In this article, we discuss top 10 dividend stocks to buy according to Warren Buffett.
The ongoing market volatility has opened new investing avenues for the world’s greatest value investor Warren Buffett. His hedge fund, Berkshire Hathaway, loaded up on energy stocks earlier this year due to the sector’s low valuations and steady shareholder return. Where the stock market selloff was worrying for many investors, Buffett made the most of it by targeting his favorite sectors. According to a report by Wall Street Journal, Berkshire bought stocks worth over $66 billion during the first nine months of the year, spending over 13 times more as compared to the same period in 2021.
The interest rate hikes have also benefitted the Berkshire this year. In the third quarter, the company earned over $397 million in interest on its $197 billion cash pile, which is over three times from a year-ago period, as reported by Financial Times. The report also mentioned that the energy business within Berkshire’s utility division reported a 17% growth in revenues due to higher power costs.
During the third quarter of 2022, Berkshire bought $9 billion in stock overall, including over $4.1 billion worth of investment in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM). Other than this, Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) are other prominent tech stocks in the billionaire’s portfolio. The hedge fund’s 13F portfolio had a value of over $296 billion in Q3 2022, compared with $300 billion in the previous quarter.
Buffett has also focused on dividend stocks since the very start of his investment career. As of Q3, nearly 90% of the companies in his portfolio pay regular dividends to shareholders. Given this, we will discuss the top dividend stocks in Buffett’s portfolio.
Our Methodology:
We selected dividend stocks from Berkshire Hathaway’s 13F portfolio, as of the third quarter of 2022. The stocks are ranked according to their stake value in the portfolio.
Warren Buffett’s Top 10 Dividend Stock Picks
10. The Kroger Co. (NYSE:KR)
Berkshire Hathaway’s Stake Value: $2,199,260,000
Dividend Yield as of November 18: 2.13%
The Kroger Co. (NYSE:KR) is an Ohio-based retail company that operates supermarkets and multi-department stores across the country. The company has been a part of Berkshire’s portfolio since the fourth quarter of 2019 when the hedge fund opened its position with shares worth over $549 million. At the end of Q3 2022, the fund owned over 50 million KR shares, worth $2.2 billion. The company represented 0.74% of Warren Buffett’s portfolio.
In addition to Taiwan Semiconductor Manufacturing Company Limited, Apple Inc., and Amazon.com, Inc., The Kroger Co. is another important holding of Warren Buffett.
The Kroger Co. is one of the best dividend stocks on our list as it has raised its payouts each year since 2006. The company pays a quarterly dividend of $0.26 per share and has a dividend yield of 2.13%, as of November 18.
In November, Evercore ISI upgraded The Kroger Co. to Outperform and also raised its price target on the stock to $56. The firm sees the above industry demand due to higher inflation in the coming months.
As of the close of Q3 2022, 49 hedge funds tracked by Insider Monkey owned stakes in The Kroger Co., the same as in the previous quarter. These stakes have a total value of over $4.12 billion.
9. Citigroup Inc. (NYSE:C)
Berkshire Hathaway’s Stake Value: $2,298,341,000
Dividend Yield as of November 18: 4.71%
Citigroup Inc. (NYSE:C) is an American multinational investment banking company that offers related services to its consumers. JPMorgan mentioned the company in its November investors’ note and stated that large-cap banks are seeing benefits in revenues from higher interest rates and credit quality. Given this, the firm raised its price target on the stock to $49.50 with a Neutral rating on the shares.
At the end of Q3 2022, Berkshire owned over 55 million shares in Citigroup Inc., valued at roughly $2.3 billion. The company represented 0.77% of Warren Buffett’s portfolio.
On October 20, Citigroup Inc. declared a quarterly dividend of $0.51 per share, in line with its previous dividend. The stock’s dividend on November 18 came in at 4.71%.
At the end of Q3 2022, 65 hedge funds in Insider Monkey’s database owned stakes in Citigroup Inc., growing from 82 in the previous quarter. These stakes have a total value of over $7.1 billion.
