Warren Buffett’s Top 5 Dividend Stock Picks

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 (NYSE:BAC) 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 (NYSE:BAC) 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 (NYSE:BAC) 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 (NYSE:BAC) 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 (NYSE:BAC) 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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