Stocks paying dividends are a key element in value investing, according to the classic works on the subject by Benjamin Graham. His student, Warren Buffett (Trades, Portfolio), understands the reasoning, and that’s why such stocks can be found in great numbers among Berkshire Hathaway’s (BRK.A, Financial)(BRK.B, Financial) holdings.
Part of the appeal of dividend stocks is that a business offering its investors regular cash payments shows respect and appreciation for their investment despite the ups and downs of price. It seems simple and easily understood, but it’s important to note the underlying dynamic.
With this in mind, this article will take a look at the stocks in Berkshire's 13F equity portfolio that pay the highest dividend yields. Given Buffett and Munger's excellent track records, these gurus have likely spent countless hours analyzing and forming careful opinions about these stocks, so I believe that makes them a great starting point for investors looking for potential dividend plays.
AbbVie
AbbVie Inc. (ABBV, Financial) pays a 3.6% dividend. The drug manufacturer, headquartered in Lake Bluff, Illinois, was created in 2013 as the spin-off of the pharmaceutical branch of Abbott Laboratories (ABT, Financial). The New York Stock Exchange-listed stock trades with a price-earnings ratio of 24, more or less in line with that of the drug manufacturing industry as a whole.
Chevron
Chevron Corp. (CVX, Financial) is paying a 3.29% dividend. The oil and gas giant has been rallying over the last few months on concerns about the effects on global markets of the Russian invasion of Ukraine. In March, Morgan Stanley (MS, Financial) reduced their opinion of the company from “overweight” to “equal weight” and JPMorgan (JPM, Financial) reduced it from “neutral” to “underweight.”
Itochu
Itochu Corp. (ITOCY, Financial) pays a 2.99% dividend. This is the U.S. listing of a Japanese trading company which has been in business in one form or another since 1858. With a market capitalization of $46 billion, the NYSE-traded stock has a price-earnings ratio of just 8 and has a three-year dividend growth rate of 7.9%.
The Kraft Heinz Co
The Kraft Heinz Co (KHC, Financial) is paying a 3.61% dividend. Warren Buffett (Trades, Portfolio) himself helped merge the brand name cheese company with the brand name ketchup company years ago and lately has seen the stock come to life after a long spell of underperformance. The Nasdaq-traded stock has a price-earnings ratio of 53, but the price-book ratio is just 1.09.
STORE Capital
STORE Capital (STOR, Financial) pays a 5.00% dividend. This real estate investment trust (REIT) has the highest-paying dividend of all the securities in the Berkshire Hathaway common stock equity portfolio. Founded in 2011, STORE Capital trades with a price-earnings ratio of 30 and a price-book ratio of 1.61.
U. S. Bancorp
U.S. Bancorp (USB, Financial) is paying a 3.42% dividend. The regional bank, based in Minneapolis, Minnesota, is NYSE-listed and is now trading with a price-earnings ratio of 10, lower than the wider market but not out of line in the sector. The price-book ratio is 1.61.
Verizon Communications Inc.
Verizon Communications Inc. (VZ, Financial) pays a 4.63% dividend. The telecommunications giant has a price-earnigns of 10.34 and trades at a price-book ratio of 2.80. Corporate headquarters for the NYSE-listed company are in New York. The five-year growth rate for Verizon’s dividend is 2.10%.
13F disclosure: The information about guru positions in this article comes from 13F filings with the SEC. Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American Depository Receipts (ADRs) as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
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