In this article, we will take a look at Warren Buffett’s top 15 dividend picks.
Billionaire Warren Buffett has time and again proved that he is truly peerless when it comes to investing. His simple style and relentless repetition of age-old, tried and tested and sometimes cliché investing principles make it all look easy. And it seems Buffett’s true genius shines when things are going south for the broader markets. Data from Bespoke Investment Group shows that Berkshire also outperforms during recessions and bears markets. The firm says that Berkshire shares have beaten the market for no less than six recessions since 1980 by a median of 4.41 percentage points.
During the same time period, Berkshire Hathaway, which is up about 4.5% year to date through May 10, surpassed S&P 500 each time it dropped 20%, beating the broader index by a median of 14.89 percentage points.
There are many lessons that could be drawn from decades of jaw-dropping outperformance of the Oracle of Omaha. But the most important and relevant of these is Buffett’s focus on dividends.
$5.7 Billion in Cash in a Single Year
According to a latest Wall Street Journal report, which cites an analysis by Dow Jones Market Data, Warren Buffett’s Berkshire Hathaway is expected to generate $5.7 billion in cash from its stock portfolio in 2023. Most of this would be coming from dividends. The WSJ report said that a major chunk of this cash would come from some famous dividend stocks that Buffett has huge stakes in.
About $1.1 billion would be coming from Chevron, in which Buffett has a huge stake (more on that later in the article). The WSJ report also mentioned that Buffett would collect $700 million each from The Coca-Cola Company (NYSE:KO), Apple Inc. (NASDAQ:AAPL), and Bank of America Corporation (NYSE:BAC), while the Oracle of Omaha will collect about $500 million from Kraft Heinz. From American Express, the billionaire’s check would give him about $363 million.
All of this looks very simple at the surface. Just find famous dividend companies, invest in them and collect your payments, right? But if it were that simple Warren Buffett would lose his charm and charisma and the world won’t line up to listen to his advice.
Buffett’s Secret Sauce: “The Weeds Wither Away in Significance as the Flowers Bloom”
In a letter penned last year, Warren Buffett told about his “secret” of success in dividend investing under a heading “The Secret Sauce.” Buffett’s words sum up decades of wisdom and his foresight.
Here’s what he said:
“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. 4 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.”
There are several other dividend stocks in Buffett’s portfolio in addition to the famous dividend-paying companies we mentioned above. In this article we are going to take a look at all of the important dividend-paying companies in Buffett’s portfolio. Dividend payments from these companies would help the legendary investor get $5.7 billion in cash this year.
Our Methodology
For this article, we scanned Berkshire’s 13F portfolio for the fourth quarter of 2022 and picked the top dividend-paying companies in which the fund had stakes. The list is ranked in ascending order of the stake values of Berkshire in these companies. Some notable names in the list include The Coca-Cola Company, Apple Inc., and Bank of America Corporation.
Warren Buffett’s $5.7 Billion Dividend Portfolio: Top 15 Picks
15. The Procter & Gamble Company (NYSE:PG)
Berkshire Hathaway’s Stake: $48 million
The Procter & Gamble Company ranks 15th in our list of the best dividend stock picks of Warren Buffett. The Procter & Gamble Company has upped its dividend for 67 years without a break.
As of the end of the last quarter of 2022, 74 hedge funds had stakes in The Procter & Gamble Company, according to Insider Monkey’s database of 943 hedge funds.
Warren Buffett owns a $48 million stake in The Procter & Gamble Company.
14. Johnson & Johnson (NYSE:JNJ)
Berkshire Hathaway’s Stake: $58 million
Johnson & Johnson is a dividend stock that never stops rewarding. Recently, the company upped its dividend by 5.3%. The healthcare giant has upped its dividend for more than six decades without a break.
Warren Buffett’s stake in Johnson & Johnson has a total worth of $58 million as of the end of the fourth quarter of 2022.
13. U.S. Bancorp (NYSE:USB)
Berkshire Hathaway’s Stake: $290.9 million
U.S. Bancorp (NYSE:USB) has a dividend yield of about 6.5% as of May 11.
During the first quarter U.S. Bancorp’s adjusted EPS came in at $1.16, beating estimates by $0.04. Revenue in the period jumped 28.2% year over year to $7.18 billion, beating estimates by $50 million.
12. The Bank of New York Mellon Corporation (NYSE:BKI)
Berkshire Hathaway’s Stake: $1.1 billion
With a dividend yield of over 3%, The Bank of New York Mellon Corporation (NYSE:BKI) is one of the notable stocks in Warren Buffett’s portfolio that pay dividends. During the first quarter, The Bank of New York Mellon Corporation adjusted EPS came in at $1.13, beating estimates by $0.02. Revenue in the period jumped 12% year over year to reach $4.4 billion.
