Searching for the World's Best Dividend Portfolio

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Includes: BIP, DVY, EMB, EXC, FTR, HYG, ICF, IDV, NGG, NLY, PCL, PM, SO, SSW, TIP, VIG, VOD, VWO
by: MyPlanIQ

Jim Royal of the Motley Fool came out with what he called the World's best dividend portfolio. That is quite a claim and is, perhaps, why many long term investors worry about on whom they should rely for advice. He claimed he is going to put $10,000 of his own portfolio to work in 10 income-producing stocks, which he later reveals.

He then claims that these companies offer yields that are at least double that of the average S&P stock.

His world champs are

Company

Trailing Yield

5-Year Dividend Growth

Southern Company (NYSE: SO ) 4.7% 4.1%
Exelon (NYSE: EXC ) 5.0% 5.6%
National Grid (NYSE:NGG)
6.0% 6.9%
Philip Morris International (NYSE: PM ) 3.6% 9.6%*
Annaly Capital (NYSE: NLY ) 13.7% 30.2%
Frontier Communications (NYSE: FTR ) 8.5% (4.1%)
Plum Creek Timber (NYSE: PCL ) 4.2% 1.8%
Brookfield Infrastructure Partners (NYSE: BIP ) 5.0% 33.2%*
Vodafone (Nasdaq: VOD ) 5.3% 5.1%
Seaspan (NYSE: SSW ) 4.4% (12.2%)
Blended Yield 6.0% N/A
Click to enlarge

Source: Capital IQ, a division of Standard & Poor's. *2-year dividend growth, since the company was spun off in 2008.

We entered these funds into our system and then compared it with a balanced portfolio of Dividend producing ETFs.

Asset Fund in this portfolio
REAL ESTATE ICF (iShares Cohen & Steers Realty Majors)
CASH CASH
FIXED INCOME TIP (iShares Barclays TIPS Bond)
Emerging Market VWO (Vanguard Emerging Markets Stock ETF)
US EQUITY DVY (iShares Dow Jones Select Dividend Index)
US EQUITY VIG (Vanguard Dividend Appreciation ETF)
INTERNATIONAL EQUITY IDV (iShares Dow Jones Intl Select Div Idx)
High Yield Bond HYG (iShares iBoxx $ High Yield Corporate Bd)
INTERNATIONAL BONDS EMB (iShares JPMorgan USD Emerg Markets Bond)
Click to enlarge
Portfolio Performance Comparison
Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Fools Worlds Best Dividend Portfolio 34% 290% 4% 14%
Retirement Income ETFs Strategic Asset Allocation Moderate 18% 186% 3% 16% 5% 25%
Retirement Income ETFs Tactical Asset Allocation Moderate 14% 123% 9% 76% 11% 75%
Click to enlarge


Three Month Chart Three Year Chart

The more detailed analysis and graphs show the volatility of the stock portfolio which has performed well in the short term but not in the longer term. The history of the portfolio is limited by Philip Morris and Brookfield. It would be nice to have a longer history but that is all there is and you have to make your decision on the information that is available.

We have looked at several stock portfolios that have had stellar one year performance but over a longer term, the returns look very mediocre. The same appears to be true here.

If you are going to invest your money into dividend stocks, we think that there are better alternatives that have better returns. Don't forget that the dividend ETFs are likely to be less volatile.

If you are looking into dividend stocks, check these two out as comparisons of where you could probably do better.

I think that the world can do better than this.

Disclosure: We do not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.