been a popular stock for the past few years because of its hefty dividend. But Fool John Maxfield has long been skeptical of the company, in particular management. Now executives are asking the company to externalize its management structure to a business owned by them, a possibility that creates clear conflicts of interest. Watch John in this video to see what he thinks of the move.

Dividends and earnings announcements
Here's the recent news on earnings and dividends.

Dividend news: 

  • Philip Morris went ex-dividend on March 26 and pays out $0.85 per share on April 12.
  • Annaly Series C went ex-dividend on Feb. 27 and paid out almost $0.48 per share on April 1.
  • Ryman Hospitality went ex-dividend on March 26 and paid out $0.50 per share on April 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 the tickers discussed here along with the nine names from a brand-new free report from The 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 nine high-yielders, simply click here -- it's free.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$21.30 (0.66%) $0.14
Annaly Capital Management, Inc. Stock Quote
Annaly Capital Management, Inc.
NLY
$6.38 (-1.08%) $0.07
The Southern Company Stock Quote
The Southern Company
SO
$75.69 (0.00%) $0.00
Philip Morris International Inc. Stock Quote
Philip Morris International Inc.
PM
$108.57 (1.83%) $1.95
Vodafone Group Plc Stock Quote
Vodafone Group Plc
VOD
$16.72 (0.97%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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