In this article, we will take a detailed look at the 15 Best Dividend Stocks to Buy According to Warren Buffett.
Billionaire Warren Buffett has for years enjoyed steady and growing dividends from some of his top investments. While dividend payments have never been the first priority of the Oracle of Omaha while looking for new investments, he does give them a lot of importance and almost always mentions his portfolio companies with growing dividends in his annual letters. In his latest annual letter to Berkshire shareholders, Buffett talked about Coca-Cola Co (NYSE:KO) and American Express Company (NYSE:AXP), in which Berkshire owns $24 billion and $28 billion worth of stakes, respectively.
“During 2023, we did not buy or sell a share of either AMEX or Coke – extending our own Rip Van Winkle slumber that has now lasted well over two decades. Both companies again rewarded our inaction last year by increasing their earnings and dividends. Indeed, our share of AMEX earnings in 2023 considerably exceeded the $1.3 billion cost of our long-ago purchase. Both AMEX and Coke will almost certainly increase their dividends in 2024 – about 16% in the case of AMEX – and we will most certainly leave our holdings untouched throughout the year. Could I create a better worldwide business than these two enjoy? As Bertie will tell you: “No way.”
Though Berkshire did not purchase shares of either company in 2023, your indirect ownership of both Coke and AMEX increased a bit last year because of share repurchases we made at Berkshire. Such repurchases work to increase your participation in every asset that Berkshire owns. To this obvious but often overlooked truth, I add my usual caveat: All stock repurchases should be price-dependent. What is sensible at a discount to business-value becomes stupid if done at a premium.
The lesson from Coke and AMEX? When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.”
Buffett loves it when he does not have to touch his stakes and let the investments do all the work. He believes his investments are rewarded when the companies he has invested in increase dividends and focus on shareholder returns.
Methodology
But Coca Cola and American Express aren’t the only two dividend-paying stocks in Buffett’s portfolio. In this article we scanned Berkshire’s Q4 portfolio and picked 15 stocks that pay dividends. 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).
15. T-Mobile Us Inc. (NAQSDAQ:TMUS)
Warren Buffett’s Stake: $840,449,860
T-Mobile Us Inc(NAQSDAQ:TMUS) ranks 15th in our list of the best dividend stocks to buy according to Warren Buffett. Berkshire owns an $840 million stake in T-Mobile Us Inc (NAQSDAQ:TMUS) as of the end of 2023. In January T-Mobile Us Inc (NAQSDAQ:TMUS) posted fourth quarter results, according which T-Mobile Us Inc’s (NAQSDAQ:TMUS) GAAP EPS in the quarter came in at $1.67, missing estimates by $0.23. Revenue in the period inched up 1% year over year to $20.48 billion, beating estimates by $810 million.
ClearBridge Dividend Strategy made the following comment about T-Mobile US, Inc. (NASDAQ:TMUS) in its Q3 2023 investor letter:
“During the quarter we initiated positions in two new names: T-Mobile US, Inc. (NASDAQ:TMUS) and Gilead Sciences. T-Mobile is the best-in-class player in the wireless space, delivering the strongest growth with the lowest cost structure and the best consumer proposition. T-Mobile’s strength is rooted in its advantaged competitive position. Its superior spectrum holdings enable it to provide better wireless service at meaningfully lower cost. T-Mobile’s annual capital expenditures run about $10 billion, on the order of half the amount its peers must spend. Due to its lower cost structure, T-Mobile can undercut its competitors on price while still generating compelling profitability and returns.
This combination — superior service at lower prices — has enabled T-Mobile to outgrow its competition. In the three years since completing its merger with Sprint, T-Mobile has grown its post-paid subscriber base by about 22%. Over the same period, AT&T’s has grown by about 14%, while Verizon’s by less than 5%.
Given the high fixed-cost nature of the wireless business, these steady increases in revenue growth have led to outsize increases in profits and free cash flow. Free cash flow in 2023 is expected to come in around $13.5 billion, up from less than $8 billion last year. In 2024 free cash flow is expected to grow by over 20% to approximately $17 billion — providing a 10% yield based on today’s stock price.
We have long admired T-Mobile, but until recently the stock did not pay a dividend. The company announced its inaugural dividend in September, and we bought the stock shortly thereafter. The initial yield is about 2% and it is expected to grow about 10% per year.”
