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|
|Philip Morris International Inc. (NYSE:PM)||$68.49||14.5429||3.8%||$1,327.91||33.3%|
|Plum Creek Timber||$38.42||26||3.4%||$1,296.88||29.8%|
|Brookfield Infrastructure Partners||$26.12||38.2825||4.6%||$1,470.05||47%|
|Vodafone Group Plc (ADR) (NASDAQ:VOD)||$26.75||56.7566||5.6%||$1,577.83||3.9%|
|Retail Opportunity Investments||$12.20||81.95||4.6%||$1,080.10||8%|
|Annaly Preferred C||$25.98||38.5||7.5%||$980.21||(1.8%)|
|Investment in SPY (Including Dividends)||20.2%|
|Relative Performance (Percentage Points)||(2.2)|
The portfolio is up 18% since we began this experiment, and we’re trailing the S&P by 2.2 percentage points. We lost about 0.5 percentage points on the S&P from last week as the index raced out to a 2.2 percentage point lead. That’s what we expect — slight underperformance in a rising market and outperformance in poor markets. So far this year, the S&P has been on fire, but that won’t continue forever. We have a load of cash in our pocket and more on the way, plus after a couple of buys and sells, the portfolio yields a very healthy 5.2%.
As I discussed last week, I sold the stake in Frontier Communications Corp (NASDAQ:FTR) for $4.13 per share and rolled those funds into Vodafone at $27.19. Frontier Communications Corp (NASDAQ:FTR) continues to experience shrinking free cash flow, and while the dividend should be covered amply for 2013, cash flow just continues to shrivel. In contrast, Vodafone owns a very attractive asset in its 45% stake in Verizon (NYSE:VZ) Wireless and has survived Verizon Communications Inc. (NYSE:VZ)‘s attempt to force Vodafone out of its stake. The market is pricing Vodafone at only a little above what its stake could fetch from Verizon, and there’s a lot of speculation that this might finally be the year that Verizon, because of dwindling cash flow and the need to cover its own dividend, will make a bid on the wireless unit. But one fund manager thinks Vodafone would be insane to sell out. Stay tuned.
In addition, I sold my stake in Annaly Capital Management, Inc. (NYSE:NLY) for $15.32 per share and rolled those funds into a new stake in Ryman Hospitality Properties at $44.93. Ryman is very attractively placed and should do well over the coming year. It yields 4.4% now — well above its lodging peers — yet is valued below most of them. It owns some of the best convention hotels in the U.S. and is well positioned. I strongly encourage you to read my details on the company here.
Unfortunately, I wasn’t able to switch my stake in Annaly Capital (NYSE:NLY) Series to Annaly Capital (NYSE:NLY) Series D, since the spread closed too quickly. I’ll keep an eye on those two and switch the stake when a $0.40 differential looks possible. While the dividend on Annaly Capital (NYSE:NLY)’s common stock continues to crumble, all those dividends would have to be wiped out before dividends on the preferreds would be cut.