While Berkshire Hathaway (BRK.B) doesn't pay a dividend, more than half of the stocks in the holding company's roughly $310-billion equity portfolio do. And the best Warren Buffett dividend stocks produce substantial income for the Oracle of Omaha.
In 2022, Berkshire Hathaway received $6.04 billion in dividend income, up from $5.06 billion in 2021 and $4.89 billion in 2020.
Dividend stocks can create impressive total returns (price plus dividends) for investors over the long term. "That's because regular dividend increases lift the yield on an investor's original cost basis. Stick around long enough, and the modest yield you received on your initial investment can hit double digits one day," writes Dan Burrows, senior investing writer at Kiplinger.com, in his story highlighting Wall Street's best dividend stocks.
And that's certainly been the case with Berkshire Hathaway. Over the last three years, BRK.B has averaged an annual total return of 16.4%, compared to the S&P 500 Index's 10.6% total return.
What Buffett has to say about dividend stocks
Here's what Buffett had to say about dividends in his 2020 letter to shareholders:
"BNSF has paid substantial dividends to Berkshire – $41.8 billion in total. The railroad pays us, however, only what remains after it both fulfills the needs of its business and maintains a cash balance of about $2 billion," Buffett wrote. "This conservative policy allows BNSF to borrow at low rates, independent of any guarantee of its debt by Berkshire."
And that's an internally owned business. The company's dividend-paying stocks generated more than $6 billion in dividend income over 2022, with 71% coming from just five stocks.
How we chose the best Buffett dividend stocks
Having written about investments since 2008, I chose to compile this list by including only stocks that yield as much or more than the S&P 500's current 1.4% yield. This is why, of all the best stocks to buy for dividends held in the Berkshire Hathaway equity portfolio, I did not include Apple (AAPL), which currently yields a low 0.5%.
All the names featured here have attractive dividend yields, solid fundamentals and have generated an impressive income stream for Berkshire Hathaway. With that in mind, here are five of the best Warren Buffett dividend stocks.
Data is as of December 27. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Berkshire Hathaway portfolio data is provided by WhaleWisdom.com.
Coca-Cola
- Market value: $253.8 billion
- Dividend yield: 3.1%
- Percentage of Berkshire Hathaway portfolio: 7.2%
- Berkshire Hathaway ownership stake: 9.2%
Coca-Cola (KO, $58.71) is one of Berkshire's oldest holdings and one of the best Warren Buffett dividend stocks. The Oracle of Omaha first started buying the beverage giant's stock in 1988, building his stake to 23.4 million shares by the end of 1989 – a position valued at roughly $1.8 billion.
The Dow Jones stock is now Berkshire's fourth-largest holding, valued at $22.3 billion. That's a compound annual growth rate of about 8%, which is slightly less than the broad market.
However, that doesn't consider the company's hefty dividend, which currently arrives at an annualized payout of $2.32 per share. Based on Berkshire's 400 million shares, it gets $928 million in dividends annually from KO. In other words, Buffett's total cost to buy the KO stake he had accumulated by the end of 1989 would be paid off in roughly two years solely from the current dividend payment.
It's a miracle of compounding in action.
In February 2023, Coca-Cola hired Philippe Schaillee as the CEO of its Costa Coffee subsidiary. Schaillee joined the company from Groupe SEB, where he was executive vice president in charge of Products and Innovation. Groupe SEB makes cookware, small kitchen appliances, and professional coffee equipment. Its brands include Krups coffee makers.
Coca-Cola also continues to get more involved in alcoholic beverages.
In mid-April, Coca-Cola and Molson Coors Beverage (TAP) announced that their alcoholic beverage collaboration, which began in 2020 with Topo Chico Hard Seltzer, would introduce three 5% alcohol-by-volume flavors of Peace Hard Tea.
"Peace Hard Tea comes with a distinct point of view, amazing flavors and incredible branding to build something new and exciting in the alcohol aisle," Molson Coors reported in the blog post comments of Amanda Devore, Molson Coors' marketing director for innovation. "The hard tea category continues to grow double digits year over year, and we think there's a huge opportunity."
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Bank of America
- Market value: $253.8 billion
- Dividend yield: 3.1%
- Percentage of Berkshire Hathaway portfolio: 9.0%
- Berkshire Hathaway ownership stake: 12.8%
Bank of America (BAC, $33.84) is Berkshire Hathaway's second-largest holding behind only Apple. Buffett first acquired BAC stock in Q3 2017. Berkshire is the bank's largest institutional shareholder with 1.03 billion shares, nearly 400 million shares more than Vanguard Group.
In an April 2023 media appearance, Buffett said that he unloaded many of the holding company's bank stocks because he didn't think they were near as solid investments as they once were.
As for Bank of America, he said this about the bank and its CEO:
"I like [CEO] Brian Moynihan enormously. And I just don't wanna, I don't wanna sell it," the 92-year-old CEO told CNBC's Becky Quick. "But I did sell banks that we'd owned for 25 or 30 years. And if they asked me why I did it, I told them – I just think the system isn't set up quite right in terms of connecting punishment to culprits on something that's important."