In addition to banks like BKI, Buffett is holding dividend stocks like The Coca-Cola Company and Apple Inc. for years.
11. Mastercard Incorporated (NYSE:MA)
Berkshire Hathaway’s Stake: $1.4 billion
In December 2022, Mastercard Incorporated (NYSE:MA) upped its dividend by a whopping 16.3%.
Berkshire Hathaway had a $1.4 billion stake in Mastercard Incorporated as of the end of the fourth quarter of 2022.
Overall, 139 hedge funds had stakes in Mastercard Incorporated as of the end of the fourth quarter of 2022. The total value of these stakes was about $16 billion.
10. Visa Inc. (NYSE:V)
Berkshire Hathaway’s Stake: $1.7 billion
Berkshire Hathaway has been holding a stake in payments giant Visa Inc. (NYSE:V) since 2011. Visa Inc. is a reliable dividend payer, having increased its dividend consistently for the last 14 years.
In April Visa Inc. posted results for the fiscal second quarter. Adjusted EPS in the quarter came in at $2.09, beating estimates by $0.10. Revenue in the period increased by 11.1% year over year to reach $8 billion, beating estimates by $210 million.
As of the end of the fourth quarter of 2022, 177 hedge funds tracked by Insider Monkey have stakes in Visa Inc., up from 165 hedge funds in the previous quarter. This shows that hedge fund sentiment for Visa Inc. jumped in the last quarter of 2022.
9. Citigroup Inc. (NYSE:C)
Berkshire Hathaway’s Stake: $2.5 billion
Warren Buffett owns a $2.5 billion stake in Citigroup Inc. (NYSE:C) as of the end of the fourth quarter of 2022. Citigroup Inc. has a dividend yield of over 4% as of May 10.
A total of 81 hedge funds tracked by Insider Monkey had stakes in Citigroup Inc.. The total worth of these stakes was $7.5 billion.
8. Moody’s Corporation (NYSE:MCO)
Berkshire Hathaway’s Stake: $6.8 billion
Despite a very small dividend yield, Moody’s Corporation is an important dividend stock in Buffett’s portfolio since Berkshire owns a massive $6.8 billion stake in the company as of the end of the fourth quarter of 2022. Moody’s Corporation has over a decade of consistent dividend hikes under its belt.
7. Occidental Petroleum Corporation (NYSE:OXY)
Berkshire Hathaway’s Stake: $12.6 billion
Occidental Petroleum Corporation (NYSE:OXY) is another important energy stock in Berkshire Hathaway’s portfolio. Berkshire in March increased its stake in Occidental Petroleum Corporation to $12.6 billion. Analysts were speculating that the hedge fund might be making moves to take control of Occidental Petroleum Corporation, but these rumors were negated by Buffett recently as he said there are no such plans.
“We wouldn’t know what to do with it,” said Buffett.
Occidental Petroleum Corporation earlier this year upped its dividend by 38.5%.
Earlier this month, Occidental Petroleum Corporation posted first-quarter results. Adjusted EPS in the period came in at $1.09, missing estimates by $0.18.
Revenue in the quarter fell 14.9% year over year to $7.2 billion, missing estimates by $110 million.
6. The Kraft Heinz Company (NASDAQ:KHC)
Berkshire Hathaway’s Stake: $13.3 billion
Food company The Kraft Heinz Company (NASDAQ:KHC) is in the limelight after it posted solid first-quarter results.
EPS in the quarter came in at $0.68, beating estimates by $0.08. Revenue jumped 7.3% YoY in the quarter to $6.49 billion, crushing past estimates by $100 million.
The Kraft Heinz Company increased its EPS guidance for 2023 to $2.83 to $2.91, up from a prior guidance of between $2.67 and $2.73.
The Kraft Heinz Company dividend yield as of May 10 came in at 3.9%
As of the end of the last quarter of 2022, 39 hedge funds reported having stakes in The Kraft Heinz Company. The total worth of these hedge fund stakes was about $14 billion. Like The Coca-Cola Company, Apple Inc., and Bank of America Corporation, KHC is one of the best dividend stocks to buy according to Buffett.
5. American Express Company (NYSE:AXP)
Berkshire Hathaway’s Stake: $22.4 billion
The Oracle of Omaha has a $22.4 billion stake in American Express Company (NYSE:AXP) as of the end of the fourth quarter of 2022. In March American Express Company increased its quarterly dividend by 15.4%.
