Warren Buffett’s Top 20 High Dividend Stocks by Ben Reynolds, Sure Dividend
Warren Buffett’s portfolio is filled with quality high dividend stocks.
Warren Buffett's net worth is now over $60 billion. He is (arguably) the greatest investor of all time.
This article analyzes his top 20 high dividend stocks based on yield. You can skip to analysis of any of Warren Buffett's 20 high dividend stocks with the table of contents below. Stocks are listed in order from lowest yield to highest yield.
- American Express (AXP)
- Apple (AAPL)
- U.S. Bancorp (USB)
- M&T Bank Corporation (MTB)
- The Kraft Heinz Company (KHC)
- Johnson & Johnson (JNJ)
- Deere & Company (DE)
- Kinder Morgan (KMI)
- Wal-Mart (WMT)
- United Parcel Service (UPS)
- General Electric (GE)
- Coca-Cola (KO)
- Wells Fargo & Company (WFC)
- Phillips 66 (PSX)
- Procter & Gamble (PG)
- Suncor Energy (SU)
- International Business Machines (IBM)
- Sanofi (SNY)
- Verizon (VZ)
- General Motors (GM)
Warren Buffett has grown his wealth by investing in and acquiring business with strong competitive advantages trading at fair or better prices.
Most investors know Warren Buffett looks for quality, but few know the degree to which he invests in dividend stocks.
- 92% of Warren Buffett’s portfolio is invested in dividend stocks
- His top 4 holdings have an average dividend yield of 3.2% (and make up 62% of his portfolio)
- Many of his dividend stocks have paid rising dividends over decades
Warren Buffett prefers to invest in shareholder friendly businesses with long track records of success.
It happens that dividend stocks with long histories of dividend increases match what Warren Buffett looks for in a stock investment.
This article examines Warren Buffett’s top 20 high dividend.
Warren Buffett's Top 20 High Dividend Stocks: #20 - American Express (AXP)
Dividend Yield: 1.8%
Price-to-Earnings Ratio: 12.8
Years of Steady or Rising Dividends: 38
Percent of Warren Buffett's Portfolio: 7.2%
10 Year Earnings-Per-Share Growth Rate: 7.0%
American Express is a well known credit provider. The company currently has a market cap of $61 billion. Only Visa (V) and MasterCard (MA) have larger market caps in the credit services industry.
Despite being a well-established business, American Express continues to exhibit solid growth. The company has compounded its earnings-per-share at 7% a year over the last decade.
Share repurchases have helped American Express realize its growth rate over the last decade. The company has repurchased nearly 4% of shares outstanding a year over the last decade.
American Express focuses its credit lending services on those with good credit. As a result, it experiences lower bad credit losses than industry averages.
American Express stock has rebounded. The company’s stock is up 22% over the last quarter. American Express suffered (mostly undue) negative ‘animal spirits‘ when Costco (COST) – another Buffett holding – announced it what drop American Express as its exclusive credit card company.
Despite the recent price rise, American Express still appears to be undervalued at this time. A price-to-earnings ratio of 12.8 is far too low for a high quality credit business.
#19 - Apple (AAPL)
Dividend Yield: 2.4%
Price-to-Earnings Ratio: 10.5
Years of Steady or Rising Dividends: 5
Percent of Warren Buffett's Portfolio: 0.8%
10 Year Earnings-Per-Share Growth Rate: 45.3%
Apple is the largest corporation in the world based on both earnings ($50 billion in the last 12 months) and market cap ($518 billion).
Readers are likely very familiar with the company’s in demand (and expensive) consumer tech products and platforms, including:
- Apple Watch
Apple is currently trading for a price-to-earnings ratio of 10.5. This is far too cheap for the world’s most profitable business.
Apple’s share price is depressed because earnings-per-share growth has stalled. It was a mathematical impossibility the company would manage to keep up its insane growth rate. Now that growth has stalled, growth oriented investors are selling the stock.
Value oriented investors are picking up shares of Apple at bargain prices. Warren Buffett has joined in on the party – Apple is his most recent stock purchase. The Oracle of Omaha has invested around $1 billion in the Palo Alto based juggernaut.
Apple will not be able to generate eye-popping growth numbers going forward. With such a low share price, management is creating shareholder vale through share buybacks. Apple decreased its share count by 4.9% in 2015, and will very likely continue to gobble up undervalued shares.
Additionally, the company pays out a solid 2.4% dividend. Apple currently has a payout ratio of just 23%. I expect the company’s payout ratio to grow (and dividends to increase significantly) as Apple transitions from a growth stock to the world’s largest blue chip tech-based consumer goods company.
#18 - U.S. Bancorp (USB)
Dividend Yield: 2.5%
Price-to-Earnings Ratio: 13.1
Years of Steady or Rising Dividends: 7
Percent of Warren Buffett's Portfolio: 2.7%
10 Year Book-Value-Per-Share Growth Rate: 8.3%
It is easy to see why Warren Buffett has invested billions of Berkshire Hathaway’s portfolio into U.S. Bancorp stock.
U.S. Bancorp is the banking industry leader in return on assets, return on equity, and efficiency ratio.
Note: The financial metric ‘efficiency ratio’ is calculated as expenses before interest expense divided by total revenue.
The image below shows U.S. Bancorp’s industry leading status in these important metrics for fiscal 2015.
U.S. Bancorp is more than highly profitable. It is also very shareholder friendly. The company targets a dividend payout ratio of 30% to 40% a year and also targets spending 30% to 40% of earnings on share repurchases each and every year.
At current price levels, this comes to a shareholder yield of around 5.3%. The company has also managed to grow assets at about 7.5% a year over the last decade. With a shareholder yield of ~5% and a 7.5% growth rate, investors can expect total returns of around 13% a year from U.S. Bancorp.
U.S. Bancorp currently trades at a price-to-earnings ratio of just 13.1. Banks have traditionally traded at price-to-earnings ratios below those of the overall market due to risk of bank failure and strong competition.
U.S. Bancorp has found a way to be more profitable than its peers. In addition, the company remained profitable throughout the Great Recession of 2007 to 2009 – though it did cut its dividend significantly during that period. At its current price-to-earnings ratio, U.S. Bancorp appears to be somewhat undervalued.
#17 - M&T Bank Corporation (MTB)
Dividend Yield: 2.5%
Price-to-Earnings Ratio: 15.5
Years of Steady or Rising Dividends: 25
Percent of Warren Buffett's Portfolio: 0.5%
10 Year Book-Value-Per-Share Growth Rate: 5.7%
M&T Bank Corporation is a bank holding company with ~800 locatons across the East Coast.
M&T Bank is one of the few banks that did not cut its dividend payments during the Great Recession of 2007 to 2009. M&T Bank Corporation has grown to become one of the 15 largest banks in the United States.
M&T Bank Corporation maintains higher than industry average returns-on-equity and returns-on assets.
Additionally, the company is highly regarded for its conservative nature. M&T Bank Corporation does not over extend itself by writing risky loans.
The company’s conservative nature has produced phenomenal results for long-term shareholders.
The company has produced 18.9% annualized