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AT&T Inc. (T), Philip Morris International Inc. (PM): 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. 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
The Southern Company (NYSE:SO) $39.71 25.0818 4.6% $1,106.86 11.1%
Exelon Corporation (NYSE:EXC) $41.36 28.818 3.9% $907.77 (23.8%)
National Grid plc (ADR) (NYSE:NGG) $48.90 20.3693 4.9% $1,220.53 22.5%
Philip Morris International Inc. (NYSE:PM) $68.49 14.5429 3.7% $1,344.05 34.9%
Ryman Hospitality Properties, Inc. (REIT) (NYSE:RHP) $44.93 24.7 5.2% $943.05 (15%)
Plum Creek Timber Co. Inc. (NYSE:PCL) $38.42 26 3.6% $1,242.02 24.3%
Brookfield Infrastructure Partners L.P. (NYSE:BIP) $26.12 38.2825 4.7% $1,393.87 39.4%
Vodafone Group Plc (ADR) (NASDAQ:VOD) $26.75 56.7566 5.3% $1,672.62 10.2%
Seaspan Corporation (NYSE:SSW) $15.24 95 5.8% $2,166.95 49.7%
AT&T Inc. (NYSE:T) $35.20 28.4 5% $1,008.20 0.9%
Retail Opportunity Investments Corp (NASDAQ:ROIC) $12.20 81.95 4.2% $1,164.51 16.5%
Annaly Capital Management Inc Preferred Series D (NYSE:NLY-D) $25.98 38.9 7.5% $978.34 (1.4%)
Cash $371.50
Dividends Receivable $56.66
Original Investment $12,983.97
Total Portfolio $15,576.92 20%
Investment in SPY(including dividends) 27.2%
Relative Performance(percentage points) (7.2)

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

There has been quite the switch in portfolio performance in the last couple of weeks, and it looks like investors were switching out of dividend stocks. The last week has been harrowing for the portfolio. It’s down four percentage points in a week! Not only that, but the S&P actually went up, 0.2 percentage points, leaving the portfolio down by 7.2 percentage points in total. The blended yield climbed to 4.9%.

AT&T Inc.

The news that the Fed might slow quantitative easing seems to have spooked the market, especially for dividend stocks. The reasoning is that as interest rates rise, investors will switch out of dividend stocks and into bonds. Am I worried? Not at all. The historical evidence on dividend stocks suggests that they outperform over time. So why worry about some short-termers trading out of them as interest rates might rise? Let’s remember all the fear that attended the tax-rate increase on dividends at the end of last year. That led to some decent buying opportunities for people who were thinking longer term. So now is not the time to panic.

As I mentioned last week, I’ll be making a few changes to the portfolio. I’m adding $1,000 to each of Gramercy Property Trust and Sprott Resource Corp. In addition, I’m selling my stakes in The Southern Company (NYSE:SO) and AT&T Inc. (NYSE:T). With the cash raised from selling, I’m going to buy more Philip Morris International Inc. (NYSE:PM), Vodafone Group Plc (ADR) (NASDAQ:VOD), and Ryman Hospitality Properties, Inc. (REIT) (NYSE:RHP), with $1,000 in the first, and $500 in each of the other two. You can read all my rationale in last week’s article.

The decline in Ryman now has that stock offering better than a 5% yield, so I’m excited to add more to the position. As I noted in my original buy of Ryman, I think the stock could trade for $60 per share or more, and I like getting a 5% yield while I wait. I discussed the stock on Boston radio station WRKO this week, and you can listen here.

No word yet on the specific dividends we should see from National Grid plc (ADR) (NYSE:NGG) and Vodafone Group Plc (ADR) (NASDAQ:VOD). Both U.K. stocks go ex-dividend in the next couple of weeks, and they’re paying their final dividends for the year, which are typically about twice as large as their interim dividends. But, while the stocks go ex-dividend in early June, we won’t see the actual cash in the account until August.

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