Stock market guru Warren Buffett is probably the most famous investor in the world and a role model for many investors. Interestingly, the two largest positions in his portfolio are two companies that reliably pay a dividend.
• Warren Buffett relies on dividend payers
• Apple reliably pays a dividend
• Plenty of room for dividend increases at Bank of America
Stocks with high dividends offer a double advantage: shareholders can benefit from both price increases and high dividends. High dividends can even serve as a buffer for price losses. It is therefore not surprising that stock market legend Warren Buffett also has strong dividend stocks in his portfolio.
Later joining Apple
“I only invest in companies whose business model I understand,” is one of the success formulas of Warren Buffett, who has been at the helm of Berkshire since 1965. This is probably one of the reasons why he stayed away from tech companies for a long time. It was all the more surprising that he invested in the smartphone manufacturer Apple in 2016. Since then, Buffett has become a real fan of the iGroup: At the annual general meeting of his investment company Berkshire Hathaway on May 6, 2023, the stock market veteran declared that Apple is simply “a better company than any other we own.”
This enthusiasm is also reflected in Buffett’s involvement with Apple: As The Motley Fool reported on December 17, Apple’s stock price has risen by a whopping 627 since the end of the first quarter, when Berkshire announced its stake in the company percent climbed. Thanks to this performance and further acquisitions, Berkshire’s stake in Apple has increased to $181 billion at current prices, which corresponds to around 48 percent of Berkshire’s stock portfolio. This means that the iPhone manufacturer is now the conglomerate’s largest holding.
Buffett particularly praises the loyalty customers show to the company and the pricing power he believes Apple has. Another reason why Buffett is confident in Berkshire’s Apple investment is the fact that the company reliably pays a dividend. According to The Motley Fool, quarterly dividend payouts have grown 68 percent since Berkshire’s entry. Although the share only offers an uninspiring return of 0.5 percent at current prices, with around 915 million Apple shares in the portfolio, the quarterly distributions are still significant. The Apple holdings are expected to give Berkshire a dividend payment worth $220 million in February and likely more in the following quarter.
Buffett remains loyal to Bank of America (BofA).
After the turmoil in the US banking sector in spring 2023, Buffett revealed in a CNBC interview that he already saw the problems in the banking sector coming. This is the reason why he has sold off bank shares worth billions in recent years. It is noteworthy, for example, that the stake in Wells Fargo, which was an integral part of the Berkshire Hathaway portfolio for decades, disappeared completely from Buffett’s portfolio at the beginning of 2022.
But even though the overall value of Berkshire Hathaway’s bank shares has fallen significantly in the last three years and Buffett has completely sold off some positions, he has also opened some new positions or expanded existing ones. One of the stocks that the Berkshire Hathaway CEO has remained loyal to is Bank of America. Buffett told CNBC that he held on to BofA shares because his first investment in 2011 was a “very decent deal” and because he liked CEO Brian Moynihan – he just didn’t want to sell.
With 9.3 percent of the stock portfolio, Bank of America is currently the conglomerate’s second-largest holding, according to “The Motley Fool.” The star investor, a firm believer in the U.S. economy’s lasting growth potential, likes to buy bank stocks after they’ve been beaten down because he believes these cyclical companies benefit from periods of economic growth. At current prices, BofA shares offer a dividend yield of 2.8 percent. Since BofA met its dividend obligation with just 20.7 percent of free cash flow over the past twelve months, The Motley Fool believes Bank of America still has plenty of room to further increase its dividend in the coming years increase – despite the already rapid jumps in distributions in recent years.
Editorial team finanzen.net
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