Warren Buffett’s Best High-Yield Dividend Stocks

6: Deere & Company (NYSE:DE)

Percent of Warren Buffett’s Portfolio: 1.3%
Dividend Yield: 3.1%   Forward P/E Ratio: 18.9x   (as of 4/15/16)
Sector: Industrials   Industry: Farm Machinery
Dividend Growth Streak: 12 years

Deere & Company (NYSE:DE) manufactures an assortment of heavy equipment primarily serving the agriculture and construction industries. Its major products include tractors, harvesters, corn pickers, construction equipment, earth moving equipment, and more.

Deere is yet another iconic American brand in Berkshire Hathaway’s portfolio. Warren Buffett began buying up shares of Deere during the third quarter of 2012.

Since then, Berkshire Hathaway’s stake in the company has increased to more than 7% of Deere’s total shares outstanding.

Buffett is no stranger to the agricultural industry and owns CTB, which sells products used in the hog and poultry industries. He is likely bullish on the ag economy over the very long term and, as a value investor, likes to increase his stake during periods of cyclical downturns like we are experiencing today.

While farm income has slumped with crop prices and reduced demand for Deere’s equipment, the company’s competitive advantages remain largely intact.

Deere owns the most robust distribution network in agricultural machinery, which allows it to service customers more quickly and cost-effectively than its rivals.

Farmers and construction workers alike depend on Deere’s multi-million dollar pieces of equipment to do their jobs, and downtime results in cost overruns. When they purchase through Deere, they know their machinery can be serviced quickly to keep it up and running.

Deere & Company (NYSE:DE) also invests heavily to offer the most innovative products in the industry and stay ahead of its competitors. As the world continues to need more food and invest in infrastructure over the next several decades, Deere will likely continue to grow with it.

7: Wells Fargo & Co (NYSE:WFC)

Percent of Warren Buffett’s Portfolio: 19.8%
Dividend Yield: 3.1%   Forward P/E Ratio: 11.6x   (as of 4/15/16)
Sector: Financials   Industry: Major Regional Banks
Dividend Growth Streak: 5 years

Wells Fargo & Co (NYSE:WFC)’s roots can be traced back to the 1850s, and the company has since grown to be the nation’s third-largest bank by assets. Wells Fargo runs 90 business lines across a mix of banking, insurance, mortgage, investment, and consumer & commercial finance services.

Overall revenue is split almost equally between traditional loan-making operations (53% of sales) and noninterest income (47%) from brokerage advisory services, credit card fees, commissions, mortgage originations, and more.

Unlike most of its big bank peers, Wells Fargo has little involvement with investment banking and trading operations and instead chooses to focus on basic lending businesses that are generally thought to have less risk.

Wells Fargo is Warren Buffett’s biggest holding and accounts for nearly 20% of Berkshire Hathaway’s portfolio. Buffett began accumulating shares of Wells Fargo in 1989, when pessimism surrounding bank stocks was extremely high.

At the time, Buffett made his investment in the company because he was very impressed with its management team.

Banking can be a disastrous business to invest in if reckless loans are issued, so the company’s management and culture are extremely important factors. In the case of Wells Fargo, it is still thought to be the highest quality and most conservatively managed bank today.

Buffett also probably likes Wells Fargo for the long haul because it possesses major cost advantages over its smaller peers. The bank has more retail deposits than any other bank in America and has seen its total deposits grow from $3.7 billion in 1966 to $1.2 trillion in 2015.

Wells Fargo only pays 8 basis points on its deposits, which allows its lending operations to make money in virtually any interest rate environment.

As the U.S. economy continues expanding, Wells Fargo & Co (NYSE:WFC) should be able to mint money with its loan book and continue earnings superior returns on equity relative to its peers.

Read More: Our Analysis of Wells Fargo

8: The Coca-Cola Co (NYSE:KO)

Percent of Warren Buffett’s Portfolio: 13%
Dividend Yield: 3.1%   Forward P/E Ratio: 23.7x   (as of 4/15/16)
Sector: Consumer Staples   Industry: Soft Drinks
Dividend Growth Streak: 54 years

The Coca-Cola Co (NYSE:KO) needs no introduction as the largest beverage company in the world. While investors most commonly associate the company with the Coca-Cola brand, the business actually owns more than 500 sparkling and still brands covering nearly 4,000 different beverages. Over 20 of its brands generate over $1 billion in sales each.

Coke is also a very global company. Only 20% of the company’s case volume was sold in North America in 2015. Latin America (29%) and Asia (22%) are major regions for Coca-Cola and are characterized by higher growth rates.

Coca-Cola might be Warren Buffett’s most famous stock investment. Buffett scooped up a major stake in Coca-Cola in 1988 after the 1987 stock market crash made the company’s valuation too enticing to pass up.

Coca-Cola’s strong brands and extensive distribution system around the world have enabled it to become the number one provider of sparkling and still beverages and increase its dividend for over 50 straight years, qualifying the company as a ember of the dividend kings list.

Consumers have been conditioned to enjoy the company’s many brands, in part driven by Coca-Cola’s substantial marketing and advertising investments each year.

With strong brands that are proven to sell, Coke’s products are very difficult to replace on shelves. Competitors will have a very hard time taking share from the company.

Buffett loves companies with economic moats, and The Coca-Cola Co (NYSE:KO)’s moat is very strong. As per capita income grows in emerging economies, where Coke has a major presence, demand should continue rising for its products.