Investing

5 Warren Buffett Big Dividend Stocks To Buy Now As Interest Rates Rise Again

Lee Jackson

Published: January 23, 2024 12:49 pm

If any investor has stood the test of time, it’s Warren Buffett, and with good reason. For years, the “Oracle of Omaha” has had a rock star-like presence in the investing world, and his annual Berkshire Hathaway shareholders meeting draws thousands of loyal fans who are investors.

Known for his long buy-and-hold strategies and his massive portfolio of public and private holdings, he remains one of the preeminent investors in the entire world, and with interest rates edging higher once again, it makes sense to add dividend-paying stocks that will rally when rates ultimately get cut at some point later this year.

We decided to screen the Berkshire Hathaway portfolio for some of the highest-yielding stock holdings. We found five top companies that make sense for growth and income investors and look like perfect ideas for 2024.

Ally Financial

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With no buildings, the bank posted substantial fourth-quarter earnings and paid a big 3.37% dividend. Ally Financial, Inc. (NYSE: ALLY), a digital financial services company, provides various digital financial products and services to consumer, commercial, and corporate customers, primarily in the United States and Canada.

The bank  operates through four segments:

• Automotive Finance Operations
• Insurance Operations
• Mortgage Finance Operations
• Corporate Finance Operations

The Automotive Finance Operations segment offers:

• Automotive financing services
• Retail installment sales contracts
• Loans
• Operating leases
• Term loans to dealers
• Financing dealer floor plans and other lines of credit to dealers, warehouse lines to automotive retailers, and fleet financing

It also provides financing services and vehicle-remarketing services to companies and municipalities to purchase or lease vehicles.

The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contracts and guaranteed asset protection products and underwrites commercial insurance coverages, which primarily insure dealers’ vehicle inventory.

The Mortgage Finance Operations segment manages a consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans from third parties and direct-to-consumer mortgage offerings.

The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies, leveraged loans, and commercial real estate products to serve companies in the healthcare industry.

The company also offers retail banking products and services. In addition, it provides securities brokerage and investment advisory services.

Chevron

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This integrated giant is a safer way for investors looking to get positioned in the energy sector and pays a rich 4.25% dividend. Chevron Corporation (NYSE: CVX) engages in integrated energy and chemicals operations worldwide.

The company operates in two segments:

• Upstream
• Downstream

The Upstream segment is involved in:

• The exploration, development, production, and transportation of crude oil and natural
• Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
• Transportation of crude oil through pipelines; transportation, storage, and marketing of natural gas, as well as operating a gas-to-liquids plant.

The Downstream segment engages in:

• Refining crude oil into petroleum products
• Marketing crude oil, refined products, and lubricants
• Manufacturing and marketing renewable fuels
• Transporting crude oil and advanced products by pipeline, marine vessel, motor equipment, and rail car
• Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives.
• It is also involved in cash management, debt financing, insurance operations, real estate, and technology businesses

Chevron Corporation announced in October that it has entered into a definitive agreement with Hess Corporation (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion.

This is one of the two energy holdings in Berkshire Hathaway, which holds 110 million shares of the integrated giant.

Citigroup

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This is another top bank trading at a cheap 8.7 times 2024 earnings and pays a rich 4.08% dividend. Citigroup Inc. (NYSE: C), a diversified financial services holding company, provides various financial products and services to consumers, corporations, governments, and institutions in North America, Latin America, Asia, Europe, the Middle East, and Africa.

It operates through three segments:

• Institutional Clients Group (ICG),
• Personal Banking and Wealth Management (PBWM)
• Legacy Franchises.

The ICG segment offers

• Wholesale banking products and services, including fixed-income and equity sales and trading
• Foreign exchange, prime brokerage, derivative, equity, and fixed-income research
• Corporate lending, investment banking, and advisory
• Private banking, cash management
• Trade Finance
• Securities services to corporate, institutional, and public sector clients

The PBWM segment offers retail and small business customers traditional banking services through retail banking, cash, rewards, value portfolios, and co-branded cards.  It also provides various banking, credit cards, custody, trust, mortgages, home equity, small business, and personal consumer loans.

The Legacy Franchises segment provides traditional retail banking and branded card products to retail and small business customers.

HP

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Warren Buffett stunned Wall Street last year when Berkshire Hathaway reported a purchase of 121 million shares of the venerable tech giant, but he has been selling shares recently, which yield 3.79%. HP, Inc. (NYSE: HPQ) provides personal computing and other access devices, imaging and printing products, and related technologies, solutions, and services in the United States and internationally.

The company operates through three segments:

• Personal Systems
• Printing
• Corporate Investments

The Personal Systems segment offers:

• Commercial and consumer desktop and notebook personal computers
• Workstations
• Thin clients
• Commercial mobility devices
• Retail point-of-sale systems, displays and peripherals
• Software, support, and services

The Printing segment provides consumer and commercial printer hardware, supplies, solutions, and services.

The Corporate Investments segment is involved in the HP Labs, business incubation, and investment projects. It serves individual consumers, small- and medium-sized businesses, and large enterprises, including government, health, and education customers.

Kraft Heinz

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Even in tough times, everybody has to eat, and this company always stands to benefit and pays shareholders a whopping 4.31% dividend. The Kraft Heinz Company (NYSE: KHC) was formed almost nine years ago via the merger of H.J. Heinz Company and Kraft Foods Group and together with its subsidiaries, manufactures and markets food and beverage products in the United States, Canada, the United Kingdom, and internationally.

Its products include

• Condiments and sauces
• Cheese and dairy products
• Meals
• Meats
• Refreshment beverages
• Coffee
• Spices and other seasonings

Kraft Heinz sells its products through its own sales organizations, as well as through:

• Independent brokers
• Agents and distributors to chain, wholesale, cooperative, and independent grocery accounts convenience, value, and club stores
• Pharmacies and drug stores
• Mass merchants
• Foodservice distributors
• Institutions, including hotels, restaurants, bakeries, hospitals, health care facilities
• Government agencies and online through various e-commerce platforms and retailers