In this article, we will take a detailed look at the 13 Best Warren Buffett Dividend Stocks To Invest In Right Now. For a quick overview of such stocks, read our article 5 Best Warren Buffett Dividend Stocks To Invest In Right Now.
Dividend stocks have posted lackluster performance over the past several years when compared to the broader market. The tech revolution caused investors to fixate their attention around growth stocks. Because of this income stocks apparently started losing their shine and popularity among the broader markets. For example, The S&P 500 High Dividend Index, which tracks the performance of 80 high dividend-yielding companies within the S&P 500 Index, is down about 0.76% year to date in 2024, compared to the S&P 500’s return of about 9.88%. Over the past five years the index returned 0.88% (annualized) while the broader S&P 500 returned 12% (annualized) during the same period. But investors don’t put their money in dividend stocks for stock price gains. Analysts believe that the real power of dividend investing comes to light when seen in the context of market dips, inflation and crashes. After all there’s a reason why one would invest in stable dividend-paying companies; no one would put their money in slow-moving dividend stocks if growth stocks or non-dividend companies posted guaranteed returns in all market cycles. Dividend stocks provide hedge against inflation and market turbulence.
Should You Invest in Dividend Stocks in 2024?
According to a report by Wisdom Tree, over the past 64 years, dividend levels dipped for only six years, while stock prices declined in 18 years during this period. And the benefits of dividend investing could be understood when you pay attention to dividend investing and compounding — something Warren Buffett is a huge fan of and regularly talks about in his investor letters (more on that later.)
The Wisdom Tree report said that since 1978, dividends and reinvested dividends have contributed 69% of the U.S. stock market return through 2023. That means if you had invested $10,000 back in 1978 and adapted a dividend reinvesting strategy, your initial investment would have ballooned to $1.6 million.
To see more interesting data points on why investing in dividends is always a good idea, read 25 Things Every Dividend Investor Should Know.
How Warren Buffett Makes Billions in Dividends Every Year? The Not-So-Secret Sauce
But if dividend investing was that simple why don’t people just invest in notable dividend-paying stocks and make a fortune? The answer is easy: not everyone is as patient and forward-looking as the Oracle of Omaha Warren Buffett, who, according to Dow Jones Market Data, was expected to receive $5.7 billion in cash in 2023 from his portfolio in which a majority of companies are dividend payers. Part of the reason why Buffett has been so successful when it comes to dividend investing is his patience and a keen eye to spot strong businesses. Buffett doesn’t invest just for dividends. He invests in companies that can pay (and grow) dividends forever and also see stock price gains. A Wall Street Journal report last year quoted Todd Finkle, a professor of entrepreneurship at Gonzaga University and the author of Warren Buffett Investor and Entrepreneurship, who said that for Buffett, dividends are not “the secret sauce, but they’re part of it.”
In his 2022 letter to Berkshire shareholders, Buffett talked about why he loves dividends and shared some insights that show the thought process of the Oracle of Omaha which makes him stand out in the crowd:
“In August 1994 – yes, 1994 – Berkshire completed its seven-year purchase of the 400 million shares of Coca-Cola we now own. The total cost was $1.3 billion – then a very meaningful sum at Berkshire. The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays. All Charlie and I were required to do was cash Coke’s quarterly dividend checks. We expect that those checks are highly likely to grow.
American Express is much the same story. Berkshire’s purchases of Amex were essentially completed in 1995 and, coincidentally, also cost $1.3 billion. Annual dividends received from this investment have grown from $41 million to $302 million. Those checks, too, seem highly likely to increase. These dividend gains, though pleasing, are far from spectacular. But they bring with them important gains in stock prices. At yearend, our Coke investment was valued at $25 billion while Amex was recorded at $22 billion. Each holding now accounts for roughly 5% of Berkshire’s net worth, akin to its weighting long ago.
Assume, for a moment, I had made a similarly-sized investment mistake in the 1990s, one that flat-lined and simply retained its $1.3 billion value in 2022. (An example would be a high-grade 30-year bond.) That disappointing investment would now represent an insignificant 0.3% of Berkshire’s net worth and would be delivering to us an unchanged $80 million or so of annual income. The lesson for investors: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.”
