Investors love dividends. Now that the bull market is six years old and that the Federal Reserve is closer to raising interest rates, investors might be smart to consider which stocks they own and what the prospects are for each stock. It also turns out that Warren Buffett, the Oracle of Omaha, also loves dividend stocks — even if Berkshire Hathaway Inc. (NYSE: BRK-A) itself does not pay a dividend and likely will not pay one for another generation.
24/7 Wall St. regularly evaluates the new positions of Berkshire Hathaway each quarter when the new filings are out. This time around, we wanted to evaluate the prospects for each of the eight highest-yielding Buffett stocks.
While Buffett has said that he does not want to pay dividends to Berkshire Hathaway shareholders, his investing actions prove that the Oracle of Omaha loves what dividends do for his conglomerate. First off, they bring in several billion a year in added income to Berkshire Hathaway Inc. (NYSE: BRK-B). In some cases Buffett has used the dividend income to grow his positions of each company, and in some cases he has simply accumulated that dividend cash to be used for past and future acquisitions.
24/7 Wall St. has handicapped each dividend stock owned by Buffett and Berkshire Hathaway. We have looked first at the dividend yield, how many shares the conglomerate owns and what the current dollar value is. We have added color on Buffett’s purchase history of each position, as well as what he and his team are attracted to about the position. Another review has been the dividend history for each position, as well what the dividend outlook is for each company. Then there are the current prices compared to a 52-week range and consensus analyst price target from Thomson Reuters, as well as a total market cap and how much each stock is up in the past year.
Those positions that have dwindled to almost nothing by Buffett or his portfolio managers were not evaluated for this review. These are the top eight dividend stocks owned by Warren Buffett.
> Dividend Yield: 4.56%
> Buffett Stake: 15.0 million shares
> Market Value: $723 million
Verizon Communications Inc. (NYSE: VZ) will be the only telecom player left in the Dow Jones Industrial Average after Apple replaces AT&T, and Verizon will be the highest yield in the Dow as well. Verizon was added by the new portfolio managers under Buffett, and it remains to be seen how the stock ultimately will perform during this cellular price war. Verizon has raised its dividend for eight straight years, and Team Buffett likely expects that the telecom giant can keep raising its dividend.
Verizon closed recently at $48.23, in a 52-week range of $45.09 to $53.66. The stock has a consensus analyst price target of $51.50, and the company has a market cap of $200 billion. Over the past year, shares are up 7%.
> Dividend Yield: 3.59%
> Buffett Stake: 10.6 million shares
> Market Value: $271 million
General Electric Co. (NYSE: GE) shares recently closed at $25.64, and the stock has a 52-week range of $23.41 to $27.53. The conglomerate has a consensus analyst price target of $28.50 and a market cap of $258 billion. Shares were up 1.6% over the past year.
Buffett’s total exposure to GE used to be larger after investing during the recession, and the conglomerate is now one of the top dividend payers in the Dow. Buffett has to like that Synchrony Financial will be entirely on its own soon and that GE is in the process of becoming an industrial conglomerate with only 25% exposure to financial services rather than half-bank and half-conglomerate.
National Oilwell Varco
> Dividend Yield: 3.56%
> Buffett Stake: 5.3 million shares
> Market Value: $272 million
National Oilwell Varco Inc. (NYSE: NOV) is still a decent sized stake, but investors have not ignored that the Buffett portfolio managers have trimmed their stake from well over 7 million shares last summer. With oil in such a bad place, one has to wonder about future dividends. It turns out that the oil well and platform maker is expected to earn over $3 per share and that $1.84 dividend is at least safe on the surface. The reason the company has such a high yield is because its stock is down over $30 from last year’s peak.
Shares closed most recently at $51.65, in a 52-week range of $49.25 to $86.55. The consensus price target is $57.14, and the market cap is $21 billion. Shares are down 26% over the past year, thanks to that drop in the oil patch.