The World's Best Dividend Portfolio

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In June, 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 here.  Now let's check out the results so far.

Company

Cost Basis

Shares

Yield

Total Value

Return

Southern$39.7125.08184.2%$1,120.6512.5%
Exelon$41.8223.8185.2%$953.91(4.2%)
National Grid$48.9020.36935.8%$1,034.563.9%
Philip Morris International$68.4914.54294.0%$1,164.3016.9%
Annaly Capital$18.2465.513.8%$1,079.44(8.0%)
Frontier Communications$7.88126.424317.6%$523.40(47.5%)
Plum Creek Timber$38.42264.2%$1,023.102.4%
Brookfield Infrastructure Partners$26.1238.28254.9%$1,105.9810.6%
Vodafone$26.5237.55664.9%$1,042.954.7%
Seaspan$14.61694.7%$1,099.869.1%
Cash   $201.34 
Dividends Receivable   $24.79 
Total Portfolio   $10,237.382.1%

Investment in SPY

(including dividends)

    6.4%

Relative Performance

(percentage points)

    (4.3)

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

Our total portfolio performance improved overall from the previous week, moving from 0.8% to 2.1% this week.  Still, we ended up losing some on the S&P as it moved ahead, leaving our portfolio underperforming by 4.3%. We have four stocks outperforming the index. I'm still confident in the long-run nature of this portfolio, and I fully expect it to outperform. If we see a downward move in the S&P, we'll quickly gain the upper hand again, I think. Stocks have been rallying furiously for months, and I don't think that type of performance can go on for much longer.

As has been the case for the past couple of months, shares of Frontier (NYS: FTR) have been dragging down the portfolio's performance. The latest blow came when it was revealed that Frontier had been downgraded by S&P from stable to negative, but the rating agency maintained the rating on Frontier's bonds. We'd be about even on the S&P -- in other words, up about 7% overall -- if not for Frontier's poor performance.  That said, there may be value in the shares now, and with $200 in the account, I'll look to deploy the cash shortly. We'll hear about earnings shortly, too.

Dividends and other announcements
We had several companies reporting this week and a few pending dividend payments:

  • Annaly (NYS: NLY) reported earnings this week that fell below the Street's estimates by $0.03. The biggest concern is the decline in Annaly's rate spread, to 1.71%, a sharp move down from the prior sequential quarter, as my Foolish colleague Ilan Moscovitz explains. Annaly also reduced its leverage for the quarter, implying a more conservative stance.
  • Vodafone (NAS: VOD) reported quarterly sales numbers earlier this week, and revenue was basically flat, up a meager 0.9%. Weakness in Spain and Italy was offset by strength in Turkey and India. The company maintained its prior guidance for operating earnings of about $18.3 billion.
  • Philip Morris (NYS: PM) does nothing but perform. In the fourth quarter the company performed better than expected and heartened analysts by topping their 2012 earnings expectations. In the quarter, the company earned $1.08 per share, versus $0.96 in the year-ago period. Revenue was up 9% and the company grew worldwide share.  For 2012, Philip Morris expects earnings per share of $5.25 to $5.35, compared to 2011's $4.85.
  • Brookfield Infrastructure (NYS: BIP) also reported strong numbers, with funds from operations climbing from $1.79 per unit to $2.41 -- growth of 35%. Much of the growth was due to the smart acquisition of Prime Infrastructure in late 2010. The company also announced a 7% bump to the next dividend, which will arrive in late March.

Dividend news

  • Southern went ex-dividend on Feb. 2 and pays out a dividend of $0.4725 per share on Mar. 5.
  • Seaspan went ex-dividend on Feb.  9 and will pay out a dividend of $0.1875 per share on Feb. 21.

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 up more shares.

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 the year, including news on these companies.

If you like dividends, consider the 10 tickers above along with the 11 names from a brand-new report from Motley Fool's expert analysts called "Secure Your Future With 11 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 11 high-yielders, simply click here -- it's free.

At the time this article was published Jim Royal, Ph.D., owns shares of the 10 portfolio stocks mentioned in the table. The Motley Fool owns shares of Seaspan, Brookfield Infrastructure, Annaly, Plum Creek, and Philip Morris. The Fool owns shares of and has created a covered strangle position on Plum Creek.Motley Fool newsletter serviceshave recommended buying shares of Exelon, National Grid, Philip Morris, Vodafone, Southern, and Brookfield Infrastructure, as well as writing a covered straddle position in Seaspan and a covered strangle position in Exelon. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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