Will Rate Cuts Help Dividend Stocks?
In an environment where the Fed is getting ready to cut rates and everyone is trying to ride the AI wave, would it make sense to invest in dividend stocks and miss out on those shiny, roaring and cool AI and tech companies? New York-based financial services company Voya Financial highlighted in a report that usually dividend-paying sectors like telecom and utilities rely on debt. When interest rates rise, these companies suffer, impacting dividends. Rate cuts would bode well for these companies and also increase the confidence of investors who withdrew funds from dividend stocks and put them into money market funds or treasuries when rate hikes started.
“We believe this shift could reverse the underperformance of dividend stocks over the past 18 months. If dividend-yielding stocks were to regain the same relative P/E multiple they carried at the end of 2022, it would represent potential outperformance of as much as2000 basis points relative to the broad U.S. equity market.”
Methodology
For this article we scanned Warren Buffett’s Berkshire Hathaway’s Q4’2023 portfolio and picked 12 dividend stocks in which the fund has notable stakes in. We preferred companies with a healthy track record of dividend growth. Some top names in the list include Bank Of America Corp (NYSE:BAC), Coca-Cola Co (NYSE:KO) and Occidental Petroleum Corp (NYSE:OXY). The list is ranked in ascending order of Buffett’s stake value in these companies. Why do we pay attention to what hedge funds are doing? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
13. Ally Financial Inc (NYSE:ALLY)
Warren Buffett’s Stake: $1,012,680,000
Ally Financial Inc (NYSE:ALLY) is one of the best dividend stocks in billionaire Warren Buffett’s Q4’2023 portfolio. Ally Financial Inc (NYSE:ALLY) has a dividend yield of about 3.3%, with a health dividend growth history. Ally Financial Inc (NYSE:ALLY) is part of our top Dividend Challengers list because of its promising dividend growth history.
12. Mastercard Inc (NYSE:MA)
Warren Buffett’s Stake: $1,700,345,238
With over a decade of consistent dividend hikes and a solid business, Mastercard Inc (NYSE:MA) is one of the best dividend stocks in Warren Buffett’s portfolio. In December 2023, the payments giant upped its dividend by a massive 16%.
As of the end of the last quarter of 2023, Warren Buffett’s Berkshire had a $1.7 billion stake in Mastercard Inc (NYSE:MA). Overall, 141 hedge funds out of the 933 funds tracked by Insider Monkey had stakes in Mastercard Inc (NYSE:MA).
Ensemble Capital Management stated the following regarding Mastercard Incorporated (NYSE:MA) in its fourth quarter 2023 investor letter:
“Mastercard Incorporated (NYSE:MA) (7.21% weight in the Fund): Payment companies are data companies. As we discussed last quarter in our write up of Mastercard, merchants can generate significant value from analyzing payment data to better understand their customers. Mastercard has long built AI-based products to enhance payment security and provide merchants with rich data analytics. In December, they rolled out Muse, a new online shopping companion that merchants who utilize certain Mastercard services can install on their own websites.
Muse seeks to replicate the instore experience of working with a salesclerk by allowing the customer to use natural language to browse products. Online shopping already works well if you know exactly what you are looking for, but Muse is striving to help customers find things to buy even when they aren’t sure what they are looking for.
Mastercard (7.21% weight in the Fund): In late October, Mastercard reported earnings that investors interpreted as pointing to a near term slowdown in payment growth. The stock fell 5.6% on the day. By the end of the next week, the stock had recovered its losses and went on to reach a new all time high on the last day of the year. But the 7.9% gain on the quarter slightly trailed the S&P 500.”
11. Visa Inc. (NYSE:V)
Warren Buffett’s Stake: $2,160,243,711
With about 15 years of consistent dividend increases, Visa Inc. (NYSE:V) is among the top dividend stocks loved by Warren Buffett, who had a $2.2 billion stake in Visa Inc. (NYSE:V) as of the end of the last year.
