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, and then more again in 2013. 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
Gramercy Property Trust
Investment in SPY (including dividends)
Relative Performance (percentage points)
The total portfolio is now up 24.8% after gaining 0.7 percentage points since the last report. We gained on the index since the last report, moving up 2.1 percentage points, to lag by 11.7 points overall. It was a bit of a miserable week for the index, and as I've been saying since the start of this portfolio in June 2011, we will outperform when the market is not skyrocketing, as it has done over most of the past year. In the meantime, we'll collect our dividends. The blended yield remained at 5%.
I expect that yield to climb in the near future, when Gramercy Property Trust announces the restart of its dividend after years on hiatus. This REIT still has significant upside as it begins its payouts and gets on the radar screens of dividend investors. As yet, because it doesn't pay dividends, it's largely invisible. The company is now current on its preferred-stock dividend, and in the next few weeks I expect to see an announcement on the new common-stock dividend. With its small portfolio, Gramercy should be able to grow very quickly, and management has promised little incremental operating expense from doubling the size of the portfolio.
We'll have no less than five stocks going ex-dividend next month, including Plum Creek Timber, Exelon, Brookfield Infrastructure, Seaspan, and Annaly Series D. That will mean more money coming into the portfolio, regardless of what the market does. If it's lower we'll always be able to reinvest those dividends in attractive stocks. I expect Brookfield Infrastructure will bump its dividend for the quarter.
One of my favorites is Seaspan, and I'm a bit puzzled by its drop on Wednesday. This is a company that's sticking to its progressive dividend policy. Seaspan continues to build out its fleet with enormous ships, which will drive huge cash-flow growth in the next few years. And so I expect it could continue to grow its dividend at 20% per year for at least several more years. With the next dividend bump likely in late February or early March, I'm surprised the market hasn't moved the stock closer to $25 -- my estimate of value with a 20% dividend increase. Recall that the stock was there just a few months ago -- but it usually goes through these regular cycles.
That yield's up from 4.5% last week, due almost entirely to the addition of Extendicare, as I announced then. The Canadian/American health care company pays nearly 7%, but I've purchased it because it also has significant upside as it divests its American unit, either as a sale or a spinoff. How much could that be worth to the company? Think triple digit gain. That's why I've called Extendicare my stock of 2014. I go into more specifics here.
Dividends and earnings announcements
- Vodafone went ex-dividend on Nov. 20 and pays out $0.562 per share on Feb. 5.
- National Grid went ex-dividend on Dec. 6 and paid out about $1.17 per share on Jan. 22.
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 continue to track and report on the portfolio's progress, including news on these companies.
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The article The World's Best Dividend Portfolio originally appeared on Fool.com.Jim Royal owns shares of all 11 companies listed in the table and Extendicare and has the following options: long May 2014 $22 calls on Seaspan and short May 2014 $30 calls on Seaspan.The Motley Fool owns shares of Extendicare, Gramercy Property Trust, Retail Opportunity Investments, Ryman Hospitality Properties, and Seaspan and has the following options: long May 2014 $22 calls on Seaspan and short May 2014 $25 calls on 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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