Berkshire Hathaway’s most recent — and only — dividend distribution under Warren Buffett’s leadership occurred in 1967. While Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) no longer distributes dividends, income investors can still take advantage of the company’s portfolio and collect a significant dividend distribution by investing in the high dividend stocks that are owned by Warren Buffett.
Even though Berkshire Hathaway’s lack of paying dividends deters some investors, Buffett opts to use shareholders’ money for business purposes and he stands against distributing dividends. However, investors can build their own dividend income portfolio by tracking Berkshire Hathaway’s dividend-paying holdings.
Holdings
Currently, the Berkshire Hathaway portfolio comprises 50 companies with a combined total market value of more than $175 billion. Of the entire portfolio, 35 companies, or more than 65%, offer some kind of dividend distribution. While the lowest dividend yield among those 35 that pay a distribution is only 0.53%, Mastercard, Inc. (NYSE:MA), the stock in Berkshire Hathaway’s portfolio that offers the top dividend yield, is more than 8%.The most recent addition to the Berkshire Hathaway portfolio came on July 5, when Dominion Energy Inc. (NYSE:D), with a dividend yield of 5.07%, announced a definitive agreement to sell substantially all of its Gas Transmission & Storage segment assets to Buffett’s company in a transaction valued at $9.7 billion. The deal includes the assumption of $5.7 billion of existing indebtedness and is expected to close in the fourth quarter of 2020.
The average dividend yield for Berkshire Hathaway’s 35 dividend-paying holdings is 3.16%. Furthermore, the average dividend yield of 3.60% for the 10 largest holdings of the Berkshire Hathaway portfolio — which includes stocks that pay dividends and stocks that do not — is slightly higher than the average dividend yield of all 35 of its dividend-paying stocks.
In looking at Berkshire Hathaway’s top 10 dividend-paying stocks exclusively, their average dividend yield is 4.81%, which is 52% higher than the average dividend yield of 3.16% for Buffett’s 35 dividend-paying stocks. Additionally, Berkshire Hathaway’s top 10 dividend-paying stocks, based on their current dividend yield, have been delivering dividend distributions to their shareholders for a period of four to 192 years, or an average of nearly seven decades. These 10 dividend-paying companies are averaging nearly seven consecutive years of annual dividend hikes.
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The list below focuses exclusively on the dividend-paying companies among Berkshire Hathaway’s holdings. If only companies that delivered positive total returns during the past 12 months are included, two of the top three dividend-paying holdings would have to be excluded from the list. Wells Fargo, the company with the highest dividend yield, 8.34%, among the 35 dividend-paying Berkshire Hathaway holdings, incurred a 44.53% drop in its share price during the last 12 months. The steep share price decline stemmed from the COVID-19 market crash and inflicted a double-digit percentage loss to its shareholders.
Here are the top 10 dividend-paying Berkshire Hathaway holdings, selected and sorted in ascending order by their current dividend yields.
The 10 high dividend stocks owned by Warren Buffett: #10
Procter & Gamble Company (NYSE:PG)
While Procter & Gamble has the lowest dividend yield of the group, it presents 63 consecutive years of dividend growth as a part of the renowned Dividend Aristocrat list. Its $0.791 quarterly dividend payment would produce an annual dividend payout of $3.16, which corresponds to a 2.59% yield.
Procter & Gamble‘s long history of dividend hikes and consistent payouts makes the company a great pick for income investors, as it delivered one-year dividend growth of 4.52%. Furthermore, the company showed great resilience during the pandemic to deliver total returns of 11% over the trailing one-year period, as well as 49% and 67% over the last three and five years, respectively.
The 10 high dividend stocks owned by Warren Buffett: #9
United Parcel Service, Inc. (NYSE:UPS)
Since beginning its current streak in 2002, UPS has raised its annual dividend payout from $0.74 to $4.04. This current annual payout is equivalent to a 3.53% dividend yield, which is also higher than its own 3.22% average yield over the past five years.
Dividend distributions contributed more than 20% to the total return of 15.59% over the past year, and the other 80% of the total return comes from capital appreciation. For the last five years, UPS has rewarded its shareholders with a total return of 35%.
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The 10 high dividend stocks owned by Warren Buffett: #8
The Coca-Cola Company (NYSE:KO)
With 57 consecutive annual dividend increases in March 2020, Coca-Cola has raised its quarterly dividend payout from $0.40 to $0.41, which would correspond to a $1.64 annualized distribution and a 3.63% dividend yield.
Due to the impact of COVID-19 market crash on consumer demand, Coca-Cola shares dropped 10.13% over the trailing 12 months. However, the 128-year old company shows historical success despite market fluctuations and its long-term total return has exceeded 12% over the last three years and approximately 31% in the past five years.
