The World's Best Dividend Portfolio
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.
|Philip Morris International||$68.49||14.5429||4.1%||$1,102.93||10.7%|
|Plum Creek Timber||$38.42||26||4.3%||$1,015.04||1.6%|
|Brookfield Infrastructure Partners||$26.12||38.2825||4.8%||$1,094.88||9.5%|
Investment in SPY
Source: Capital IQ, a division of Standard & Poor's.
Our total portfolio performance declined overall from the previous week, moving from 1.8% to 0.8% this week. So we even lost some on the S&P, as it moved head, leaving our portfolio underperforming by 3.5 percentage points. We have four 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, we'll quickly gain the upper hand again, I think.
Given the massive move down in shares of Frontier (NYS: FTR) over the last few months, I'm strongly considering reinvesting the money there. I'll dig in there and see if I can find some opportunity. We've got a solid $200 in cash now in the account, and February will see even more pour in, so if there's something attractive, I'm all for buying it now.
Frontier's recent big down day came on reports that it had been downgraded by S&P from stable to negative, but the rating agency maintained the rating on Frontier's bonds. Without its truly horrific performance -- down nearly 50% since late June -- the portfolio would be clearly better than the market (in other words, about 4.5% better than now).
Annaly (NYS: NLY) investors have reason to cheer, as the Federal Reserve promised to keep rates low through 2014. That should keep the cost of funds low for mortgage REITs such as Annaly, and overall it benefits many capital-intensive companies in our portfolio, especially utilities Exelon (NYS: EXC) and National Grid (NYS: NGG) and hard-asset play Brookfield Infrastructure (NYS: BIP) . But for mortgage REITs like Annaly, many investors are worried that mortgage rates keep trending downward, setting new record lows week after week, it seems. And that potentially exposes Annaly to prepayment risk and lower spreads.
Dividends and other announcements
We had one company reporting this week, and we'll have a bunch of companies going ex-dividend in the next couple of weeks:
- Exelon had a nuclear reactor in Illinois shut down unexpectedly earlier this week. Apparently the shutdown was due to a failed insulator, which helps regulate electricity flow. Separately, the Nuclear Regulatory Commission mandated that nuclear plants in the central and eastern U.S. must reassess how well they can withstand earthquakes. Exelon said the reviews at its plants would take three to five years to complete, but noted that its plants were designed to withstand earthquakes up to 6.9 on the Richter Scale.
- National Grid came out with its interim performance. Of particular note for us dividend investors, the company promised a 4% dividend raise for next year. That's not as good as in recent years, but better than nothing, especially in this economic climate. The company's August 2012 dividend will still show the promised 8% annual growth.
- Plum Creek also reported earnings this week, with net income flat year over year. Weak timber prices in the South offset firmer pricing in the North, and the company's forecast for 2012 earnings -- $1 to $1.25 per share -- came in below analysts' estimates of $1.35.
- Vodafone paid out a dividend of about $1.12 per U.S. share on Feb. 3. We waited a long time for this one.
- Annaly went ex-dividend on Dec. 27 and paid out $0.57 per share on Jan. 25.
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 -- and 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 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 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.
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