Diamond Hill Capital mentioned Citigroup Inc. in its Q1 2022 investor letter. Here is what the firm has to say:
“Shares of Citigroup declined in the quarter as investors became increasingly negative on capital markets activity. The company is also continuing to divest certain consumer banking geographies which may be dilutive to earnings in the near term.”
8. The Bank of New York Mellon Corporation (NYSE:BK)
Berkshire Hathaway’s Stake Value: $2,396,364,000
Dividend Yield as of November 18: 3.33%
The Bank of New York Mellon Corporation (NYSE:BK) is a New York-based investment banking services holding company that conducts businesses in all markets of the world. Berkshire has been investing in the company since the fourth quarter of 2010. During Q3 2022, the hedge fund reduced its position in the company by 15%, which takes its total BK stake to roughly $2.4 billion. The company represented 0.8% of Warren Buffett’s portfolio.
On October 17, The Bank of New York Mellon Corporation declared a quarterly dividend of $0.37 per share, which fell in line with the company’s previous dividend. The company has paid regular dividends to shareholders for 21 years in a row. As of November 18, the stock has a dividend yield of 3.33%.
Citigroup raised its price target on The Bank of New York Mellon Corporation to $50 in October with a Buy rating on the shares, highlighting the company’s strong capital returns and improving net interest income outlook for FY23.
The Bank of New York Mellon Corporation experienced growth in hedge fund positions in Q3 2022, as 50 funds tracked by Insider Monkey owned stakes in the company, up from 38 in the previous quarter. These stakes are valued at $3.28 billion collectively, compared with $3.6 billion worth of stakes owned by hedge funds in the preceding quarter.
7. U.S. Bancorp (NYSE:USB)
Berkshire Hathaway’s Stake Value: $3,136,420,000
Dividend Yield as of November 18: 4.45%
U.S. Bancorp (NYSE:USB) is an American bank holding company. Elite funds remained bullish on the company in Q3 2022, with hedge fund positions increasing to 52, from 43 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a total value of roughly $4.8 billion.
At the end of Q3 2022, Berkshire’s stake in U.S. Bancorp amounted to over $3.1 billion, after the fund reduced its position in the company by 36%. The company constituted 1.05% of Warren Buffett’s portfolio.
In September, U.S. Bancorp declared a 4% hike in its quarterly dividend to $0.48 per share. This was the company’s 12th consecutive year of dividend growth, coming through as one of the top dividend stocks on our list. The stock’s dividend yield came in at 4.45%, as recorded on November 18.
In November, JPMorgan raised its price target on U.S. Bancorp to $47 with an Overweight rating on the shares, presenting a positive outlook on large-cap banking stocks.
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. Moody’s Corporation (NYSE:MCO)
Berkshire Hathaway’s Stake Value: $5,997,470,000
Dividend Yield as of November 18: 0.95%
Moody’s Corporation (NYSE:MCO) is a New York-based credit and financial services company that provides services related to risk analysis and credit ratings. The company has been raising its dividends consistently for the past 12 years, which makes it one of the top dividend stocks on our list. It currently pays a quarterly dividend of $0.70 per share and has a dividend yield of 0.95%, as of November 18.
Berkshire Hathaway opened its position in Moody’s Corporation with $249 million in 2001. Over the years, the firm has increased its position in the company. At the end of Q3 2022, the hedge fund owned over 24.6 million MCO shares, worth roughly $6 billion. The company constituted 2.02% of Warren Buffett’s portfolio. It is another prominent holding of Buffett alongside Taiwan Semiconductor Manufacturing Company Limited, Apple Inc., and Amazon.com, Inc..
Following the company’s Q3 earnings, Atlantic Equities raised its price target on Moody’s Corporation to $292 in November with a Neutral rating on the shares.
The number of hedge funds tracked by Insider Monkey owning stakes in Moody’s Corporation grew to 63 in Q3 2022, from 48 in the preceding quarter. The collective value of these stakes is over $11 billion.