14. Aon Plc (NYSE:AON)
Warren Buffett’s Stake: $1,193,182,000
Professional services and management consulting company Aon Plc (NYSE:AON) is one of the low-yield dividend stocks in Warren Buffett’s portfolio. In January Aon Plc declared a quarterly dividend of $0.615/share, payable on February 15. Forward dividend yield at the time came in at 0.82%.
As of the end of the fourth quarter of 2023, 57 hedge funds out of the 933 funds tracked by Insider Monkey had stakes in Aon Plc.
Polen Global Growth Strategy stated the following regarding Aon plc (NYSE:AON) in its fourth quarter 2023 investor letter:
“AON PLC’s (NYSE:AON) stock price underperformed this past quarter following the announcement of the company’s acquisition of NFP, a middle market insurance broker, for $13 billion. Though the deal complements Aon’s current business, it is expected to be dilutive to earnings in the near term, prompting a sell-off in the shares. We will continue to assess the merits of the NFP transaction, but it does not currently change our long-term view of Aon, which we view as a steady, durable, low-teens earnings compounder.”
13. Capital One Financial Corp (NYSE:COF)
Warren Buffett’s Stake: $1,635,201,454
Warren Buffett has a $1.64 billion stake in Capital One Financial Corp (NYSE:COF), which is everywhere in the news since the announcement of its acquisition of Discover Financial for an eye-popping $35.3 billion.
Evercore ISI recently downgraded the stock to In Line from Outperform amid huge uncertainty around the Discover deal.
“We expect uncertainty re: regulatory approval of the DFS deal, lengthy TBV [tangible book value] earnback & sizeable dilution, and lack of catalysts to limit upside to the shares,” Evercore analyst John Pancari said in a note.
Sound Shore Management made the following regarding Capital One Financial Corporation in its fourth quarter 2023 investor letter:
“Long-term holding Capital One Financial Corporation (NYSE:COF) was also one of our better performers this quarter. The company boasts a diversified deposits base with about 80% FDIC insured, well above industry average. It is the only major bank 100% in the cloud, which enables better underwriting and quicker response to changes in the environment. This technology also helps reduce operating and fraud cost while freeing up cash flow for reinvestment in marketing to grow products (Venture X card) and build its brand. Periods of stress, like we saw in the banking sector during March, are a reminder of the underwriting acumen and high quality deposits of Capital One. We added to our position after the fallout, knowing that the company’s seasoned management team had steered capably through previous cycles. Today, as credit card delinquencies have risen to more normal levels, Capital One is already reporting a slowing in delinquency growth. Conversely, some peers saw prior underwriting missteps begin to surface in 2023. Currently trading at 9 times 2024 consensus earnings and around book value, we remain enthusiastic about the investment.”
12. Mastercard Inc (NYSE:MA)
Warren Buffett’s Stake: $1,700,345,238
With over a decade of dividend increases, Mastercard Inc (NYSE:MA) is one of the best dividend stocks to buy for 2024 according to billionaire Warren Buffett. Berkshire had a $1.7 billion stake in Mastercard Inc as of the end of 2023. In December, Mastercard Inc’s (NYSE:MA) board approved a 16% hike in the quarterly cash dividend.
As of the end of the fourth quarter of 2023, 141 hedge funds tracked by Insider Monkey had stakes in Mastercard Inc. The most significant stake in Mastercard Inc is owned by Charles Akre’s Akre Capital Management which owns a $2.2 billion stake in Mastercard Inc.
Like Mastercard, Warren Buffett also likes Chevron Corp (NYSE:CVX), Coca-Cola Co and American Express Company.
Ensemble Capital Management stated the following regarding Mastercard Incorporated 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
Warren Buffett has been holding stakes in Visa Inc (NYSE:V) since the third quarter of 2011. As of the end of 2023 Berkshire had a $2.2 billion stake in Visa Inc. With an impressive track record of dividend growth and a resilient business, Visa Inc is one of the best dividend stocks to buy according to Warren Buffett.
In addition to Visa, Warren Buffett also enjoys dividends from Chevron Corp, Coca-Cola Co and American Express Company.
