Warren Buffett’s Top 20 High Dividend Stocks by Ben Reynolds, Sure Dividend
Updated July 9th, 2016
I think you’ll agree with me that high dividend stocks can be excellent investments for those looking for both:
- Current income
- Bond-beating total returns
But it can be difficult to find high quality, high dividend stocks.
It isn’t much good finding high yielding stocks when they cut their dividends shortly thereafter.
That’s where Warren Buffett comes in…
Warren Buffett’s portfolio is filled with quality high dividend stocks.
You can ‘cheat’ off of Warren Buffett’s own picks to find high quality, high dividend stocks for your portfolio.
Table of Contents
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): 1.9% dividend yield
- Apple (AAPL): 2.4% dividend yield
- M&T Bank Corporation (MTB): 2.4% dividend yield
- U.S. Bancorp (USB): 2.5% dividend yield
- The Kraft Heinz Company (KHC): 2.6% dividend yield
- Johnson & Johnson (JNJ): 2.6% dividend yield
- Kinder Morgan (KMI): 2.7% dividend yield
- Wal-Mart (WMT): 2.7% dividend yield
- United Parcel Service (UPS): 2.9% dividend yield
- General Electric (GE): 2.9% dividend yield
- Deere & Company (DE): 3.0% dividend yield
- Coca-Cola (KO): 3.1% dividend yield
- Procter & Gamble (PG): 3.1% dividend yield
- Wells Fargo & Company (WFC): 3.2% dividend yield
- Suncor Energy (SU): 3.2% dividend yield
- Phillips 66 (PSX): 3.4% dividend yield
- IBM (IBM): 3.6% dividend yield
- Verizon (VZ): 4.0% dividend yield
- Sanofi (SNY): 4.1% dividend yield
- General Motors (GM): 5.1% dividend yield
Warren Buffett & Dividend Stocks
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 3.1% (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.
#20 – American Express (AXP)
Dividend Yield: 1.9%
Price-to-Earnings Ratio: 12.3
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 one of Warren Buffett’s core holdings. He first purchased the stock in 1964… Over 50 years ago.
Now that’s a long-term investment.
American Express is a credit card provider with wide consumer recognition. The company currently has a market cap of over $58 billion. Only Visa (V) and MasterCard (MA) have larger market caps in the credit services industry.
American Express was founded in 1850 by Henry Wells and William Fargo. The Wells and Fargo also founded long-time Buffett holding Wells-Fargo.
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 suffered (mostly undue) negative ‘animal spirits‘ when Costco (COST) – another Buffett holding – announced it what drop American Express as its exclusive credit card company.
This has caused American Express to trade for a bargain price. The company currently has a price-to-earnings ratio of just 12.3. This appears to be far too low for a high quality credit card business.
#19 – Apple (AAPL)
Dividend Yield: 2.4%
Price-to-Earnings Ratio: 10.8
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 ($50.78 billion in the last 12 months) and market cap ($533 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 10.8. 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 – M&T Bank Corporation (MTB)
Dividend Yield: 2.4%
Price-to-Earnings Ratio: 15.9
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 locations 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 total returns for shareholders since 1980, one of the highest of any stocks during that time period.
Rising interest rates are a catalyst for M&T Bank Corporation. Rising rates favor the company as they lead to a greater spread on interest earned from deposits versus interest paid.
Shares of M&T Bank Corporation currently trade for a price-to-earnings ratio of 15.9. The company appears to be trading around fair value at current prices.
The company’s future looks bright and it trades at a reasonable valuation multiple. Additionally, M&T Bank Corporation has a dividend yield of 2.4%, a bit above the S&P 500’s dividend yield.
The company’s combination of stable growth, fair valuation, and solid dividend yield should appeal to dividend growth investors looking for exposure in the banking sector.
#17 – U.S. Bancorp (USB)
Dividend Yield: 2.5%
Price-to-Earnings Ratio: 12.7
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