5. The Kraft Heinz Company (NASDAQ:KHC)
Berkshire Hathaway’s Stake Value: $10,859,921,000
Dividend Yield as of November 18: 4.22%
The Kraft Heinz Company (NASDAQ:KHC) is a Chicago-based multinational food company that operates over 20 brands. The company has been offering dividends to shareholders even before the merger of Kraft and Heinz in 2015. It currently pays a quarterly dividend of $0.40 per share and has a dividend yield of 4.22%, as of November 18.
BNP Paribas initiated its coverage of The Kraft Heinz Company in November with a Neutral rating and a $39 price target. The firm mentioned that US packaged food group has historically outperformed the wider market.
Berkshire started building its position in The Kraft Heinz Company during the third quarter of 2015, purchasing shares worth roughly $23 billion. During Q3 2022, the hedge fund did not change its position in the company and owned a $10.8 billion worth of KHC stake. The company represented 3.66% of Warren Buffett’s portfolio.
At the end of September 2022, 40 hedge funds tracked by Insider Monkey owned stakes in The Kraft Heinz Company, compared with 41 in the previous quarter. These stakes are collectively worth over $11.8 billion.
4. American Express Company (NYSE:AXP)
Berkshire Hathaway’s Stake Value: $20,453,800,000
Dividend Yield as of November 18: 1.36%
American Express Company (NYSE:AXP) is an American multinational credit card service company. At the end of Q3 2022, Berkshire owned over 151.6 million shares in the company, worth over $20.4 billion. The hedge fund did not change its position in the company during the quarter. It represented 6.9% of Warren Buffett’s portfolio. Moreover, Buffett has earned over $25 billion from the company since he started investing in it 25 years ago.
BMO Capital raised its price target on American Express Company to $166 in October with a Market Perform rating on the shares, following the company’s earnings beat in the recent quarter. The firm also appreciated the company’s higher net interest income.
American Express Company has been making consecutive dividend payments for the past 30 years. The company currently pays a quarterly dividend of $0.52 per share and has a dividend yield of 1.36%, as of November 18.
Of the 920 hedge funds tracked by Insider Monkey in Q3 2022, 68 funds owned stakes in American Express Company, compared with 67 in the previous quarter. These stakes are collectively valued at roughly $25 billion.
3. Coca-Cola Company (NYSE:KO)
Berkshire Hathaway’s Stake Value: $22,407,999,000
Dividend Yield as of November 18: 2.88%
An American multinational beverage company, Coca-Cola Company (NYSE:KO) is one of the strongest dividend stocks in the US market. The company has been raising its dividends consistently for the past 60 years. Currently, it pays a per-share dividend of $0.44 every quarter and has a dividend yield of 2.88%, as of November 18.
Coca-Cola Company first invested over $1 billion in Coca-Cola Company in 1988. The hedge fund has earned millions in dividends from the company, which amounted to $672 million in 2021. At the end of Q3 2022, the fund owned over 400 million KO shares, worth over $22.4 billion. The company accounted for 7.56% of Warren Buffett’s portfolio.
Street analysts appreciated the quarterly earnings of Coca-Cola Company. In October, both UBS and Barclays raised their price targets on the stock to $68 and $67, respectively.
As of the close of Q3 2022, 59 hedge funds tracked by Insider Monkey owned stakes in Coca-Cola Company, with a total value of over $25 billion.
Aristotle Capital Management, LLC mentioned The Coca-Cola Company in its Q2 2022 investor letter. Here is what the firm has to say:
“The Coca-Cola Company (NYSE:KO), the global beverage business, was a leading contributor for the period. Coca-Cola continues to benefit from the refranchising of its bottling operations and realignment of incentives, catalysts we previously identified. These initiatives are demonstrating their strength in an inflationary and supply-chain-challenged environment. Additionally, the company has focused on evolving its customer engagement practices by leveraging digital and social medias for targeted campaigns, such as the design and launch of Coke Byte in the metaverse. Lastly, Coca-Cola has furthered its transformation into a total beverage company, as it debuted its new Jack Daniel’s Tennessee Whiskey and Coca-Cola ready-to-drink premixed cocktail. Although uncertainties surrounding cost pressures, lockdowns and geopolitical conflicts remain, we believe Coca-Cola is uniquely positioned to successfully continue its transition toward a total beverage business.”