In its October 2023 investor letter, Lakehouse Capital stated the following regarding Visa Inc.:
“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
In July 2023, Kroger Co (NYSE:KR) raised its dividend by 12%. This marked the 17th consecutive year of dividend increases by the retailer. As of the end of 2023 Warren Buffett had a $2.3 billion stake in Kroger Co.
Kroger Co is in the news after the FTC filed a lawsuit to block Kroger Co’s (NYSE:KR) almost $25 billion purchase of Albertsons (NYSE:ACI).
In its fourth quarter 2023 investor letter, Oakmark Global Fund stated the following regarding The Kroger Co.:
“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
With a dividend yield of about 3.8% as of February 27, Citigroup Inc (NYSE:C) is one of the top dividend stocks in Warren Buffett’s portfolio since Berkshire had a $2.84 billion stake in Citigroup Inc.
Earlier in February, BofA Securities published a list of stocks that it believes could offer higher dividend yield over the next three years than cash. Citigroup Inc was part of the list.
Patient Capital Management stated the following regarding Citigroup Inc. 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
Moody’s Corp earlier this month increased its dividend by 10.4%. The new dividend is payable by March 15. As of the end of the fourth quarter of 2023, 56 hedge funds tracked by Insider Monkey had stakes in the credit ratings company Moody’s Corp.
Warren Buffett’s Berkshire Hathaway had a $9.7 billion stake in Moody’s Corp as of the end of the fourth quarter of 2023.
L1 Capital International Fund made the following comment about Moody’s Corporation 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
With a dividend yield of about 4.4%, Kraft Heinz Co (NASDAQ:KHC) ranks seventh in our list of the best dividend stocks to buy according to Warren Buffett. The Oracle of Omaha had a $12 billion stake in Kraft Heinz Co as of the end of the fourth quarter of 2023.
6. Occidental Petroleum Corp (NYSE:OXY)
Warren Buffett’s Stake: $14,552,270,657
Occidental Petroleum Corp (NYSE:OXY) earlier in February said it will increase its dividend from last year’s comparable payment on the 15th of April to $0.22.
“On an annual basis, the dividend is $0.88 per share at the new rate, compared to the previous annual rate of $0.72 per share,” the company said in a press release.
As of the end of 2023, Berkshire had a $14.55 billion stake in Occidental Petroleum Corp.
5. Chevron Corp (NYSE:CVX)
Warren Buffett’s Stake: $18,808,080,506
Chevron Corp ranks fifth in our list of the best dividend stocks to buy according to Warren Buffett. Chevron Corp has a whopping 37 years of consistent dividend increases under its belt. Warren Buffett owns a $19 billion stake in Chevron Corp.
The London Company Large Cap Strategy stated the following regarding Chevron Corporation in its fourth quarter 2023 investor letter:
“Chevron Corporation (NYSE:CVX) – CVX underperformed during 4Q as oil prices fell, 3Q results missed expectations, and CVX negatively adjusted 2024-2025 cash flow guidance for its key asset in Kazakhstan. It is also notable that CVX announced a deal to acquire Hess Corp in a stock-for-stock transaction. While we generally do not maintain a high degree of exposure to pure commodity businesses, we continue to view CVX favorably for its conservative balance sheet, focus on returns, and commitment to the dividend.”
4. Coca-Cola Co (NYSE:KO)
Warren Buffett’s Stake: $23,572,000,000
Warren Buffett has been a believer in Coca-Cola Co for several decades. With over six decades of consistent dividend increases and a resilient business Coca-Cola Co is an example of the textbook businesses Warren Buffett likes.
As of the end of 2023 Berkshire Hathaway had a stake worth about $24 billion in the beverage company Coca-Cola Co.
Hayden Capital made the following comment about The Coca-Cola Company in its third 2023 investor letter:
“It’s not just emerging markets either, where one could argue a “scarcity premium” given fewer quality public companies. Even in the US, The Coca-Cola Company (NYSE:KO) trades at ~30x P/E despite having the same earnings as 10 years ago.
Both of these companies actually have lower revenues than 10 – 15 years ago too, indicating that their profit growth is mostly from margin expansion. This can only last for so long before there’s no more excess expenses left to cut.
I find it ironic that all these companies trade as “bond-equivalents” in the minds of investors – even commanding lower yields than US treasuries, the safest security in the world. But it’s clear that their businesses are not nearly as safe. Coca-Cola is facing disruption risk from consumers shifting to new, heathier beverage brands.
