This High-Yield Portfolio Will Beat the Market
Jan 11th 2012 3:19PM
Updated Jan 11th 2012 4:12PM
|National Grid (NYS: NGG)||$45.63||22||$48.77||$1,072.94||6.88%|
|Annaly Capital Management (NYS: NLY)||$17.55||57||$16.28||$927.96||(7.24%)|
|France Telecom (NYS: FTE)||$22.23||45||$15.21||$684.45||(31.58%)|
|Vodafone Group (NAS: VOD)||$28.69||38||$27.81||$1,056.78||(3.07%)|
|Eli Lilly (NYS: LLY)||$34.48||29||$40.33||$1,169.57||16.97%|
|Investment in SPY||0.01%|
|Return vs. SPY (percentage points)||+7.77|
Source: S&P Capital IQ, as of Jan 10.
Since my last report, the SPDR S&P 500 rose 3.37%. Our portfolio rose less than the market, with our outperformance moving from beating the market by 11.75 percentage points to a 7.77-point advantage. While outperformance is always good, it should be taken with a grain of salt. We're investing for the long term, and it's only been 10 months.
Movers and shakers
As usual of late, our largest mover the past week was Frontier Communications, which fell 5.1%. Fool contributor Dan Radovsky took a look at Frontier's 2011 and the year ahead of it, click here for his take. Fool Nick Nejad did a stress test of Frontier's dividend and came to the conclusion that the market has overreacted.
There are three upcoming dividends for the portfolio:
- National Grid will pay a dividend of $1.09 on Jan. 18. The ex-dividend date was Nov. 30.
- Vodafone will pay a dividend of 0.705 pence (roughly $1.12, not included in dividends receivable as exchange rate won't be determined until Jan. 20) on Feb. 3. The ex-dividend date was Nov. 16.
- Eli Lilly will pay a dividend of $0.49 on March 9. The ex-dividend date is Feb. 13.
With $100 in cash and more coming in the next few weeks it's time to consider our options for reinvestment. Personally, I'm partial to investing in Annaly, Vodafone, or France Telecom. Annaly had a good year in 2011 and with low rates expected to stay until 2013 or even 2014, its high dividend looks safe. Vodafone also had a good year, finally receiving its first dividend from its 45% ownership of Verizon Wireless. The company is using the money to buy back shares and pay out a special dividend which we receive on Feb. 3. France Telecom has been beaten down due to its debt level and exposure to the European crisis. So, Fools, what should I buy? Let me know in the comments section below.
My Foolish bottom line
I'm highly confident in this portfolio's ability to crush the market over the next decade, and that's why I put $10,000 of my personal cash into these stocks. My strategy is simple. I'm buying strong companies with outsized dividends, reinvesting those dividends, and holding them for the long run. Over the coming year, I'll track my performance, update you on when I'm going to reinvest all my dividends, and keep you abreast of news affecting these companies.
Consider the 10 tickers above along with the 11 names from a new free report from Motley Fool's expert analysts called "11 Rock-Solid Dividend Stocks." To get instant access to the names of these 11 dividend stocks, click here -- it's free.
At the time this article was published Dan Dzombak can be found on his Twitter account: @DanDzombak. He owns shares of Altria, Philip Morris, National Grid, Annaly Capital, Frontier, Southern Co., France Telecom, Vodafone, Eli Lilly, and Bristol-Myers Squibb.The Motley Fool owns shares of Altria Group, Philip Morris International, and Annaly Capital Management. Motley Fool newsletter services have recommended buying shares of Southern, France Telecom, Philip Morris International, Vodafone Group, and National Grid. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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