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The World’s Best Dividend Portfolio

Saturday - 5/4/2013, 4:00pm  ET

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%

$1,184.61

18.9%

Exelon

$41.36

28.818

3.4%

$1,047.25

(12.1%)

National Grid

$48.90

20.3693

5.7%

$1,296.51

30.2%

Philip Morris International

$68.49

14.5429

3.6%

$1,381.72

38.7%

Ryman Hospitality

$44.93

24.7

4.6%

$1,072.47

(3.4%)

Plum Creek Timber

$38.42

26

3.3%

$1,324.18

32.6%

Brookfield Infrastructure Partners

$26.12

38.2825

4.4%

$1,477.70

47.8%

Vodafone

$26.75

56.7566

5.3%

$1,706.10

12.4%

Seaspan

$15.24

95

5.9%

$2,112.80

46%

AT&T

$35.20

28.4

4.8%

$1,066.70

6.7%

Retail Opportunity Investments

$12.20

81.95

4.1%

$1,202.21

20.2%

Annaly Preferred D

$25.98

38.9

7.3%

$999.73

0.8%

Cash

     

$330.37

 

Dividends Receivable

     

$12.73

 

Original Investment

     

$12,983.97

 

Total Portfolio

     

$16,215.09

24.9%

Investment in SPY (Including Dividends)

       

22.5%

Relative Performance (Percentage Points)

       

2.5

Source: Capital IQ, a division of Standard & Poor's.

The portfolio continued to perform strongly since my last report. Cumulative performance is now at 24.9%, up 2.3 percentage points from before. However, we slipped a bit against the S&P, from 2.8 down to 2.5. The portfolio's surge has occurred just as the market started getting rocky. I'm continuing to hold dividends in cash – better than a half-year's worth – waiting for an excellent opportunity. I've been holding more cash than I normally would, expecting a downturn after the runaway start to the markets this year.

The blended yield is 4.8%, and we have more than $300 in cash in the portfolio. May is one of the big months for dividends around here, too, so more money will be rolling in.

In June, I'm going to add $2,000 in cash to the portfolio, to mimic what an investor might do annually. I'll also add at least two new positions, and I expect to sell at least one. As I asked last week, if you have any good dividend stocks to buy or would like to recommend ones from the portfolio to sell, let me know in the comments box below. Thanks for the suggestions so far.

Dividends and earnings announcements
Here is the recent news on earnings and dividends:

Earnings news:

  • Brookfield Infrastructure reported a 38% increase of funds from operation per share, while it was up 48% on an absolute basis. In particular, focus on the per-share amount, since this MLP sometimes issues shares to buy its assets. The company's FFO payout ratio, at 59%, fell just below the target range of 60%-70%, meaning that we should see up a nice distribution increase if these highly stable assets continue to perform. The company is continuing to look at deals and says 2013's acquisitions could be as nice as last year's.
  • Retail Opportunity Investments reported $0.19 per share in FFO, and the company continues to grow quickly and strongly. Occupancy was up 110 bps year over year, to 93.4%, while same-store cash net operating income grew at a very strong 7.9% clip. With 23.5% debt-to-total-market cap, ROIC has a lot of room to leverage its balance sheet to grow its portfolio. I expect more greatness from the company. It's up 20% (not including dividends) for 11 months.
  • Annaly's adjusted earnings came in at $0.47 per share, compared with $0.54 in the year-ago quarter, and leverage is up to 6.6, from 5.8. Book value per share slipped sequentially, from $15.85, to $15.19. The interest rate spread declined sequentially and year over year and currently stands at just 0.91%. That continues to augur declining common dividends, and it's one of the reason I moved to the preferred stock.
  • Exelon reported sales and earnings per share that both topped analysts' estimates. The company reaffirmed its previously announced 2013 guidance of $2.35 to $2.65 per share. The utility is thinking about investing as much as $3 billion over the next five years in natural gas exploration, solar assets, and other projects.
  • Seaspan returned in its usual steady-as-she-goes numbers, with revenue up 7.5% and cash available for distribution climbing 2.3%. The latter number is the one dividend investors want to keep growing briskly. The company continues to grow its fleet over the next couple years, which should help dividends move in the right direction. The stock looks a little pricy right now, and I won't be surprised to see its yield rise back to above 6%.
  • Plum Creek reported growing revenue 1% year over year, but earnings nearly doubled, from $29 million to $56 million. Management highlighted the strength the company is seeing in each business segment and says it's expecting good cash flow from the timber and manufacturing segments in 2013. Demand for lumber is keeping sawlog prices up for the foreseeable future.
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