The World's Best Dividend Portfolio
In June 2011, I invested my money equally in a selection of 10 high-yield dividend stocks. With a year of success behind me, in July 2012, I added even more money to the portfolio. 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 (NYS: SO) | $39.71 | 25.0818 | 4.6% | $1,085.04 | 8.9% |
Exelon | $41.36 | 28.818 | 6.7% | $913.24 | (23.4%) |
National Grid (NYS: NGG) | $48.90 | 20.3693 | 5.4% | $1,141.70 | 14.6% |
Philip Morris International | $68.49 | 14.5429 | 3.9% | $1,244.15 | 24.9% |
Annaly Capital (NYS: NLY) | $17.79 | 72.5 | 13.4% | $1,078.08 | (16.4%) |
Frontier Communications (NAS: FTR) | $7.88 | 126.4243 | 8.9% | $549.95 | (44.8%) |
Plum Creek Timber | $38.42 | 26 | 3.9% | $1,114.10 | 11.5% |
Brookfield Infrastructure Partners (NYS: BIP) | $26.12 | 38.2825 | 4.5% | $1,299.69 | 30% |
Vodafone | $26.52 | 37.5566 | 5.4% | $1,002.39 | 0.6% |
Seaspan | $15.14 | 89 | 6% | $1,446.25 | 7.3% |
AT&T | $35.20 | 28.4 | 5.2% | $942.88 | (5.7%) |
Retail Opportunity Investments | $12.20 | 81.95 | 4.4% | $1,027.65 | 2.8% |
Annaly Preferred C | $25.98 | 38.5 | 7.5% | $980.60 | (2%) |
Cash | $60.34 | ||||
Dividends Receivable | $46.01 | ||||
Original Investment | $12,983.97 | ||||
Total Portfolio | $13,932.05 | 7.3% | |||
Investment in SPY (including dividends) | 5.9% | ||||
Relative Performance (percentage points) | 2.4 |
Source: Capital IQ, a division of Standard & Poor's.
Our portfolio was down significantly for the week, moving from 10.5% to 7.3%. But the S&P moved down even more, increasing our lead from 0.9 percentage points to 2.4. That's not the way I'd like to beat the S&P, but it does continue to suggest how we'll outperform in rocky markets. Our blended yield increased to 6%. I'm confident in the long-run performance of this dividend portfolio, and I expect that time will bear us out. With much of the global economy in recession, dividends should outperform.
Fellow Fool Stuart Watson breaks down National Grid's earnings to reveal if the company has been playing games with investors. You can read his article here.
Dividends and earnings announcements
Here is the relevant news about earnings and dividends:
Earnings news:
Southern reported weaker-than-expected numbers for its recent quarter, with earnings of $1.11, $0.03 below estimates. Revenue was down 7% year over year, partly due to milder weather in its operating regions. But operating expenses declined faster, allowing the company to earn more than it did in the year-ago quarter. You can see the Fool's longer take on Southern's earnings here.
It's much of the same at Frontier. At $1.252 billion, revenue slipped again, though at a slower rate than in prior quarters. The company continued to bleed access lines, losing 47,000 customers. Again, that was an improvement on the 77,000 that left in the year-ago quarter. Frontier provided some guidance for next year. It expects capital expenditures to drop $100 to $125 million, but any savings there will be offset by an increase in cash taxes, from just $15 million today up to as much as $150 million. Fellow Fool Dan Radovsky as more on the quarter.
Brookfield grew its fund from operations (FFO) by 16% in the latest quarter, but per-share FFO dropped 6%. What gives? The culprit was an equity issuance in August in order to fund acquisitions that won't close until later this year. The company's transportation and utilities businesses performed well, but that was offset somewhat by the timber business. At 65% of FFO, the dividend payout ratio remains in the middle of the 60% to 70% range, meaning that investors will have to rely on FFO to drive increasing dividends and can no longer rely on the company increasing its payout ratio to achieve above-normal gains.
Annaly reported earnings, and then got punished for it, and not without some reason. The key metric to watch -- interest rate spread -- slipped substantially in the most recent quarter, from 2.08% last year, to 1.02%. The company is not making up for a less-profitable portfolio with more leverage, so we should expect the dividend to go down, as it has done in recent quarters. But the stock trades below book value, and the company's announcement to buy back shares below book value could provide a floor for shares. Book value is now $16.60 per share, up from $16.23 in sequentially prior quarter.
Dividend news:
AT&T went ex-dividend on October 5, and paid out $0.44 per share on November 1.
Southern went ex-dividend on November 1, and pays out $0.49 per share on December 6.
Seaspan went ex-dividend November 9, and pays out $0.25 per share on November 23.
Retail Opportunity Investments went ex-dividend November 9, and pays out $0.14 per share on November 30.
All that, of course, means more money coming into our pockets.
It's fun to sit back and get paid and, with the market's 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 continue to track and report on the portfolio's progress, including news on these companies.
If you like dividends, consider the 13 tickers above, along with the nine names from a brand-new, free report from Motley Fool's expert analysts called, "Secure Your Future With 9 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 9 high yielders, simply click here -- it's free.
The article The World's Best Dividend Portfolio originally appeared on Fool.com.
Jim Royal, Ph.D., owns shares of the 13 portfolio stocks mentioned in the table. The Motley Fool owns shares of Seaspan, Brookfield Infrastructure, ROIC, and Annaly. Motley Fool newsletter services have recommended buying shares of Vodafone, ROIC, National Grid, Brookfield Infrastructure, Exelon, Annaly, and Southern. Motley Fool newsletter services have recommended creating a write covered straddle position in Exelon. Motley Fool newsletter services have recommended creating 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.
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