In this article, we discuss Warren Buffett’s dividend portfolio.
Warren Buffett’s repute as one of the Wall Street’s most successful investors is due to his distinct investment strategies that laid the foundation for a lot of investment firms to come. Buffett’s investment in value and dividend stocks resulted in his hedge fund, Berkshire Hathaway, returning 20.1% on average annually since 1965. The dividend stocks in his concentrated portfolio generate a substantial income for the hedge fund every year.
According to a report published by Morgan Stanley, dividend-paying stocks have substantially outperformed non-dividend stocks in the past. From 1991 to 2015, non-dividend stocks averaged a 4.18% return per year, compared with a 9.7% annual average return of dividend stocks during the same period. Moreover, the same report mentioned that over the past 90 years, dividends have represented over 40% of the total return equation. Due to this, many companies have initiated dividend payments in the recent past to facilitate investors. Dividend stocks represent a big portion of Warren Buffett’s portfolio.
In 2018, Berkshire Hathaway made $3.8 billion in dividend income and the amount has increased significantly ever since. In 2021, the hedge fund earned over $5.3 billion in dividends.
Financial and technology sectors dominated the portfolio of Buffett in Q1, with significant investments in the energy sector. Moreover, the portfolio also contains a number of dividend stocks through which the hedge fund generated billions in the quarter. Some of them include Chevron Corporation (NYSE:CVX), Apple Inc. (NASDAQ:AAPL), and The Coca-Cola Company (NYSE:KO).
Our Methodology:
In this article, we discuss some of the notable dividend stocks in Warren Buffett’s Q1 portfolio.
10. The Kroger Co. (NYSE:KR)
Dividend Yield as of May 19: 1.75%
Quarterly Dividend: $0.21 per share
The Kroger Co. (NYSE:KR), an American retail company, increased its quarterly dividend by 17% in 2021 to $0.21 per share. This marked the company’s 15th year of consistent dividend increase, at an average of 13% each year. The stock’s dividend yield stood at 1.75%, as of the close of May 19.
Berkshire Hathaway started building its position in The Kroger Co. during the fourth quarter of 2019, with shares worth roughly $550 million. In Q1 2022, the hedge fund slashed its position in the company by 6%, equaling shares worth over $3.3 billion. The company represented 0.91% of Warren Buffett’s portfolio in Q1 2022. Along with this, some of the notable blue-chip holdings in Warren Buffett’s portfolio include Chevron Corporation, Apple Inc., and The Coca-Cola Company.
In April, Robert Ohmes, an analyst of BofA, upgraded The Kroger Co. to Buy from Neutral, with a $75 price target. In Q4 2021, 41 hedge funds tracked by Insider Monkey reported owning stakes in The Kroger Co., valued at over $4.1 billion. Along with Warren Buffett, Jim Simons’ Renaissance Technologies was one of the major stakeholders of the company in Q1 2022, with shares worth over $942.4 million.
9. The Bank of New York Mellon Corporation (NYSE:BK)
Dividend Yield as of May 19: 3.14%
Quarterly Dividend: $0.34 per share
The Bank of New York Mellon Corporation (NYSE:BK) has been a part of Warren Buffett’s portfolio for more than a decade now. The hedge fund made its first investment in the company during the fourth quarter of 2010. At the end of Q1 2022, the hedge fund held shares worth roughly $3.6 billion in the company, representing 0.98% of Warren Buffett’s portfolio.
The Bank of New York Mellon Corporation increased its quarterly dividend by 10% in 2021 to $0.34 per share. The stock’s dividend yield stood at 3.14%, as of May 19.
In April, Barclays set a $68 price target on the stock, with an Overweight rating on the shares, appreciating the company’s Q1 result.
Of the 924 elite funds tracked by Insider Monkey, 49 hedge funds held positions in The Bank of New York Mellon Corporation in Q4 2021, up from 46 in the previous quarter. The total value of these stakes stood at roughly $5.2 billion.
Ariel Investments mentioned The Bank of New York Mellon Corporation in its Q4 2021 investor letter. Here is what the firm has to say:
“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.
This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. Smaller positions in The Bank of New York Mellon Corporation (BK) also benefited from higher rates, principally with their ability to invest customer cash.”
8. Citigroup Inc. (NYSE:C)
Dividend Yield as of May 19: 4.14%
Quarterly Dividend: $0.51 per share
In Q4 2021, Citigroup Inc. (NYSE:C) experienced a spike in hedge fund interest, as 97 hedge funds tracked by Insider Monkey reported owning stakes in the company, up from 79 in the previous quarter. These stakes hold a consolidated value of over $6.6 billion. Harris Associates was one of the company’s major shareholders in Q1 2022, with shares worth over $1.4 billion.