In January, Visa Inc. (NYSE:V) posted first quarter results. Adjusted EPS in the quarter came in at $2.41, beating estimates by $0.07. Revenue in the quarter jumped 8.9% year over year to $8.6 billion, surpassing estimates by $50 million.
In its October 2023 investor letter, Lakehouse Capital stated the following regarding Visa Inc. (NYSE:V):
“Visa Inc. (NYSE:V) reported a strong result with net revenue increasing 11% year-on-year to $8.6 billion and non-GAAP earnings per share increasing by 21% to $2.33. As has been the case for many years now, the scalable nature of the business allows for revenue growth to outpace its costs, which places the company in a good position to navigate through this inflationary period. The network continues to grow, with credentials and merchant locations up 7% and 17%, respectively. Cross-border travel-related spend also maintained its robust growth, increasing 26% year-on-year while Visa Direct reported 7.5 billion transactions, up 19% yearon-year, progressing on penetrating categories such as cross-border remittances. Altogether, we’re pleased with how the business is tracking and remain positive on Visa’s outlook.”
10. Kroger Co (NYSE:KR)
Warren Buffett’s Stake: $2,285,500,000
Kroger Co (NYSE:KR) has been paying dividends since 2006 and it has about 17 years of consistent dividend increases under its belt, which are enough to make it one of the best dividend stocks in Buffett’s portfolio. Berkshire Hathaway owns a $2.3 billion stake in Kroger Co (NYSE:KR) as of the end of the fourth quarter of 2023.
Last month, Kroger Co (NYSE:KR) posted Q4 results. Adjusted EPS in the period came in at $1.34 per share, beating estimates by $0.21. Revenue in the quarter jumped 6.5% year over year to $37.1 billion, beating estimates by $40 million.
In its fourth quarter 2023 investor letter, Oakmark Global Fund stated the following regarding The Kroger Co. (NYSE:KR):
“The Kroger Co. (NYSE:KR) (U.S.) is the second-largest grocery retailer in America, behind only Walmart. Although the grocery industry is highly competitive, Kroger’s scale advantages allow it to offer a more compelling value proposition than smaller peers and earn higher returns on capital. In recent years, the market has assigned Kroger a lower multiple due to concerns that e-commerce would disrupt traditional brick-and-mortar grocery businesses. However, we believe Kroger’s performance through the pandemic highlighted that its store footprint, distribution infrastructure, technology investments and strong brand all position the company well for a world with higher online grocery adoption. The stock trades for just 10x our estimate of next year’s EPS, which we believe is attractive given Kroger’s competitive positioning and earnings growth outlook. The pending merger with Albertsons could accelerate the company’s earnings growth and produce additional scale advantages. If the merger is not approved, the company will have the capacity to return over 25% of its market cap to shareholders.”
9. Citigroup Inc (NYSE:C)
Warren Buffett’s Stake: $2,841,792,358
A healthy dividend yield of 3.3% and a low PE ratio makes Citigroup Inc (NYSE:C) one of the top dividend stocks in Warren Buffett’s Q4 portfolio.
As of the end of the last quarter of 2023, 87 hedge funds out of the 933 funds tracked by Insider Monkey had stakes in Citigroup Inc (NYSE:C). Berkshire Hathaway owns a $2.8 billion stake in Citigroup Inc (NYSE:C).
Patient Capital Management stated the following regarding Citigroup Inc. (NYSE:C) in its fourth quarter 2023 investor letter:
“Citigroup Inc. (NYSE:C), run by Jane Fraser since 2021, is on a multi-year journey to reorganize the business and reach return on tangible common equity of 11-12% by 2025-2026 (and higher further out). Citigroup is finally taking the hard actions necessary, cutting unprofitable departments, taking out middle management layers, and reducing overall headcount. We have high confidence Citi will hit its targets.”
