After finishing last year strong, U.S. equity markets had a volatile start this year, pulling back from all-time highs. Stocks have recovered since and, so far this year, the S&P is up — if only just barely. Some investors are concerned that the current valuation of many stocks is excessive. Such investors may decide that now is the time to reduce exposure to more risky investments and instead target high-yielding, defensive stocks.
For active investors looking to change the exposure of their portfolio to make it less risky, sector rotation is often a popular play. This involves moving from volatile sectors that disproportionately gain as the market rises, such as technology and biotech, to sectors that are less exposed to changes in the market, such as utilities, telecom and consumer staples.
Another strategy investors may consider is to target income. Investors can achieve income by investing in shares that offer large dividend yields, measured by the annualized dividend payout divided by the stock price.
One investor whose portfolio contains a large number of dividend stocks is the legendary Warren Buffett. In addition to private placements and wholly owned subsidiaries, Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) owns a portfolio of publicly traded companies, many of which have large dividend yields.
Many companies Buffet holds share a focus on income. Five of the highest yielding Buffett stocks have dividend yields above 3%, led by ConocoPhillips, which has a 3.6% dividend yield. They also span a wide range of industries. ConocoPhillips and Exxon Mobil are both energy companies, Coca-Cola and Procter & Gamble produce consumer staples, and General Electric is a fellow conglomerate.
To determine the top-yielding stocks in Warren Buffett’s portfolio, 24/7 Wall St. reviewed Berkshire Hathaway’s filings with the U.S. Securities and Exchange Commission (SEC). Berkshire’s most recent relevant filing disclosed its holdings as December 31, 2013. Dividend yields are based on a screen conducted on May 5, 2014, while prices and market capitalization are current as of market close May 6, 2014. In addition to reviewing SEC filings, we also reviewed Thomson Reuters consensus one-year analyst price targets. Berkshire’s positions in Johnson & Johnson, Kraft Foods Group, and United Parcel Service were not included due to their relatively small sizes.
Be advised that Verizon and its 4.4% yield would be on top of this list, but that position was not revealed until May 15.
These are Warren Buffett’s nine top dividend stocks.