This High-Yield Portfolio Will Beat the Market
Thirty weeks ago, I invested my cold, hard cash into 10 high-yield dividend stocks that I believe will beat the market. Let's see the results so far.
|Altria (NYS: MO)||$24.86||40||$26.54||$1,061.60||6.76%|
|Philip Morris (NYS: PM)||$61.83||16||$66.02||$1,056.32||6.78%|
|National Grid (NYS: NGG)||$45.63||22||$49.42||$1,087.24||8.31%|
|Annaly Capital Management (NYS: NLY)||$17.55||57||$17.95||$1,023.15||2.28%|
|Frontier Communications (NYS: FTR)||$8.95||137||$6.94||$950.78||(22.46%)|
|France Telecom (NYS: FTE)||$22.23||45||$15.75||$708.75||(29.15%)|
|Investment In SPY||(10.67%)|
|Return vs SPY (percentage points)||+12.81|
Source: Capital IQ, a division of Standard & Poor's. As of Sept. 12, 2011.
Over the past week, the S&P 500 fell by 1%. As it did, so did our portfolio outperformance, moving from beating the market by 13.66 percentage points to 12.81 percentage points. Outperformance is always good, but it should be taken with a grain of salt. We're investing for the long term, and it's been only six months. I firmly believe the results will bear us out.
Movers and shakers
Of our stocks, the biggest mover in the portfolio the past week was, again, France Telecom, which fell about 12% as the European markets fell to near 2009 levels. As of last night, the company yielded 12%, in line with Spanish mobile telecom Telefonica (NYS: TEF) , which yields 12.2%.
If weakness in the shares continues, we will look to add to our holdings of France Telecom next month, when our cash is somewhat replenished by dividends, including an $0.85-per-share dividend from France Telecom. Note that France has a withholding tax on dividends of 15%, meaning that although you receive the full dividend, your broker automatically withholds 15% and pays it to France. It's not as bad as it sounds, though, as my colleague Dan Caplinger has explained:
The good news is that in many cases, you can get all or part of your money back. Under U.S. tax law, taxpayers are entitled to a foreign tax credit for taxes they pay on their overseas income. The form that many taxpayers are required to file to claim a foreign tax credit is extremely complicated. But if you haven't had much foreign tax withheld -- less than $300 for single taxpayers or $600 for joint filers -- then you can often claim a credit without filing the long form.
A further complication, though, is that you're not allowed to claim a foreign tax credit for taxes withheld on stocks held in IRAs. Although some countries have special provisions in their tax treaties that eliminate withholding taxes for stocks held in tax-favored accounts, many do not. As a result, you may end up paying foreign tax on IRA income even while it's tax-deferred for U.S. tax purposes.
Reading material on Europe
In the meantime, Fool writers have been busy collecting information to help you understand Europe:
- Why You Should Look at Europe's Big Value by Dan Caplinger
- 5 Articles to Help You Understand What's Happening in Europe by Morgan Housel
There are three upcoming dividends for the portfolio:
- France Telecom, as mentioned, will pay a dividend of $0.85 per share on Sept. 29. The ex-dividend date was Aug. 30.
- Frontier Communications will pay a dividend of $0.1875 per share on Sept. 30. The ex-dividend date was Sept. 7.
- Altria will pay a dividend of $0.41 per share on Oct. 11. The ex-dividend date is today, Sept. 13.
My Foolish bottom line
I'm highly confident in this portfolio's ability to crush the market over the next decade, and that's why I put $10,000 of my personal cash into these stocks. My strategy is simple. I'm buying strong companies with outsized dividends, reinvesting those dividends, and holding them for the long run. Over the coming year, I'll track my performance, update you on when I'm going to reinvest all my dividends, and keep you abreast of news affecting these companies.
Consider the 10 tickers in my portfolio along with the 13 names from a free report from The Motley Fool's expert analysts, called 13 High-Yielding Stocks to Buy Today, including one that a senior retail analyst called "the dividend play of a lifetime." Tens of thousands have requested access to this report, and today I invite you to download it at no cost to you. Get instant access to the names of these 13 high-yielders -- it's free.
At the time this article was published FollowDan Dzombakon his Twitter account,@DanDzombak. He owns shares of Altria, Philip Morris, National Grid, Annaly Capital, Frontier, Southern, France Telecom, Vodafone, Eli Lilly, and Bristol-Myers Squibb.The Motley Fool owns shares of Altria Group, Chimera Investment, Philip Morris International, and Annaly Capital Management.Motley Fool newsletter serviceshave recommended buying shares of Southern, France Telecom, Philip Morris International, Vodafone Group, and National Grid. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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