Earlier this year Morgan Stanley gave bullish comments for American Express Company and added the stock in the list of its top picks for 2025. The firm said it believes slowing growth in expenses related to marketing and card member acquisition could help American Express Company drive about 430bp operating leverage growth in 2023. Morgan Stanley thinks this operating leverage growth trajectory could continue in 2024 as well.
4. The Coca-Cola Company (NYSE:KO)
Berkshire Hathaway’s Stake: $25.4 billion
The Coca-Cola Company is one of the most sought-after dividend stocks since the company has upped its dividend for six decades without break. In April, The Coca-Cola Company posted its first quarter results according to which its adjusted EPS came in at $0.68, beating estimates by $0.03. Revenue in the quarter jumped about 4.8% year over year to $11 billion, beating estimates by $220 million.
Out of the 943 hedge funds tracked by Insider Monkey, 58 hedge funds were long KO as of the end of the fourth quarter of 2022.
3. Chevron Corporation (NYSE:CVX)
Berkshire Hathaway’s Stake: $29.3 billion
Warren Buffett’s Berkshire has a whopping $29 billion stake in oil giant Chevron Corporation (NYSE:CVX) as of the end of the fourth quarter of 2022. With over three decades of consistent dividend increase, Chevron Corporation is one of the most reliable dividend stocks out there.
Other hedge funds were also piled into Chevron Corporation at the close of 2022. 57 hedge funds (including Berkshire) tracked by Insider Monkey had stakes in the company. The total worth of these stakes was over $32 billion.
2. Bank of America Corporation (NYSE:BAC)
Berkshire Hathaway’s Stake: $33.5 billion
Bank of America Corporation remains the favorite bank stock of Warren Buffett. The Oracle of Omaha said during the 2023 shareholders meeting that there’s a lot of uncertainty in the banking sector amid the current crisis, but he continues to stick with Bank of America Corporation.
“We’re very cautious… about ownership of banks and we do remain with one bank… I like Bank of America and I like the management,” Buffett said.
As of the end of 2022, Berkshire Hathaway had owned $33 billion stake in Bank of America Corporation.
Bank of America Corporation has upped its dividend for five decades.
Oakmark Equity and Income Fund made the following comment about Bank of America Corporation in its Q1 2023 investor letter:
“The Oakmark Equity and Income Fund has 29% of its equity portfolio in financials. This made the March sell-off painful, but we do not believe that this has meaningfully changed the value of most of our financial equity holdings. In fact, we were adding to financial positions throughout March. We believe that one way to analyze our financial holdings is to look at them in different buckets given their various business models and risk profiles. Almost 30% of our financial exposure is in insurance companies and insurance brokers. Insurance companies have very stable liability profiles, so the main risk is a change in asset values. We are comfortable with their investment portfolios and think these stocks are quite attractive. Around 5% of our financials are asset managers. This leaves a little over 40% of the financials exposure in a varied group of banks and lenders. About 5% of that portfolio is in Bank of America Corporation and State Street. These two banks are designated as Systematically Important Financial Institutions and are held to higher regulatory standards. Our largest single financials holding is Bank of America, which has grown deposits during March, and we believe it is one of the best managed companies in the sector.”
1. Apple Inc. (NASDAQ:AAPL)
Berkshire Hathaway’s Stake: $116.3 billion
Warren Buffett’s has long been a believer in Apple Inc.. As of the end of the last quarter of 2022, Apple Inc. accounted for about 38% of Berkshire’s entire portfolio. Apple Inc. started paying dividends in 2012 and has since upped its dividend every year. According to a latest report from Bloomberg, Apple Inc. is expected to initiate a new five-part debt offering to raise $5 billion.
As of the end of the last quarter of 2022, 135 hedge funds were long Apple Inc., according to Insider Monkey’s proprietary database of 943 hedge funds
RiverPark Large Growth Fund made the following comment about Apple Inc. in its Q1 2023 investor letter:
“Apple Inc. (NASDAQ:AAPL): Apple shares were our final top contributor for the quarter. While the company reported a rare quarterly earnings miss, investors had expected slower sales due to macro headwinds. Services continue to be a bright spot for the company with an all-time high of $21 billion in quarterly revenue, a 6% year-over-year increase, and management expects iPhone revenue growth to re-accelerate in 2Q. Operating Cash Flow was $34 billion for the quarter, and the company returned $23 billion to shareholders in the last three months, including $4 billion in dividends and $19 billion in share repurchases.
With an installed base of 2 billion active devices and significant growth of the company’s recurring revenue Services segment (now 18% of revenue), we believe that Apple remains one of the most innovative, best-positioned and most profitable companies in the mobile technology industry.”
You can also take a peek at 10 Most Profitable Small Businesses in 2023 and 10 Best April Dividend Stocks To Buy.
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This article is originally published at Insider Monkey.
