The World's Best Dividend Portfolio
In June 2011, 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||3.6%||$1,229.02||23.4%|
|Plum Creek Timber||$38.42||26||4.6%||$949.00||(5%)|
|Brookfield Infrastructure Partners||$26.12||38.2825||4.8%||$1,198.24||19.8%|
|Investment in SPY (including dividends)||3.9%|
|Relative Performance (percentage points)||1.6|
Source: S&P Capital IQ.
Our portfolio held its own this week, maintaining its 5.5% cumulative return with the help of some dividend payouts. Meanwhile, the S&P index fell to 3.9%, meaning we're up by 1.6 percentage points on our benchmark. So after nearly a year, we're beating the index and have a substantially better blended yield -- 6.1% -- than the index at 1.9%. If markets continue to be stagnant or down, we should probably outperform. And I don't see a whole lot that is positive in the next few months. Growth is slowing in various places across the globe, and Europe is a mess that is not being fixed yet.
With the ongoing dust-up in global markets, I continue to like Annaly Capital (NYS: NLY) . If things get worse, Annaly could continue to be a place where investors flee. Its strong yield and track record of growing book value bode well for shareholders. At least for the moment, that beats out its recent record of declining net interest margin.
Our portfolio recently acquired shares of Exelon (NYS: EXC) for its quite high yield. Fellow Fool Robert Eberhard took a look at Exelon and other high-yield utilities according to a metric called the Graham number, and he found Exelon to be underpriced. You can read the article here. And its 5.7% yield is quite high, and it still has one of the lowest debt ratios of major utilities.
Some fellow Fools also like the prospects at Vodafone (NAS: VOD) better than some of its stateside rivals. You can see why in this article. Just last week, the company reported that it expected lower cash flow of $8.3 billion to $9 billion, down from 2011's $9.5 billion.
Philip Morris (NYS: PM) is battling Russia's efforts to curb smoking. Along with British American Tobacco and Japan Tobacco, Big Phil is trying to mitigate the nation's plan to limit advertising, sale, and public use of cigarettes. The draft law proposes banning cigarette ads immediately, followed by ceasing sales at kiosks in 18 months and ending use of cigarettes in public buildings in 36 months.
Within the next couple of weeks, I'll publish an article that details how the portfolio will operate for year 2. I anticipate adding a few more stocks, eliminating at least one, and adding more cash (to help simulate an investor who keeps adding to the portfolio). Again, I'll detail all that in an upcoming Fool.com article. It's been a really fun year with this portfolio, and I look forward to more.
Dividends and other announcements
We're at the end of earnings season, and we have a few bits of dividend news for the moment.
- Southern (NYS: SO) went ex-dividend on May 7 and pays out $0.49 per share on June 6.
- Exelon went ex-dividend on May 11 and pays out $0.37925 per share on June 8. Previously, Exelon paid out a $0.14575 dividend in early April to keep its total quarterly dividend at $0.525, as part of its recent acquisition of Constellation.
- Plum Creek went ex-dividend on May 18 and paid out $0.42 per share on May 31.
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're craving more dividend payers, I invite you to read the free report from The Motley Fool titled "3 American Companies Set to Dominate the World." Plus, you can download it at no cost. To get instant access to the names of these dominant dividend stocks, 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 Annaly, Seaspan, Plum Creek, and Brookfield Infrastructure. The Fool owns shares of and has created a covered strangle position in Plum Creek. Motley Fool newsletter services have recommended buying shares of Exelon, Philip Morris, Annaly, Southern, National Grid, Vodafone, and Brookfield Infrastructure; as well as writing a covered strangle position in Exelon and a covered straddle position in Seaspan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.