Analysts certainly like the blue chip stock, as evidenced by a consensus Buy rating among the 25 analysts following it that are tracked by S&P Global Market Intelligence.
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HP
- Market value: $30.0 billion
- Dividend yield: 3.7%
- Percentage of Berkshire Hathaway portfolio: 0.8%
- Berkshire Hathaway ownership stake: 9.7%
Berkshire started buying HP (HPQ, $30.24) in the first quarter of 2022. Then, in April 2022, Berkshire revealed its ownership stake of 121 million shares in HP. The share price rose 15% on the news, giving the holding company a quick unrealized gain on its investment. Since then, Berkshire has whittled its stake in HP down to 102.5 million shares.
Based on the average estimated price paid for the HPQ shares, Buffett is currently losing money on his position. Berkshire is HP's third-largest shareholder, falling behind Vanguard Group and BlackRock.
In addition to its attractive valuation – HPQ is trading at just 8.8 times forward earnings – the company is known for rewarding its shareholders. HP increased its quarterly dividend in October 2023 by 5%, which followed a 5% hike in November 2022.
The dividend yield is healthy at 3.7%, more than double the dividend yield for the S&P 500. In addition to paying out $1.0 billion in dividends in fiscal 2023 (October year-end), it also repurchased $100 million of its stock.
With $3.6 billion in cash on its balance sheet at the end of its fiscal year, it has plenty to continue paying the healthy dividend – and keep HP on this list of the best Warren Buffett dividend stocks. Based on Berkshire's 102.5 million HPQ shares owned, it will receive nearly $113 million in dividends from HP over the next year.
Buffett's more than fine getting paid to wait for the stock to come around.
Meanwhile, Argus Research analyst Jim Kelleher has a Buy rating and a $40 price target on the stock, 32% higher than where it's currently trading.
The possibility of an economic downturn and "a corresponding dip in PC and printer sales" is a "main risk" for HPQ, but Kelleher believes the company "has the financial strength, market leadership, and growth characteristics to weather this storm and emerge a stronger player."
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Chevron
- Market value: $286.8 billion
- Dividend yield: 4.0%
- Percentage of Berkshire Hathaway portfolio: 5.9%
- Berkshire Hathaway ownership stake: 5.7%
Energy stocks had an outstanding year in 2022. Chevron (CVX, $156.22) was no exception.
In mid-November, it hit an all-time high of $189.68 before dropping back slightly, closing out the year up 53%, not including dividends. That's considerably higher than the S&P 500, which finished down 23.9% in 2022. But while the stock is down 12% in 2023, this just gives investors the chance to buy this top blue chip stock at a discount.
Chevron CFO Pierre Breber told Fortune's Sheryl Estrada last October that the company's dividend is its "first financial priority." In January, it announced it would increase its quarterly dividend by 6% to $1.51 a share. The annual rate of $6.04 yields 4.0%, more than double the S&P 500's yield.
CVX has grown the payout for 36 consecutive years, making it one of the best Warren Buffett dividend stocks. In addition, the company announced a new $75 billion stock buyback program that took effect on April 1.
The icing on the cake: Chevron remains one of the best value stocks, trading at just 10.2 times forward earnings, well below its five-year average of 39.8.
That's very reasonable.
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Kraft Heinz
- Market value: $44.8 billion
- Dividend yield: 4.4%
- Percentage of Berkshire Hathaway portfolio: 3.5%
- Berkshire Hathaway ownership stake: 26.5%
Consumer staples stocks in the S&P 500 broadly underperformed the broad market in 2023. However, should a recession occur in 2024, UBS analyst Peter Grom thinks defensive sectors, including consumer staples, will see relative strength.
Kraft Heinz (KHC, $36.52), whose products include Kraft mac & cheese and Heinz ketchup, is one of six consumer staples stocks in the Berkshire Hathaway equity portfolio. Shares are down about 6% for 2023, but have averaged an annual return of almost 6% over the past three years.
Berkshire Hathaway shareholders can be secure knowing that KHC will remain one of the best Warren Buffett dividend stocks. The company continues to pay a quarterly dividend of 40 cents a share. The $1.60 per-share annual payment yields a high 4.4%.
In 2022, Kraft Heinz paid out $1.96 billion in dividends. Berkshire will receive $521 million in dividends in 2023. It has not repurchased any of its shares in recent years, opting to pay down its debt instead.
Argus Research analyst Taylor Conrad thinks KHC's dividend is secure, but thinks it is "unlikely to grow rapidly given the company's current challenges." The analyst says these include struggles to increase volume, as well as pressure from inflation as consumers trade down to private-label products.
" On the positive side, we are encouraged by the divestment of the nuts and natural cheese businesses and by the company's new investments, including Assan Foods and Hemmer," Conrad says.
She has a Hold recommendation on KHC stock, but the majority of analysts are upbeat toward KHC, as evidenced by a consensus Buy recommendation at S&P Global Market Intelligence.
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