Updated February 24th, 2017 by Nicholas McCullum

I think you’ll agree with me that high dividend stocks can be excellent investments for those looking for both:

  1. Current income
  2. Strong 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.  That’s because Buffett (and other institutional investors) are required to periodically show their holdings in a ’13F Filing’.  On February 14th, 2017, Buffett released his latest 13F filing.

Free PDF Download: Get exclusive access to the free 1 page PDF executive summary detailing the exact strategy Warren Buffett used to grow his wealth to $60+ billion.

This article analyzes Warren Buffett’s top 20 high dividend stocks based on yield from his latest 13F filing.

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.

If you are interested in seeing more detail about Warren Buffett’s investment portfolio, you can click here to download an excel document that contains each of Buffett’s holdings along with dividend yields, price-to-earnings ratios, how many shares Buffett owns, and the market value of Berkshire’s investment.

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.

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Most investors know Warren Buffett looks for quality, but few know the degree to which he invests in dividend stocks:

  • 91% of Warren Buffett’s portfolio is invested in dividend stocks
  • His top 4 holdings have an average dividend yield of 2.9% (and make up 57% 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 stocks in detail.

Warren Buffett’s Recent Investment Activity

When Berkshire Hathaway published their most recent 13F filing with the Securities Exchange Commission, there were two developments that stood out to investors.

Firstly, Buffett has purchased a substantial stake in the airline industry, spread out over four different companies:

  • Delta Air Lines, Inc. (DAL): 60,025,995 shares
  • Southwest Airlines Co. (UAL): 43,203,775 shares
  • United Continental Holdings Inc. (UAL): 28,951,353 shares
  • American Airlines Group Inc. (AAL): 45,544,854

While none of these stocks make it into this top 20 list because of their low (or nonexistent) dividend yields, Buffett’s stake in these companies is worth approximately $9.9 billion – a significant proportion of his investment portfolio.

For many investors, this is puzzling. Buffett has been vocally critical of the airline industry in the past, saying in 2013 that airlines are a “deathtrap for investors”.

However, Berkshire’s management appears to have had a change of heart. Charlie Munger, Berkshire’s Vice Chairman, was recently quoted as saying:

“[Railroads were] a terrible business for about 80 years, but finally they got down to four big railroads and it was a better business. And something similar is happening in the airline business.”

This has led many investors to posit that Berkshire may be interested in fully purchasing an aircraft, similar to what they did with the BNSF railroad in 2010.

The second surprising fact contained in Berkshire Hathaway’s 13F was their increased stake in Apple (AAPL). In between his last two 13F filings, Buffett had purchased 42,131,950 additional shares of Apple.

Buffett has notably stayed away from technology stocks in the past. However, in the technology industry, there are few companies that exhibit as strong of a competitive advantage as Apple does.

Apple is now Berkshire Hathaway’s seventh largest holdings with a market value of ~$6.6 billion.

Moving on, Warren Buffett’s top 20 dividend stocks (sorted by yield) will now be analyzed in detail.

Warren Buffett's Top 20 Dividend Stocks With the Highest Yields

#20 – Bank of New York Mellon (BK)

Dividend Yield: 1.6%
Price-to-Earnings Ratio:  15.1
Years of Steady or Rising Dividends: 8 years
Percent of Warren Buffett’s Portfolio: 0.7%
10 Year Earnings-Per-Share Growth Rate: 5.1% per year

BNY Mellon is a large-scale investment management and capital markets corporation. And when I say large scale, I really mean it. The company’s figures are impressive:

  • $1.6 trillion of assets under managements
  • $29.9 trillion of assets under custody and administration
  • 52,000+ employees
  • 100+ markets served
  • 35 countries with a BNY Mellon presence

Clearly, BNY Mellon is a leader in their industry. More details about their operating model can be seen below.

BK Client Investment Solutions

Source: BNY Mellon Client Investment Solutions Handout

BNY Mellon is coming off of a strong year. Their financial performance was driven by the current macroeconomic environment.

Rising interest rates have led to higher fees earned by BNY Mellon from their money market products. Further, higher rates mean more revenue from BNY Mellon’s Securities Lending division. The only major negative for BNY Mellon during fiscal 2016 was the continued strength of the U.S. dollar.

All of this culminated in the company’s GAAP EPS increasing by 16%.

BK Summary Financial Results for Full-Year 2016 - GAAP

Source: BNY Mellon Fourth Quarter Investor Presentation, slide 5

Looking ahead, it is reasonable to believe that rates will continue to increase, at least domestically. The Federal Reserve has hinted at executing a rate hike sometime in March, and they have explicitly stated that they aim to increase rates three times in 2017.

BNY Mellon is an attractively valued stock that will benefit from this trend, with a price-to-earnings ratio of 15.1. Further, the company has managed to grow earnings-per-share at a satisfactory rate over the past decade, 5.1%. Keep in mind that this time period includes the global financial crisis – performance would have been much better otherwise.

Overall, investors in BNY Mellon can likely expect

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