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 | $39.71 | 25.0818 | 4.2% | $1,215.71 | 22.1% |
| Exelon | $41.36 | 28.818 | 3.6% | $1,056.76 | (11.3%) |
| National Grid | $48.90 | 20.3693 | 5.7% | $1,230.51 | 23.5% |
| Philip Morris International (NYSE:PM) | $68.49 | 14.5429 | 3.7% | $1,349.87 | 35.5% |
| Ryman Hospitality | $44.93 | 24.7 | 4.7% | $1,063.58 | (4.2%) |
| Plum Creek Timber | $38.42 | 26 | 3.2% | $1,365.26 | 36.7% |
| Brookfield Infrastructure Partners | $26.12 | 38.2825 | 4.6% | $1,439.04 | 43.9% |
| Vodafone Group Plc (ADR) (NASDAQ:VOD) | $26.75 | 56.7566 | 5.3% | $1,687.94 | 11.2% |
| Seaspan | $15.24 | 95 | 6.5% | $1,925.65 | 33% |
| AT&T Inc. (NYSE:T) | $35.20 | 28.4 | 4.7% | $1,099.93 | 10% |
| Retail Opportunity Investments | $12.20 | 81.95 | 4.2% | $1,165.33 | 16.6% |
| Annaly (NYSE:NLY) Preferred D | $25.98 | 38.9 | 7.4% | $992.34 | 0% |
| Cash | $317.59 | ||||
| Dividends Receivable | $12.78 | ||||
| Original Investment | $12,983.97 | ||||
| Total Portfolio | $15,922.30 | 22.6% | |||
| Investment in SPY
(including dividends) | 19.8% | ||||
| Relative Performance
(percentage points) | 2.8 |
Source: Capital IQ, a division of Standard & Poor’s.
The portfolio continued to perform strongly, though on relative terms. While it was down 0.6 percentage points since the last article, to 22.6% gains, the outperformance on the S&P grew, from 1.1 points to 2.8. That’s strong performance for a week, but it suggests that investors are moving to “safe” dividend-paying assets. That flight to safety may ultimately presage a market move lower, but we’ll see. In any case, it suggests that investors are getting more cautious and shun riskier assets. But as I’ve said all along, I expect we’ll outperform in down markets, and we continue to see that.
The blended yield is 4.9%, and we have more than $300 in cash in the portfolio, with more on the way in the next 10 days. I’ve been holding more cash than I normally would expecting a market downturn after the runaway start to the markets this year.
We’re coming up on the two-year anniversary of the portfolio in June, and I’m planning to add more money and perhaps more positions. In addition, I may shake things up a little bit and sell some stocks from the portfolio. Have any good dividend stocks to buy or ones from the portfolio to sell? Let me know in the comment box below.
I continue to follow the rumors around Vodafone with quite a bit of interest. I think the deal will happen sooner rather than later because Verizon Communications Inc. (NYSE:VZ) needs the cash flow from Verizon Wireless, its joint venture with Vodafone. In the last four quarters, Wireless net income comprised 90% of Verizon Communications Inc. (NYSE:VZ)’s bottom line, and you’ll recall that Verizon doesn’t get that Wireless cash unless it makes dividends to itself — and Vodafone Group Plc (ADR) (NASDAQ:VOD). At the very least, I expect to see the Wireless dividend spigot turned on regularly, and that means a lot more cash coming Vodafone’s way– cash that could be used for buybacks and more dividends.
But things still look ripe for a buyout of at least Vodafone Group Plc (ADR) (NASDAQ:VOD)’s 45% interest in Wireless. As Verizon’s CFO revealed on a conference call, the company is “extremely confident that such a transaction could be accomplished in a manner that is very tax efficient and would not result in a tax on the gain in that stake.” That would mean little or no tax leakage for Vodafone Group Plc (ADR) (NASDAQ:VOD). So while it’s researching ways to make a tax-efficient deal, Verizon is not “currently” making a deal for Vodafone Group Plc (ADR) (NASDAQ:VOD) in whole or in part. Ri-i-i-i-ght.
The most recently rumored deal had Verizon Communications Inc. (NYSE:VZ) acquiring Vodafone Group Plc (ADR) (NASDAQ:VOD)’s stake in Wireless and AT&T Inc. (NYSE:T) taking control of the U.K. telecom’s far-flung empire of assets. The rumored deal price valued Vodafone Group Plc (ADR) (NASDAQ:VOD) shares near $40 – a sizable gain for an already-megacap stock. I think a deal will happen and I have real money riding on just such an outcome.
I continue to be surprised by the discount that Annaly Capital Management, Inc. (NYSE:NLY) Series D shares have, relative to the Series C, and they have much the same payouts, though Series D has a bit longer until its call date. The discount is pretty consistently $0.30 per share and sometimes as high as $0.50. As I mentioned last week, I switched out the Series C for Series D, and if the pattern reverses, I’ll switch back to the C series. While the preferreds offer little or no chance for capital gains, they do have a solid yield and one that won’t slide, unlike payouts from the common stock.
Dividends and earnings announcements
Here is the recent news on earnings and dividends:
Earnings news:
Philip Morris reports earnings that trailed analysts’ estimates, with net income falling nearly 2%, to $2.13 billion, or $1.28 per share. Analysts expected $1.34 per share. The company was hurt by shipments that were off 6.5% globally, including a 10% plunge in the EU. The stronger dollar has also hurt results. Philip Morris lowered its annual profit estimates to $5.55-$5.65 per share. Annualizing its current quarterly dividend of$0.85 per share suggests that it is paying out about 61% of net income — a reasonable figure for a stable company. Fellow Fool Sean Williams has more in this article.
Dividend news:
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 is written by Jim Royal, Ph.D..
Jim Royal, Ph.D., owns shares of the 12 portfolio stocks mentioned in the table. The Motley Fool recommends Brookfield Infrastructure, Exelon, National Grid, Retail Opportunity Investments, Seaspan, Southern, and Vodafone. It owns shares of Brookfield Infrastructure, Philip Morris, Retail Opportunity Investments, Ryman Hospitality, and Seaspan.
The article The World’s Best Dividend Portfolio originally appeared on Fool.com.
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