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 for yourself. Now let's check out the results so far.
|National Grid (NYS: NGG)||$48.90||20.3693||5.8%||$1,038.02||4.2%|
|Philip Morris International (NYS: PM)||$68.49||14.5429||3.6%||$1,249.24||25.4%|
|Annaly Capital (NYS: NLY)||$18.24||65.5||14.1%||$1,062.41||(9.5%)|
|Frontier Communications (NYS: FTR)||$7.88||126.4243||9.3%||$539.20||(45.9%)|
|Plum Creek Timber||$38.42||26||4.1%||$1,077.44||7.9%|
|Brookfield Infrastructure Partners (NYS: BIP)||$26.12||38.2825||4.8%||$1,186.37||18.6%|
|Investment in SPY (Including Dividends)||10.6%|
|Relative Performance (Percentage Points)||(2.9)|
Source: S&P Capital IQ.
Our total portfolio performance since inception is 7.7%, up just slightly since last week, but falling further behind that of the dividend-adjusted S&P. We have seven of 10 stocks in positive territory. Despite the underperformance, we're still achieving a much larger yield than the S&P, which should help ballast the portfolio when times get tough.
As for portfolio composition, I continue to like Philip Morris and Brookfield Infrastructure for their all-weather performance. They simply keep pushing out growing dividend streams year after year and have defensible businesses in consumer goods and infrastructure, respectively. So over time I expect them to continue to climb higher. I also continue to like the utilities, especially National Grid, for its global exposure but also for the good returns it earns in the U.K. and the billions in new investment needed in the next few years to maintain their infrastructure. Of these three, I expect to see the highest total returns from Philip Morris.
Dividends and other announcements
We're through earnings season, and we have limited dividend news for the moment.
- Perhaps my favorite stock in the portfolio, Philip Morris, took advantage of low long-term interest rates this week. The company sold $700 million of 30-year notes at 4.5% and $550 million of five-year notes at 1.625%. That's very cheap financing and yet another reason to like the company's future.
- Frontier is one of the most shorted stocks on the market, with nearly 18% of shares short. If the stock ever turns around, those shorts could help juice the stock price. However, Frontier's recent dividend cut to $0.10 quarterly makes it even easier for the shorts to hang on, since they also no longer have to pay Frontier's $0.1875 quarterly dividend to maintain their short position. Fellow Fool Rex Moore also warns that Frontier's tangible book value stands at -$3.8 billion.
- 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 -- it has to do with the declining spreads the businesses earn. Fellow Fool Alex Dumortier also has a good column on what to watch out for in the mortgage REIT sector.
- Brookfield Infrastructure went ex-dividend on Feb. 27 and pays out $0.375 per share on March 30.
- Frontier went ex-dividend on March 9 and pays out $0.10 per share on March 30.
All that, of course, means more money coming into our pockets.
It's fun to sit back and get paid, and with the current 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 nine names from a brand-new free report from The 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. Get instant access to the names of these high yielders.
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 and has created a covered strangle position in Plum Creek.Motley Fool newsletter serviceshave 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 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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