8. Moody’s Corp (NYSE:MCO)
Warren Buffett’s Stake: $9,635,028,496
Almost a decade and a half in dividend increases and solid business fundamentals make credit ratings agency Moody’s Corp (NYSE:MCO) one of the best dividend stocks to buy according to billionaire Warren Buffett. Earlier this month Moody’s Corp (NYSE:MCO) increased its dividend by 10.4%. Earlier this month, Barclays upgraded the stock to Overweight from Equal Weight and increased the stock’s price target to $450 from $375.
In February Moody’s Corp’s (NYSE:MCO) board approved an addition $1 billion in share buyback plan.
In addition to Moody’s, Bank Of America Corp (NYSE:BAC), Coca-Cola Co (NYSE:KO) and Chevron Corp (NYSE:CVX) are also liked by Warren Buffett and other hedge funds.
As of the end of the last quarter of 2023, 56 hedge funds tracked by Insider Monkey had stakes in Moody’s Corp (NYSE:MCO).
L1 Capital International Fund made the following comment about Moody’s Corporation (NYSE:MCO) in its Q3 2023 investor letter:
“Portfolio adjustments during the September 2023 quarter were modest, diversified, but meaningful. In total around 10% of the Fund was divested and reinvested into opportunities we consider provide a superior risk-adjusted base case return.
We continued to trim our investment in high-quality technology businesses such as Intuit, mentioned previously. These adjustments were purely for valuation considerations, rather than any business concerns and some of these companies remain significant portfolio holdings.
The Fund’s remaining investment in Moody’s Corporation (NYSE:MCO)’s was fully divested during the September quarter. Moody’s is the world’s leading credit rating, risk assessment and analytics business. The core credit ratings business is largely a duopoly with S&P Global, with modest competition from Fitch Ratings and regional competitors – a great example of our preferred ‘Noah’s Ark’ industry structure.
The share price of Moody’s has been volatile over recent times, often reacting too greatly to changes in short-term capital markets conditions. During the quarter we took advantage of positive market sentiment to divest our holding at a share price we considered to be above fair value. Moody’s is very well managed and ‘ticks all our boxes’ for one of the world’s highest-quality businesses. The company has moved from our Portfolio to our Bench of potential investments. Having a Bench of ‘ready to go’ investment opportunities is a core aspect of our investment process. We continue to analyse Moody’s as if we owned it and are excited by the pull-back in the share price from recent highs.”
7. Kraft Heinz Co (NASDAQ:KHC)
Warren Buffett’s Stake: $12,041,975,570
Kraft Heinz Co (NASDAQ:KHC) is one of the high-yield (over 4.2% as of April 2) dividend stocks in Warren Buffett’s portfolio. Berkshire owns a $12 billion stake in Kraft Heinz Co (NASDAQ:KHC) as of the end of the fourth quarter of 2023.
Earlier this year Kraft Heinz Co (NASDAQ:KHC) posted Q4 results. Adjusted EPS in the period came in at $0.78, beating estimates by $0.01. Revenue in the quarter fell 7.1% year over year to $6.9 billion, missing estimates by $80 million.
6. Occidental Petroleum Corp (NYSE:OXY)
Warren Buffett’s Stake: $14,552,270,657
In February, Occidental Petroleum Corp (NYSE:OXY) it boosted its quarterly dividend by 4 cents to 22 cents a share.
Warren Buffett’ Berkshire owns a $14.5 billion stake in Occidental Petroleum Corp (NYSE:OXY) as of the end of the fourth quarter of 2023. Overall, 66 hedge funds tracked by Insider Monkey had stakes in Occidental Petroleum Corp (NYSE:OXY). Like OXY, Warren Buffett also likes Bank Of America Corp (NYSE:BAC), Coca-Cola Co (NYSE:KO) and Occidental Petroleum Corp (NYSE:OXY).
In February, Occidental Petroleum Corp (NYSE:OXY) posted Q4 results. Adjusted EPS in the period came in at $0.74, beating estimates by $0.05. Revenue in the quarter fell 9.6% year over year to $7.53 billion, surpassing estimates by $660 million.
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Disclosure. None. 13 Best Warren Buffett Dividend Stocks To Invest In Right Now was initially published on Insider Monkey.