Warren Buffett of Berkshire Hathaway is arguably the most successful investor in history, having started with nothing and achieving a net worth of $65 billion dollars (and that despite donating tens of billions of dollars along the way). While Buffett has achieved his wealth by using many different investment styles over time, perhaps his most successful strategy has been to invest in wide-moat stocks that pay generous dividends.
In this article, we’ll look at some of Buffett’s favorite dividend investments, which include Wells Fargo & Co (NYSE:WFC), The Coca-Cola Co (NYSE:KO), International Business Machines Corp. (NYSE:IBM), Phillips 66 (NYSE:PSX), and General Motors Company (NYSE:GM).
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).
#5 General Motors Company (NYSE:GM)
– Shares Held (as of June 30): 50 million
– Value of Shares (as of June 30): $1.42 billion
GM recently made some waves when it introduced the Chevy Bolt, which at around $37,500 per vehicle costs about as much as Tesla Motors Inc (NASDAQ:TSLA)’s planned Model 3. The difference is that the Chevy Bolt goes a little bit further, with a planned range of 238 miles versus the Model 3’s target of 218 miles. Although the car won’t make a big impact in General Motors’ earnings in the near-term, the successful production and sale of the car will show investors that General Motors can successfully navigate the coming tectonic changes ahead in the automotive industry (such as with autonomous vehicles, ride sharing, the shift to EVs, etc.). With an annual dividend yield of 4.91%, General Motors Company (NYSE:GM) is one of Buffett’s higher-yielding dividend stocks. Buffett owns 50 million shares of GM as of June 30, with the position good for slightly over 1% of the value of his equity portfolio.
#4 Phillips 66 (NYSE:PSX)
– Shares Held (as of June 30): 78.78 million
– Value of Shares (as of June 30): $6.25 billion
Unlike the other dividend stocks on this list, Buffett has been adding to his position in Phillips 66 (NYSE:PSX) quite a bit recently. In the second quarter, Buffett increased his holding in the refiner by 3.231 million shares to 78.78 million shares at the end of June. Those shares were worth north of $6.2 billion on June 30 and accounted for almost 5% of the value of the legendary investor’s portfolio. Given that refiners can do well in a lower-for-longer crude price environment and that Phillips 66 has a wide moat (refining is very capital intensive and the sector is concentrated), it’s not hard to see why the Oracle of Omaha likes the stock. Shares currently pay an annual payout of $2.52 per share, good for a 3.19% yield.
Three more dividend stocks favored by Warren Buffett are disclosed on the next page.