The World's Best Dividend Portfolio
Last June, I invested my money equally over 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. Let's check out the results so far.
|Philip Morris International||$68.49||14.5429||4.2%||$1,072.98||7.7%|
|Plum Creek Timber||$38.42||26||4.3%||$1,036.36||3.7%|
|Brookfield Infrastructure Partners||$26.12||38.2825||4.9%||$1,098.71||9.9%|
Investment in SPY
Source: S&P Capital IQ.
Our total portfolio performance improved overall from the previous week, moving from 0.5% to 1.1% this week. That's a solid gain, but it was outpaced by the even brisker move on the S&P, leaving our portfolio underperforming by 2.3%. We have five stocks outperforming the index. But I'm 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, I think we'll quickly gain the upper hand again.
Thanks for your suggestions so far with what to do with some $200 that will reach the portfolio by early February. You've given me a lot of meat to chew on.
Given the massive move downward in shares of Frontier (NYS: FTR) , I'm strongly considering reinvesting the money I put there. Without its truly horrific underperformance, the portfolio would be doing clearly better than the market (in other words, about 4% better than now). Woulda, coulda, shoulda. But that also gives us an opportunity to make some capital gains if the shares return to anywhere close to where they were just six months ago -- and the sizeable dividend, to boot. Also a good sign: CEO Maggie Wilderotter put a quarter-million of her own cash on the line, buying shares at $5.25 per stub.
Presumably the recent move downward in shares of Philip Morris (NYS: PM) was due to its heavy reliance on Europe for its profits. That has bumped the yield back over 4%, but the business has shown great resiliency. The company continues to buy back shares and has a good track record for raising its payout.
Another concern for the portfolio could be a possible repeat of quantitative easing by the Federal Reserve. Speculation is flying now that Chairman Ben Bernanke could start purchases of mortgage-backed securities. That could lead to rallying stocks, but would probably be especially good for the trashier parts of the market, and less helpful to dividend stocks like those in the portfolio.
That new round of easing suggests a rockier economic climate, meaning it could still be a good time for Annaly (NYS: NLY) , which tends to thrive in difficult conditions. I also like the safety in Brookfield Infrastructure's (NYS: BIP) high-quality hard assets, which tend to hold their value year after year and yield increasing rents.
Dividends and other announcements
Going into the new year, the news has been pretty light. But there have been a few developments and some year-end recaps:
- One Baird analyst predicts utilities could be a great investment in 2012, after a pretty good year in 2011. The industry will invest $750 billion over the next decade in infrastructure to meet new regulations and shifting consumer preferences. That bodes well for our utility-heavy portfolio, with National Grid (NYS: NGG) , Exelon, and Southern.
- National Grid went ex-dividend on Dec. 2 and paid out $1.0967 per share on Jan. 18. We won't see another dividend on this U.K. utility for half a year.
- Vodafone announced a special dividend of 4 pence on top of its 3.05 pence interim payout. The stock traded ex-div on Nov. 16 and the money will be paid out on Feb. 3. In dollars, the total payout comes to about $1.12 per U.S. share at current exchange rates.
- Annaly went ex-dividend on Dec. 27 and will pay out $0.57 per share on Jan. 26.
All that, of course, means more money coming into our pockets shortly, and that means more money to re-invest.
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 free report from Motley Fool's expert analysts, "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 - again, 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.
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