Warren Buffett's Dividend Portfolio

Warren Buffett’s Berkshire Hathaway outperformed the S&P 500 by 9.6% per year from 1965 through 2023, generating an overall gain of 4,384,748% compared to the market’s total return of 31,223%.

It’s no wonder why investors closely monitor Warren Buffett’s portfolio. He is arguably the greatest investor of all time, and he has doled out some of the best investment advice over the years.

Here's a list of all the dividend stocks owned by Warren Buffett:While Berkshire Hathaway itself does not pay a dividend because it prefers to reinvest all of its earnings for growth, Warren Buffett has certainly not been shy about owning shares of dividend-paying stocks. 

Over half of Berkshire's holdings pay a dividend, and several of them have yields near 4% or higher. 

A dividend is often the sign of a financially healthy and stable business that is committed to rewarding shareholders. These are some of the qualities Warren Buffett looks for when he invests.

Berkshire Hathaway has been building a massive cash reserve as market valuations look frothy, leading many to speculate that the Oracle of Omaha predicts that the market may be nearing a reset.

The firm's cash position now exceeds the value of its equity holdings.

Notably, Berkshire Hathaway has trimmed its stake in Apple (AAPL) by nearly two-thirds since the beginning of the year. Despite these cuts, the iconic iPhone maker remains Berkshire's largest holding.

Last quarter, Warren Buffet also reduced his stake in dividend stocks Bank of America (BAC) and Capital One (COF).

No other notable dividend stock trades were made. 

New Positions

Here's a look at some of the dividend stocks with the highest yields in Berkshire's portfolio.

Berkshire has owned shares of Ally since the first quarter of 2022, making the financial services company approximately 0.4% of its portfolio.

Buffett has likely followed Ally for a long time as it was founded in 1919 by General Motors (another Berkshire holding) to provide financing to automotive customers.

Ally is still one of the largest car finance companies in America but has evolved to become a full spectrum provider of consumer and banking services as well.

Rising interest rates have squeezed the BBB- rated bank's profitability since Buffett's initial purchase. But he likely expects deposits to continue rising over the long run, fueling earnings growth as Ally invests these funds into loans and other interest-earning assets.

Berkshire Hathaway established a position in Coca-Cola in 1988, seeing the company's strong brand, global reach, and consistent earnings as key strengths. The soda maker accounts for nearly 11% of the firm's investment portfolio.

The company's enduring brand loyalty and expansive distribution network have resulted in a stable and growing revenue base. Despite market fluctuations and changing consumer preferences towards healthier alternatives, Coca-Cola has consistently adapted its product offerings, maintaining its market dominance.

Coca-Cola will likely continue growing its portfolio of healthier options to satisfy American consumers while its core products benefit from international growth. The company's A+ credit rating provides additional financial flexibility to adapt as needed while maintaining a strong commitment to the dividend.

Warren Buffett initiated a position in Citigroup in early 2022. Berkshire has invested in bank stocks for many decades, attracted by their ability to print money by taking in cheap deposits, lending out at higher rates, and managing risk appropriately.

It's hard to say why Citigroup, which accounts for 1% of Berkshire's portfolio, caught Buffett's eye. The bank's stock trades at a discount compared to larger, more reputable peers such as JPMorgan Chase.

And perhaps Buffett expected higher interest rates to act as a rising tide to lift all banks, even though this has had the opposite effect so far due to the fierce battle for deposits.

Buffett bought into Chevron in late 2020 when the market was worried about the safety of dividends across the oil patch. Chevron's dividend yield was nearly twice as high back then, approaching 8%.

Energy demand has since boomed as the global economy rebounded from Covid lockdowns while supply has shown more restraint, contributing to today's inflationary environment while bolstering profits across the industry.

Chevron is one of the highest-quality companies in this space, with a pristine balance sheet and low breakeven oil price required to cover its capital expenditures and dividend. The stock accounts for about 6% of Buffett's equity holdings.

Kraft Heinz represents about 4% of Berkshire Hathaway's portfolio and is one of the firm's less successful investments, with roots tracing back to a 2013 deal Buffett struck with 3G Capital to take Heinz private.

Kraft Heinz got into trouble after its private equity owners cut costs too far, leaving the maker of condiments, sauces, frozen meals, and other packaged foods more vulnerable to competition and healthy eating trends.

Coupled with a bloated balance sheet, Kraft Heinz slashed its dividend in 2019 and has struggled to achieve consistent, profitable organic growth. This is one of the less interesting investments in Berkshire's portfolio, even though it is among Buffett's highest-yielding dividend stocks.

Warren Buffett has evolved as an investor since launching his original partnership in 1956. 

Back then, Warren Buffett’s portfolio was much smaller in size and allowed him to pursue the greatest inefficiencies he could find in the market almost regardless of the stock’s market cap. He focused intensely on finding stocks trading at cheap valuations.

Buffett was not afraid to make a single position account for more than 25% of his portfolio and stated that he would be comfortable investing up to 40% of his net worth in a single security if the probabilities were deemed to be extremely in his favor, limiting risk.

Warren Buffett’s portfolio remains concentrated today, with Apple representing around 25% of Berkshire Hathaway’s portfolio (excluding cash). 

The idea behind running a concentrated portfolio is that there are relatively few excellent businesses and investment opportunities in the market at any given time, and owning too many positions reduces the impact from your few best ideas.

Importantly, Warren Buffett’s investment strategy has always been focused on the concept of staying within one’s circle of competence. Buffett has said that “risk comes from not knowing what you’re doing.”

In other words, never invest in a business or industry that is too hard for you to understand. The reality is, most investment opportunities fall outside of our circle of competence and should be ignored. 

Since the days of his initial partnership, Buffett’s strategy has evolved to concentrate more on buying up wonderful businesses at reasonable prices rather than digging through the bargain bin for “cheap” stocks. He looks for companies that have strong economic moats and numerous opportunities for growth.

When Warren Buffett makes an investment, he has said that his favorite holding period is “forever.” The idea is to buy excellent companies with solid long-term growth prospects and let them compound over the long run.

Not surprisingly, our dividend investment philosophy shares many similarities with Warren Buffett’s. 

By remaining focused on simple, high quality businesses trading at reasonable prices, we can construct a sound dividend portfolio that can deliver safe, growing dividend income for years to come.