This High-Yield Dividend Portfolio Will Beat the Market
Back in February, I invested my cold hard cash into 10 high-yield dividend stocks I believe will beat the market. Let's see the results after 29 weeks:
|Altria (NYS: MO)||$24.86||40||$26.72||$1,068.80||7.48%|
|Philip Morris (NYS: PM)||$61.83||16||$68.24||$1,091.84||10.37%|
|National Grid (NYS: NGG)||$45.63||22||$50.27||$1,105.94||10.17%|
|Annaly Capital Management (NYS: NLY)||$17.55||57||$17.37||$990.09||(1.03%)|
|Frontier Communications (NYS: FTR)||$8.95||137||$7.25||$993.25||(18.99%)|
|Southern Co. (NYS: SO)||$37.87||26||$41.16||$1,070.16||8.69%|
|Vodafone Group (NYS: VOD)||$28.69||38||$26.32||$1,000.16||(8.26%)|
|Investment In SPY||(9.77%)|
|Return vs SPY (percentage points)||+13.66|
Source: Capital IQ, a division of Standards and Poor's. Sept. 2, 2011.
Over the past week, the S&P 500 fell 0.24%. As the market fell, our portfolio outperformance rose, moving from beating the market by 12.85 percentage points to beating the market by 13.66 percentage points. While outperformance is always good, it should be taken with a grain of salt. We're investing for the long-term, and it's only been six months. I firmly believe the results will bear us out.
Movers and shakers
Of our stocks, the biggest mover in the portfolio the past week was France Telecom, which fell 3.46%.
There are five upcoming dividends for the portfolio:
- Southern Co. will pay a dividend of $0.4725 per share today, Sept. 6. The ex-dividend date was July 28.
- France Telecom will pay a dividend of $0.85 per share on Sept. 8. The ex-dividend date was Sept. 5.
- Eli Lilly will pay a dividend of $0.49 per share on Sept. 9. The ex-dividend date was Aug. 11.
- Frontier Communications will pay a dividend of $0.1875 per share on Sept. 30. The ex-dividend date is Sept. 7.
- Altria will pay a dividend of $0.41 per share on Oct. 11. The ex-dividend date is Sept. 13.
The power of dividend growth and reinvesting
Altria and Philip Morris International are my favorite dividend stocks for a variety of reasons. They have some of the most shareholder-friendly managements, with a stated goal "to return a large amount of cash to shareholders in the form of dividends" by paying out roughly 80% of earnings per share.
With this goal, as the companies grow, their dividend also grows. Last week Altria announced a 7.9% increase in its quarterly dividend from $0.38 to $0.41 per share. Altria has increased its dividend 45 times in the last 42 years. Those increases make a massive difference between a large-cap stock that stagnates (such as Microsoft) and a stock that grows slowly but steadily over time. The growing dividend coupled with reinvesting that dividend is where massive profits can be made. As fellow Fool Morgan Housel showed, an investor who invested in Altria in the 1960s would have earned 11,000%. While that's huge, if that same investor had reinvested the dividends, the total return sky-rockets to 278,000%!
Source: Capital IQ, a division of Standard & Poor's; Motley Fool.
There's money to be made in dividends, and hopefully you own shares. Keep a lookout for Philip Morris to announce a dividend increase in the next week or two. It's the high, sustainable, and increasing dividends that make Altria and Philip Morris two of my favorite stocks.
My Foolish bottom line
I'm highly confident in this portfolio's ability to crush the market over the next decade, and that's why I put $10,000 of my personal cash into these stocks. My strategy is simple. I'm buying strong companies with outsized dividends, reinvesting those dividends, and holding them for the long run. Over the coming year, I'll track my performance, update you on when I'm going to reinvest all my dividends, and keep you abreast of news affecting these companies.
Consider the 10 tickers above along with the 13 names from a free report from Motley Fool's expert analysts called "13 High-Yielding Stocks to Buy Today," including one named by a senior retail analyst as "the dividend play of a lifetime." Tens of thousands have requested access to this report, and today I invite you to download it at no cost to you. To get instant access to the names of these 13 high-yielders, simply click here -- it's free.
At the time this article was published Dan Dzombakcan be found on his Twitter account:@DanDzombak. He owns shares of Altria, Philip Morris, National Grid, Annaly Capital, Frontier, Southern Co., France Telecom, Vodafone, Eli Lilly, and Bristol-Myers Squibb.The Motley Fool owns shares of Microsoft, Altria Group, Chimera Investment, Philip Morris International, and Annaly Capital Management.Motley Fool newsletter serviceshave recommended buying shares of Southern, France Telecom, Philip Morris International, Vodafone Group, Microsoft, and National Grid, as well as creating a bull call spread position on Microsoft. 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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