3 Stocks with High Dividend Yields that Warren Buffett Likes
Susan Dziubinski: I’m Susan Dziubinski with Morningstar. Warren Buffett’s Berkshire Hathaway BRK.ABRK.B doesn’t intentionally buy dividend-paying stocks, but the firm favors financially strong companies with significant competitive advantages run by managers who thoughtfully allocate capital. And as a result of that strategy, Berkshire Hathaway naturally owns many dividend-paying stocks.
Today we’re looking at three stocks in Berkshire Hathaway’s portfolio with trailing yields twice that of the market as of the end of April. Not all of these stocks are undervalued according to Morningstar’s metrics today, but they make fine watchlist candidates for dividend-stock investors.
The first stock with a high dividend yield that Warren Buffett likes is Coca-Cola. co*ke is a classic Warren Buffett company. It has a wide economic moat thanks to its strong brand and significant cost advantages. Management has been adept at allocating capital, with a history of smart acquisitions and equally smart spending to maintain growth; the team also consistently returns cash to shareholders through cash dividends and stock buybacks. We expect the dividend payment to grow in line with earnings over the next five years at a high-single-digit rate. We think co*ke’s stock is worth $60.
The second high-dividend stock in Berkshire Hathaway’s portfolio that we’ll look at today is Chevron. Morningstar assigns the oil giant a narrow economic moat rating because we expect the firm to be able to deliver excess returns on invested capital over the next decade through a combination of an improved cost structure and the addition of higher-return production volumes. Here, too, management has done an exceptional job of allocating capital, and we think there’s room to grow the dividend. We think Chevron stock is worth $176 per share.
The final high-dividend stock that Warren Buffett’s Berkshire Hathaway likes is Citigroup. CIti is in the middle of a strategic repositioning, and Morningstar doesn’t think the bank has an economic moat at this point. But first-quarter results came in better than expected as management’s efforts to transform its business are beginning to show progress. We expect progress to continue as management focuses on expenses. We think Citi’s stock is worth $68.
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Morningstar director Allen Good and analysts Suryansh Sharma and Dan Su provided the research behind this segment.
Although old-guard favorites such as American Express (AXP) and Coca-Cola (KO) still form the core of the portfolio, Buffett & Co. have taken a shine to names such as Apple (AAPL) and Amazon.com (AMZN), and even to lesser-known firms such as Nu Holdings (NU).
Coca-cola. Owning 400 million Coca-Cola shares, Warren Buffett is estimated to be worth approximately $23.5 billion. He acquired a 9.3% share in the corporation as a result of his investments in Coca-Cola. In 2024, Warren Buffett is expected to receive $775 million in dividends.
With questions about the U.S. economy mounting, here are three high-yield dividend stocks that investors can buy and hold forever: Ford Motor Company (NYSE: F), AT&T (NYSE: T), and Kraft Heinz (NASDAQ: KHC).
One of the safest dividend stocks you can own is undoubtedly from healthcare company Abbott Laboratories. Last year, the Dividend King announced it was raising its dividend for a 52nd straight year. And the company has now been paying dividends for 100 years.
Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.
Stocks recently added to Warren Buffett's portfolio
Buffett added just two new holdings to the Berkshire portfolio in the second quarter. Those investments include the beauty product retailer Ulta Beauty (ULTA) and the aerospace and defense company Heico Corp.(HEI.A).
Buffett holds two in his portfolio: the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) and the Vanguard S&P 500 ETF (NYSEMKT: VOO). This sort of fund buys shares of each of the S&P 500 companies, with them weighted to the same degree in the fund as they are in the actual index.
Berkshire Hathaway is a large, diversified holding company led by renowned investor Warren Buffett that invests in the insurance, private equity, real estate, food, apparel, and utilities sectors. Despite being a large, mature, and stable company, Berkshire Hathaway does not pay dividends to its investors.
For those who need inspiration, let's consider two excellent candidates: Microsoft (NASDAQ: MSFT) and Coca-Cola (NYSE: KO). These longtime market leaders, both of which are also top dividend stocks, are worth holding on to for good.
Based on Berkshire Hathaway's existing portfolio, Buffett and his investment team should oversee the collection of well over $5 billion in dividend income over the next 12 months. But most of this dividend income can be traced back to just a few top holdings.
Introduction: My name is Mr. See Jast, I am a open, jolly, gorgeous, courageous, inexpensive, friendly, homely person who loves writing and wants to share my knowledge and understanding with you.
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