Citigroup Inc. currently pays a quarterly dividend of $0.51 per share, with a dividend yield of 4.14%, as of the close of May 19. In May, Oppenheimer saw an opportunity for Citigroup Inc. due to loan growth and rising interest rates. The firm set a $93 price target on the stock, with an Outperform rating on the shares.
Citigroup Inc. was one of the recent acquisitions of Berkshire Hathaway. The hedge fund started building its position in the company with shares worth roughly $3 billion. The company represented 0.81% of Warren Buffett’s portfolio.
7. U.S. Bancorp (NYSE:USB)
Dividend Yield as of May 19: 3.75%
Quarterly Dividend: $0.46 per share
U.S. Bancorp (NYSE:USB), an American bank holding company, hiked its quarterly dividend by 10% in 2021. The company currently pays a quarterly dividend of $0.46 per share, with a dividend yield of 3.75%, as of the close of May 19.
Warren Buffett’s Berkshire Hathaway started investing in U.S. Bancorp during the fourth quarter of 2010. The hedge fund did not change its position in the company during the first quarter of 2022 and held shares worth over $6.7 billion. The company accounted for 1.84% of Warren Buffett’s portfolio.
This May, Oppenheimer lifted its price target on American Express Company (NYSE:AXP) to $72, with an Outperform rating on the shares.
First Eagle Investment Management was one of the major stakeholders of U.S. Bancorp in Q1 2022, with shares worth over $506.2 million. Overall, 46 hedge funds tracked by Insider Monkey reported owning stakes in the company in Q1 2022, up from 42 in the previous quarter. These stakes hold a consolidated value of roughly $8 billion.
ClearBridge Investments mentioned U.S. Bancorp in its Q4 2021 investor letter. Here is what the firm has to say:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp.”
6. American Express Company (NYSE:AXP)
Dividend Yield as of May 19: 1.33%
Quarterly Dividend: $0.52 per share
American Express Company has been maintaining a 30-year dividend streak with occasional dividend increases. In March 2022, the company raised its quarterly dividend by 20% to $0.52 per share. The stock’s dividend yield, as of May 19, stood at 1.33%.
Appreciating the company’s solid Q1 results and lower expenses, this April, RBC Capital raised its price target on American Express Company to $200, with a Sector Perform rating on the shares. In Q1 2022, Berkshire Hathaway did not change its position in the company and held shares worth over $28.5 billion. The company was the third-largest holding of the hedge fund, accounting for 7.79% of Warren Buffett’s portfolio.
In Q4 2021, 64 hedge funds tracked by Insider Monkey held positions in American Express Company, with stakes valued at roughly $29 billion. In comparison, 57 hedge funds held shares in the company in the previous quarter, valued at $29.6 billion.
Along with AXP, other strong dividend-paying stocks in Buffett’s portfolio are Chevron Corporation, Apple Inc., and The Coca-Cola Company.
5. The Kraft Heinz Company (NASDAQ:KHC)
Dividend Yield as of May 19: 4.10%
Quarterly Dividend: $0.40 per share
The Kraft Heinz Company (NASDAQ:KHC) was the sixth-largest holding of Berkshire Hathaway in Q1 2022. The hedge fund held shares worth roughly $13 billion in the company, which represented 3.52% of Warren Buffett’s portfolio.
As of Q4 2021, 39 hedge funds tracked by Insider Monkey reported owning stakes in The Kraft Heinz Company, up from 33 in the previous quarter. The total value of these stakes is over $12.2 billion. Along with Berkshire Hathaway, First Eagle Investment Management also held a significant stake in the company, worth $254.3 million.
In 2019, The Kraft Heinz Company slashed its dividend by 36% to $0.40 per share and has maintained a quarterly dividend of the same amount ever since. The stock’s dividend yield stood at 4.10%, as of May 19. Warren Buffett’s Berkshire Hathaway has been investing in the company since the third quarter of 2015 and has benefitted a lot from its dividend.
In May, BofA added The Kraft Heinz Company to its ‘US 1’ list, naming the company as one of its best investment ideas, and kept a Buy rating on the shares.
4. The Coca-Cola Company (NYSE:KO)
Dividend Yield as of May 19: 2.88%
Quarterly Dividend: $0.44 per share
The Coca-Cola Company is one of the oldest holdings of Berkshire Hathaway, as the hedge fund started investing in the company in 1988. The stock has soared over 2,000% ever since. In March, the company announced a 4.8% hike in its quarterly dividend to $0.44 per share. This was the company’s 60th consecutive year of dividend growth. The stock’s dividend yield stood at 2.88%, as of May 19.
