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.
Philip Morris International
Plum Creek Timber
Brookfield Infrastructure Partners
Retail Opportunity Investments
Annaly Preferred D
Investment in SPY
There has been quite the switch in portfolio performance in the last couple of weeks, and it looks like investors were switching out of dividend stocks. The last week has been harrowing for the portfolio. It's down four percentage points in a week! Not only that, but the S&P actually went up, 0.2 percentage points, leaving the portfolio down by 7.2 percentage points in total. The blended yield climbed to 4.9%.
The news that the Fed might slow quantitative easing seems to have spooked the market, especially for dividend stocks. The reasoning is that as interest rates rise, investors will switch out of dividend stocks and into bonds. Am I worried? Not at all. The historical evidence on dividend stocks suggests that they outperform over time. So why worry about some short-termers trading out of them as interest rates might rise? Let's remember all the fear that attended the tax-rate increase on dividends at the end of last year. That led to some decent buying opportunities for people who were thinking longer term. So now is not the time to panic.
As I mentioned last week, I'll be making a few changes to the portfolio. I'm adding $1,000 to each of Gramercy Property Trust and Sprott Resource Corp. In addition, I'm selling my stakes in Southern and AT&T. With the cash raised from selling, I'm going to buy more Philip Morris International, Vodafone, and Ryman Hospitality, with $1,000 in the first, and $500 in each of the other two. You can read all my rationale in last week's article.
The decline in Ryman now has that stock offering better than a 5% yield, so I'm excited to add more to the position. As I noted in my original buy of Ryman, I think the stock could trade for $60 per share or more, and I like getting a 5% yield while I wait. I discussed the stock on Boston radio station WRKO this week, and you can listen here.
No word yet on the specific dividends we should see from National Grid and Vodafone. Both U.K. stocks go ex-dividend in the next couple of weeks, and they're paying their final dividends for the year, which are typically about twice as large as their interim dividends. But, while the stocks go ex-dividend in early June, we won't see the actual cash in the account until August.
Annaly got hammered hard in recent weeks, spooked by rising interest rates and the potential end of quantitative easing. That fear also hit the company's preferred stocks, though not nearly as hard. I'm still not convinced that interest rates are going much higher for a while yet, so I think the preferreds are a good place to stay for yield. In addition, they are among the highest-yielding preferreds that still have call protection, so if they go below par, it shouldn't be too much. At less than 1% above par now, the Series D has low downside, especially relative to the common stock.
Dividends and earnings announcements
Here is the recent news on earnings and dividends:
- Southern went ex-dividend on May 2, and pays out $0.5075 per share on June 6.
- Exelon went ex-dividend on May 13, and pays out $0.31 per share on June 10.
- Seaspan went ex-dividend on May 16, and paid out $0.3125 per share on May 30.
- Plum Creek went ex-dividend on May 15, and paid out $0.44 per share on May 31.
- Annaly Series D went ex-dividend on May 30, and pays out almost $0.48 per share on June 30.
- Brookfield went ex-dividend on May 29, and pays outs $0.43 per share on June 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 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 12 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 nine 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 12 portfolio stocks mentioned in the table, as well as Gramercy and Sprott. The Motley Fool recommends Brookfield Infrastructure, Exelon, National Grid, Retail Opportunity Investments, Seaspan, Southern, and Vodafone. The Motley Fool owns shares of Gramercy Property, Brookfield Infrastructure, Philip Morris, Retail Opportunity Investments, Ryman Hospitality, Sprott, and 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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