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The World's Best Dividend Portfolio

Friday - 3/22/2013, 3:17pm  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

4.3%

$1,139.47

14.4%

Exelon

$41.36

28.818

3.6%

$971.17

(18.5%)

National Grid

$48.90

20.3693

5.7%

$1,146.59

15.1%

Philip Morris International

$68.49

14.5429

3.7%

$1,324.13

32.9%

Ryman Hospitality

$44.93

24.7

4.3%

$1,124.34

1.3%

Plum Creek Timber

$38.42

26

3.4%

$1,304.94

30.6%

Brookfield Infrastructure Partners

$26.12

38.2825

4.5%

$1,430.62

43.1%

Vodafone

$26.75

56.7566

5.6%

$1,580.10

4.1%

Seaspan

$15.24

95

6.6%

$1,886.70

30.4%

AT&T

$35.20

28.4

5.0%

$1,026.66

2.7%

Retail Opportunity Investments

$12.20

81.95

4.4%

$1,120.26

12.0%

Annaly Preferred C

$25.98

38.5

7.4%

$992.53

(0.5%)

Cash

     

$231.79

 

Dividends Receivable

     

$59.74

 

Original Investment

     

$12,983.97

 

Total Portfolio

     

$15,339.03

18.1%

Investment in SPY
(including dividends)

       

18.4%

Relative Performance
(percentage points)

       

(0.3)

Source: S&P Capital IQ.

The portfolio is up 18.1% since we began this experiment, a modest gain of 0.1% from last week. But we made a substantial gain on the S&P, moving from 2.2% points back to just 0.3. That's an example of the kind of outperformance we expect in rough markets.

Over the next week, w'’ll receive more dividends, bringing the total cash in the account to nearly $300. For the moment I'm content to sit on that cash, but I'm continuing to think about the best place to put it. One interesting possibility for that cash is Plum Creek . Lumber prices have gone up markedly in the last year and now stand at levels seen in 2004 and 2005. That's largely a question of supply, since demand has plummeted since the crisis. But a return of demand, as we've seen recently, could propel lumber prices higher, and shares of Plum Creek, too.

Fellow Fool John Maxfield had an intriguing take on Annaly's proposal to convert its management structure from internal to external. He sees that as a way for executives to move their very high salaries away from public scrutiny. As a holder of the preferred stock, I'm less concerned about this than a common-stock shareholder should be.

Two weeks ago, I traded this portfolio's Annaly common for shares in Ryman Hospitality , a very attractively placed REIT with a solid yield of more than 4%. It compares very favorably to lodging peers but its valuation doesn't reflect it yet. Management is buying back $100 million in stock and will keep buying until the stock is valued near its peers. You can read more on this fascinating special situation here. I'm continuing to look for a favorable spread -- at least $0.40 -- between the Series C and Series D preferreds, and then I’ll switch my ownership position to the Series D.

The rumors continue to swirl around some type of Verizon-Vodafone deal, whether that takes the form of a buyout or perhaps just the purchase of Vodafone’s 45% stake of their joint wireless venture. We know Verizon has been trying to acquire this asset for the past couple of years, and negotiations have been at different levels of depth. With Verizon in serious need of income to pay its dividend, I think this deal will happen sooner rather than later. Hedge fund titan David Einhorn owns a stake in Vodafone and thinks it is cheap.

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