During the first quarter of 2021, Berkshire Hathaway did not change its position in The Coca-Cola Company, holding shares worth $400 million. The company was the fifth-largest holding of the hedge fund and represented 6.82% of Warren Buffett’s portfolio.
At the end of Q4 2021, 70 hedge funds tracked by Insider Monkey reported owning stakes in the company, compared with 64 in the previous quarter. These stakes hold a consolidated value of over $2.86 billion. With shares worth over $801.5 million, Rajiv Jain’s GQG Partners was one of the major stakeholders of the company in Q1 2022.
ClearBridge Investments mentioned The Coca-Cola Company in its Q4 2021 investor letter. Here is what the firm has to say:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
3. Apple Inc. (NASDAQ:AAPL)
Dividend Yield as of May 19: 0.65%
Quarterly Dividend: $0.23 per share
Berkshire Hathaway started buying Apple Inc. in 2016 and today the company is the largest holding of the hedge fund. The hedge fund owned shares worth over $155.5 billion in the tech giant, which accounted for 42.78% of Warren Buffett’s portfolio.
Apple Inc. in April announced a 5% increase in its quarterly dividend to $0.23 per share. As of May 19, the stock’s dividend yield stood at 0.65%.
In May, Morgan Stanley estimated an 8% year-over-year growth in Apple Inc.’s App Store net revenue growth. The firm raised its price target on the stock to $195, with an Overweight rating on the shares.
ClearBridge Investments mentioned Apple Inc. in its Q4 2021 investor letter. Here is what the firm has to say:
“Despite these mixed emerging growth results, the ClearBridge Global Growth Strategy outperformed the benchmark due to resilience among our secular and structural growth holdings. The bulk of these contributions came from U.S. mega-cap growth stocks Apple and Microsoft which continued to uniquely act both offensively and defensively as they have through most of the pandemic.”
2. Bank of America Corporation (NYSE:BAC)
Dividend Yield as of May 19: 2.41%
Quarterly Dividend: $0.21 per share
In April, Morgan Stanley highlighted the higher loan portfolio of Bank of America Corporation (NYSE:BAC) along with its strong credit quality. The firm upgraded the stock to Equal Weight, with a $49 price target.
Berkshire Hathaway started building its position in Bank of America Corporation in 2011, with shares worth over $5 billion. At the end of Q1 2022, the hedge fund owned $41.6 billion worth of shares in the company, which represented 11.4% of Warren Buffett’s portfolio.
At the end of Q4 2021, 84 hedge funds tracked by Insider Monkey held stakes in Bank of America Corporation, up from 72 in the previous quarter. These stakes hold a consolidated value of over $47.8 billion.
Miller Value Partners mentioned Bank of America Corporation in its Q1 2022 investor letter. Here is what the firm has to say:
“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.
A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).
We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”
1. Chevron Corporation (NYSE:CVX)
Dividend Yield as of May 19: 3.38%
Quarterly Dividend: $1.42 per share
Chevron Corporation was one of the biggest purchases of Berkshire Hathaway during Q1 2022, as the hedge fund increased its position in the company significantly by 317%. The company accounted for 7.12% of Warren Buffett’s portfolio in Q1 2022.
On April 27, Chevron Corporation raised its quarterly dividend for the 35th consecutive year to $1.42 per share, from the previous dividend of $1.34 per share. As of May 19, the stock’s dividend yield came in at 3.3%.
Fisher Asset Management was one of the company’s major shareholders in Q1 2022, holding stakes worth over $1 billion. Overall, 53 hedge funds tracked by Insider Monkey held stakes in the company in Q4 2021, worth $6.5 billion. In comparison, 51 hedge funds held shares in the company in the previous quarter, valued at $4.4 billion.
ClearBridge Investments mentioned Chevron Corporation in its Q1 2022 investor letter. Here is what the firm has to say:
“The energy sector, which led a strong market in 2021, generated even more dramatic relative performance in the quarter, advancing 39% and leading the benchmark Russell 1000 Value Index. Years of restrained investment in the energy sector, combined with a strong post-pandemic recovery, contributed to the higher commodity prices. The upward pressure escalated with the Russian invasion of Ukraine. Our energy holding Chevron (NYSE:CVX) benefited from higher commodity prices and was among the top contributors to first-quarter performance.”
You can also take a look at 10 Stocks to Buy and Hold for Long Term According to Warren Buffett and 11 Best Value Stocks To Buy According To Warren Buffett
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This article is originally published at Insider Monkey.
