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. Now let's check out the results so far.
|Southern (NYS: SO)||$39.71||25.0818||4.3%||$1,112.88||11.7%|
|Exelon (NYS: EXC)||$41.82||23.818||5.4%||$1,123.04||(5.8%)|
|Philip Morris International||$68.49||14.5429||3.7%||$1,224.95||23%|
|Annaly Capital (NYS: NLY)||$18.24||65.5||13.8%||$1,080.75||(7.9%)|
|Frontier Communications (NYS: FTR)||$7.88||126.4243||8.9%||$568.91||(42.9%)|
|Plum Creek Timber||$38.42||26||4.3%||$1,025.44||2.7%|
|Brookfield Infrastructure Partners||$26.12||38.2825||4.7%||$1,134.69||13.5%|
|Seaspan (NYS: SSW)||$14.61||69||5.4%||$1,277.19||26.7%|
|Investment in SPY|
Source: S&P Capital IQ.
Our total portfolio performance weakened overall from the previous week, moving from 3.8% to 3.2% this week. We lost ground on the S&P, even as it moved ahead, and our portfolio is underperforming by 5.1 percentage points. We have four stocks outperforming the index and seven in positive territory.
I just reinvested $195.75 of portfolio money into shares of Exelon. The yield sits at a tidy 5.4%, and the shares have experienced weakness of late. I had considered reinvesting in Frontier Communications, but the recent dividend cut to $0.10 per share per quarter and the weak free cash flow guidance for 2012 have spooked me for now.
Note that my calculation of return on investment is penalized by dividend reinvestment. Although I report a return on investment of 3.2%, the actual total portfolio return so far is 6.9% -- which you can see when you realize that the total portfolio value of $10,680.38 sits well above the approximately $10,000 ($9,986.58, to be perfectly accurate) we initially deposited in the account. On those calculations, we're only mildly underperforming the S&P, but we have a much higher yield. I'll adjust the calculation in future weeks to more accurately reflect our returns, but I wanted to explain it here first. So I'm still confident in the long-run nature of this portfolio, and I fully expect it to outperform.
In its latest earnings report, we got some dubious news for Annaly Capital, one of the most popular dividend stocks because of its massive payout. In this video article called "Bad News for the Market's Hottest Dividends," I explain why investors should be cautious on the mortgage REITs going forward (hint: it has to do with the sustainability of their dividend).
Dividends and other announcements
We're just about through earnings season, and we'll have a bunch of companies going ex-dividend in the next few weeks:
- Seaspan announced its recent quarterly results and had great news for dividend investors. The company saw cash available for distribution increase 19%, to $65.5 million. And it bumped its payout by 33%, to $1 per year. Even better is that at that level, Seaspan would still be paying out only about 25% of its cash available for distribution, meaning it has plenty of room to boost the payout more. The company also announced a $50 million repurchase program. It doesn't get much better than this.
- The U.S. Nuclear Regulatory Commission has recommended that the first of three proposed changes to how nuclear plants operate be implemented. The changes include reactor design modification and operating changes and are expected to cost millions for plant operators such as Southern and Exelon. The rules will be implemented by the end of 2016.
- Southern went ex-dividend on Feb. 2 and pays out a dividend of $0.4725 per share on March 5.
- Exelon went ex-dividend on Feb. 13 and pays out $0.525 per share on March 8.
- Plum Creek went ex-dividend on Feb. 15 and paid out $0.42 per share on March 2.
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 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 these 10 tickers along with the 11 names from a brand-new free report from The 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. Get instant access to the names of these 11 high yielders -- 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 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 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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