But these companies are ~35% more expensive than US Treasuries, despite the heightened risk. On a risk-adjusted basis, one could argue the implied premium is even higher.”
Perhaps the explanation is simply the price volatility difference between these stocks and treasuries over the last two years. For example, 10-year Treasury bonds are down ~-20% since the beginning of 2022. By comparison, KO and PG are remarkably down only -4 – 6% over that time frame.”
3. American Express Company (NYSE:AXP)
Warren Buffett’s Stake: $28,402,748,537
In January, American Express Company increased its dividend by 16.7%. As of the end of 2023, Warren Buffett’s fund had a $28.4 billion stake in American Express Company.
In its fourth quarter 2023 investor letter, Oakmark Select Fund stated the following regarding American Express Company:
“American Express Company (NYSE:AXP) is one of the largest credit card issuers and payment networks in the world. We believe the company’s closed-loop network, brand equity and scale represent durable competitive advantages. Unlike most card issuers that process credit card transactions over third-party networks, American Express processes transactions over its own network. This allows American Express to earn greater economics than peers on each card transaction. The company retains part of this advantage in the form of higher profitability and reinvests the rest in enhanced customer rewards and service. Over time, these investments have helped American Express build its brand and attract more lucrative, high-spending card customers. We expect this business model and customer-centric approach will continue to drive industry-leading growth for years to come. Concerns over the near-term economic outlook allowed us to purchase shares of American Express at a 13x P/E on next year’s consensus earnings estimate. We think that is an attractive valuation for a company with this combination of business quality and growth.”
2. Bank of America Corp (NYSE:BAC)
Warren Buffett’s Stake: $34,776,127,042
With a 2.86% dividend yield and a dominance in the banking industry, Bank of America Corp (NYSE:BAC) is among the top dividend stocks in Warren Buffett’s portfolio.
Smead Value Fund made the following comment about Bank of America Corporation in its Q3 2023 investor letter:
“Through the first nine months of the year, we had a gain of 2.10%. The S&P 500 had a gain of 13.07% and the Russell 1000 Value had a gain of 1.79%. The stock market realized markedly higher riskless US Treasury interest rates had their effect on the stock market as it began to reassert what Warren Buffett calls the “gravitational pull” on price-to-earnings ratios (P/E).
On the downside, Target (TGT), Bank of America Corporation (NYSE:BAC) and Pfizer (PFE) detracted the most in the first nine months of the year. Inverted yield curves are historically lousy for the banks, so the weak performance for BAC is no surprise.”
1. Apple Inc (NASDAQ:AAPL)
Warren Buffett’s Stake: $174,347,466,800
Warren Buffett owns a $174 billion stake in Apple Inc (NASDAQ:AAPL), which is a stock that offers both dividends and stock price growth opportunities.
During its February 2024 earnings call Apple Inc’s (NASDAQ:AAPL) management talked about dividends and outlook:
“During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter.
As we move ahead into the March quarter, I’d like to review our outlook, which includes the types of forward-looking information that Suhasini referred to at the beginning of the call. The color we are providing today assumes that the macroeconomic outlook doesn’t worsen from what we are projecting today for the current quarter. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter’s total revenue last year.
When we remove this impact from last year’s revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter.”
Read the entire earnings call here.
Horizon Kinetics stated the following regarding Apple Inc. in its fourth quarter 2023 investor letter:
“The full point is that if BYD has turned its attention from its domestic market to direct global competition, then other Chinese companies can do the same. The next most visible example of Chinese commercially applied technological prowess relates to the 2nd highest-weight company in the S&P 500, Apple Inc. (NASDAQ:AAPL).
In September 2023, Huawei Technologies introduced its Mate 60 Pro smartphone. It uses its own, internally developed 5G enabled chip that is apparently competitive with the Apple A17 chip. For practical purposes it has the functionality of the iPhone 15 Pro. This came as a great surprise – perhaps even shock – to the U.S. technology community, because four years ago the U.S. placed strict sanctions on China’s access to state-of-the-art semiconductor manufacturing technology…” (Click here to read the full text)
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Disclosure. None. 15 Best Dividend Stocks to Buy According to Warren Buffett was initially published on Insider Monkey.