The 10 high dividend stocks owned by Warren Buffett: #7
JPMorgan Chase & Company (NYSE:JPM)
With a 12.50% one-year dividend growth rate, JPMorgan Chase has a current yield of 3.90% and declared an annualized dividend payout of $3.60. Having established and maintained its dividend policy since 1827, JPMorgan Chase has the longest history of dividend payouts in this list of the top 10 Berkshire Hathaway dividend-paying stocks.
Due to the effects of COVID-19 on the financial services industry, the company has delivered a total loss of 15% over the trailing 12 months. However, during the past five years, JPMorgan Chase rewarded its long-term shareholders with total returns of 57%.
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The 10 high dividend stocks owned by Warren Buffett: #6
The PNC Financial Services Group (NYSE:PNC)
PNC has boosted its annual dividend payout over the last nine consecutive years since the 2008 financial crisis. Since then, the annual dividend payout advanced more than 11-fold, and it currently has a one-year dividend growth rate of more than 50%.
The company’s annual dividend of $4.60 corresponds to a 4.61% yield, but it could not offset PNC’s loss from the COVID-19 market crash. The company’s total loss over the trailing 12 months was 25% due to the large impact on the demand for financial services. However, long-term total returns performed better at 21.20% over the last five years.
The 10 high dividend stocks owned by Warren Buffett: #5
US Bancorp (NYSE:USB)
For its most recent distribution, US Bancorp hiked its quarterly dividend payout from $0.37 to $0.42. This new quarterly amount would convert to a $1.68 annualized distribution and a 4.72% dividend yield.
With 10 years of consecutive dividend hikes, the company has advanced its annual dividend payout at an average rate of 13.51% over the past year. Hit by the COVID-19 market crash, it currently has a 30% total loss over the trailing 12 months. Despite the total losses incurred during the pandemic, the company still presents great potential in dividend growth, with a three- year dividend growth rate of 13.87%.
The 10 high dividend stocks owned by Warren Buffett: #4
The Kraft Heinz Company (NASDAQ:KHC)
KHC’s share price advanced slightly after the company emerged as a new business entity from the Kraft and Heinz merger in 2016. However, since July 2017, the share price has been declining steadily. Combined with a continuing share price decrease since 2017 and the market crash from COVID-19, the dividend yield effectively rose to 4.99%, which is 16% higher than the company’s own 4.31% average yield over the last five years.
With benefits from the rising yield, the company actually delivered a total return of 8.58% over the last year, but has not kept consistent increases in its dividends.
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The 10 high dividend stocks owned by Warren Buffett: #3
Phillips 66 (NYSE:PSX)
Phillips 66 has boosted its annual payout every year since beginning dividend distributions in 2012, with a current dividend yield of 5.57%. Since then, the company has enhanced its annual distribution amount four-fold. This level of advancement corresponds to the current one-year average dividend growth of 30.12%.
After a 50% decline during the COVID-19 market crash, the share price has been recovering steadily since April 2020. However, the current share price is still short of a full recovery, which has caused the total loss of 29% over the trailing 12 months.
The 10 high dividend stocks owned by Warren Buffett: #2
STORE Capital Corporation (NYSE:STOR)
The STORE Capital Corporation has delivered one of the best balances between rising dividend payouts and asset appreciation. Since its formation in 2014, the company has enhanced its annual dividend payout nearly 60% and has a one-year dividend growth rate of more than 4%. The declared $1.40 annualized dividend amount yields 6.26%.
The market crash caused a total loss of 30% over the last year. However, long-term shareholders saw their total gains top 18% over a three-year period for a total return of more than 38% in a five-year period.
The 10 high dividend stocks owned by Warren Buffett: #1
Wells Fargo & Company (NYSE:WFC)
For its quarterly dividend payout in August 2019, Wells Fargo raised its dividend more than 13% from $0.45 in the previous period to $0.51. The $2.04 annualized distribution corresponds to an 8.34% dividend yield, which is more than 100% above the company’s own 4.15% five-year average yield. As of June 29, 2020, the company has announced its plan to cut the dividend payout, but has not specified how much its $0.51 dividend will drop.
While Wells Fargo offers the highest current dividend yield, a large part of its high-dividend yield is due to the decrease in its share price from the COVID-19 financial crisis. Wells Fargo’s stock price has crashed over the trailing 12 months, offsetting all dividend income gains and actually producing a total loss of 44.53% over a one-year period. However, while its 8.34% trailing 12- month dividend growth rate is appealing, investors should keep in mind that Wells Fargo will be cutting its dividends.
The list above was sorted primarily on high-dividend yield. While some investors might see these high yields and share price pullback as a long-term buying opportunity, Berkshire Hathaway offers additional dividend-paying equities recovering from the COVID-19 market crash with above-average dividend yields and double-digit percentage total returns over the trailing 12-month period.
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Read more from Ned Piplovic and Katie Kao at StockInvestor.com
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