2. Chevron Corporation (NYSE:CVX)
Berkshire Hathaway’s Stake Value: $23,757,173,000
Dividend Yield as of November 18: 3.15%
Chevron Corporation (NYSE:CVX) is an American multinational energy company. During Q3 2022, Berkshire Hathaway increased its position in the company by 3%, which takes the firm’s total stake in the company to over $23.7 billion. The company represented 8.02% of Warren Buffett’s portfolio.
Chevron Corporation is one of the top dividend stocks on our list as it has a 25-year run of raising its dividends. The company pays a quarterly dividend of $1.42 per share for a dividend yield of 3.15%, as of November 18.
In November, Piper Sandler gave a positive outlook on integrated oil companies due to high demand. In view of this, the firm raised its price target on the stock to $206 with an Overweight rating on the shares.
The number of hedge funds tracked by Insider Monkey owning stakes in Chevron Corporation jumped to 66 in Q3 2022, from 59 in the previous quarter. These stakes have a total value of over $27 billion.
Diamond Hill Capital mentioned Chevron Corporation in its Q1 2022 investor letter. Here is what the firm had to say:
“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”
1. Bank of America Corporation (NYSE:BAC)
Berkshire Hathaway’s Stake Value: $30,505,039,000
Dividend Yield as of November 18: 2.33%
Bank of America Corporation (NYSE:BAC) is an American multinational financial services holding company. As banks are well-positioned to benefit from the higher interest rates and benign credit quality, JPMorgan raised its price target on BAC in November to $39 with an Overweight rating on the shares.
Berkshire Hathaway has been investing in Bank of America Corporation since 2011. The company was the second-largest holding of the firm at the end of the third quarter of 2022. The fund owned BAC shares worth over $30.5 billion, which represented 10.3% of its 13F portfolio.
Bank of America Corporation currently pays a quarterly dividend of $0.22 per share and has a dividend yield of 2.33%, as of November 18. The company has been raising its dividends consistently for the past nine years, which makes it one of the top dividend stocks in Warren Buffett’s portfolio.
Bank of America Corporation was a part of 97 hedge fund portfolios in Q3 2022, down from 99 in the previous quarter, according to Insider Monkey’s data. The stakes owned by these hedge funds have a total value of over $35.6 billion.
Here is what Artisan Partners said about Bank of America Corporation in its Q2 2022 investor letter:
“We made only one new purchase during the quarter, initiating a position in Bank of America (BAC). As one of America’s largest banks, Bank of America Corporation is second only to JPMorgan Chase (JPM) in size and is probably its closest peer. Both are well-run banks, but compared to JPM, since the GFC, BAC has retired more shares, grown EPS faster and currently has more capital and a lower dividend payout. We are attracted to BAC’s strong capital base, high capital generation capacity, large loan loss reserve, low (~50%) loan/deposit ratio, short duration investment securities book, and low dividend payout that provides financial flexibility. BAC has a less volatile earnings stream than JPM with lower capital market sensitive exposures. Additionally, BAC is rigorously stress tested by the Fed every year in quantitative and qualitative fashion. Warren Buffett’s Berkshire Hathaway, which we hold in the portfolio, owns 12% of BAC. He petitioned the Fed to own more than 10%, so he clearly likes it. Bank stocks were strong gainers in 2021 on the prospects of higher rates boosting net interest margins, but the stocks pulled back in the first half of 2022 on economic concerns. We believe BAC has massive scale advantages, should benefit from increasing interest rates, particularly in the 2-year part of the yield curve, and should grow over time with the economy. The economic environment is highly uncertain, but current consensus includes the provision for losses more than doubling and capital markets activity slowing. Against that backdrop, our purchase price equated to about 8.5X our estimates of “mid-cycle” earnings. With leading businesses, a double-digit ROE, a prudent capital return strategy and a strong balance sheet, we believe this entry point offers a solid long-term value.”
You can also take a look at Billionaire Ken Fisher’s Top 10 Dividend Stock Picks and Billionaire Seth Klarman’s Top 9 Dividend Stock Picks
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This article is originally published at Insider Monkey.
