To invest in great businesses, you have to find them first.
That’s where Warren Buffett comes in…
Warren Buffett’s portfolio is filled with quality high dividend stocks.
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You can ‘cheat’ off of Warren Buffett’s own picks to find high quality dividend stocks for your portfolio. That’s because Buffett (and other institutional investors) are required to periodically show their holdings in a ’13F Filing’.
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This article analyzes Warren Buffett’s top 20 stocks based on information disclosed in his newest 13F filing, published on August 14th, 2017.
How To Use Warren Buffett’s Portfolio To Find Investment Ideas
Having a database of Warren Buffett’s top stocks is more powerful when you have the ability to filter it based on important investing metrics.
That’s why this article’s Excel download is so useful…
It allows you to search Warren Buffett’s portfolio to find dividend investment ideas that match your specific portfolio.
For those of you unfamiliar with Excel, this section will show you how to filter Warren Buffett’s portfolio for two important investing metrics – price-to-earnings ratio and dividend yield.
Step 1: Click on the filter icon in the column for dividend yield or price-to-earnings ratio.
Step 2: Filter each metric to find high-quality stocks. Two examples are provided below.
Example 1: To find stocks with dividend yields above 1% and list them in descending order, click the ‘Dividend Yield’ filter and do the following:
Example 2: To find stocks with price-to-earnings ratios below 25 and list them in descending order, click the ‘Price-to-Earnings Ratio’ filter and do the following:
Table of Contents
You can skip to an analysis of any of Warren Buffett’s 20 top stock holdings with the table of contents below. Stocks are listed in order from smallest percentage of Buffett’s portfolio to largest percentage of Buffett’s portfolio.
- USG Corporation (USG)
- VeriSign, Inc. (VRSN)
- General Motors Company (GM)
- United Continential Holdings, Inc. (UAL)
- American Airlines Group Inc. (AAL)
- The Goldman Sachs Group, Inc. (GS)
- DaVita (DVA)
- The Bank of New York Mellon Corporation (BK)
- Delta Air Lines, Inc. (DAL)
- Southwest Airlines Co. (LUV)
- Moody’s Corporation (MCO)
- Charter Communications (CHTR)
- U.S. Bancorp (USB)
- Phillips 66 (PSX)
- International Business Machines Corporation (IBM)
- American Express Company (AXP)
- The Coca-Cola Company (KO)
- Apple Inc. (AAPL)
- Wells Fargo & Company (WFC)
- The Kraft Heinz Company (KHC)
Warren Buffett & Dividend Stocks
Buffett has grown his wealth by investing in and acquiring businesses 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 2.6% (and make up 56% 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.
Warren Buffett’s Recent Investment Activity
The most notable activity in Warren Buffett’s investment portfolio this year was his investment in Synchrony Financial (SYF).
Synchrony Financial is not a top 20 holding in Warren Buffett’s investment portfolio, so the stock does not have a dedicated section in this article. However, since the company was Warren Buffett’s only previously-unannounced purchase revealed in his 13F filing, the company’s business model, growth prospects, and valuation deserves some discussion in this article.
Synchrony Financial is a retail finance company that specializes in offering private-label credit cards to third-party merchants. Headquartered in Stanford, Connecticut, Synchrony Financial has a market capitalization of $23.8 billion. Buffett’s Berkshire Hathaway owns 4,934,756 shares of Synchrony Financial worth approximately $520.7 million.
Synchrony has a very short history as a publicly-traded company. Until recently, Synchrony operated as a wholly-owned subsidiary of General Electric. Synchrony’s initial public offering was completed on July 31, 2014, when General Electric sold 125 million shares to the public at a price of $23.00 per share.
The offering raised $2.88 billion for GE, which retained 85% of Synchrony after the IPO. General Electric has divested of most of this 85% stake since then (Value Line reports Synchrony’s largest shareholder to be Blackrock with a 6.3% stake).
So why did Buffett invest in Synchrony Financial?
It appears to be a way to diversify and increase his stake in the financial sector. Buffett already has significant investments in Wells Fargo (his second-largest stock holding), American Express, U.S. Bancorp, Moody’s, the Bank of New York Mellon, and the Bank of America (through warrants, which he is expected to exercise in the near future).
Synchrony Financial’s valuation certainly helped Buffett (or one of his investment associates) take note of this stock. Synchrony Financial reported adjusted earnings-per-share of $2.71 in fiscal 2016, and trades at a stock price of $30.22 for a price-to-earnings ratio of 11.2.
A price-to-earnings ratio of 11.2 is a significant bargain in today’s market. For context, the average price-to-earnings ratio in the S&P 500 is about 24.2 right now… which means Synchrony is attractively priced for value-focused investors like Buffett.
The stock also pays a reasonable dividend, yielding 2.0% at current prices (a tick above the S&P 500’s average dividend yield of 1.9%).
Quantitatively, there’s a lot to like about Synchrony Financial. Warren Buffett is not the only super-investor who has taken notice.
Seth Klarman’s Baupost Group has invested a significant sum in Synchrony Financial – the stock is his fund’s second-largest position, composing ~10% of the portfolio with a market value of nearly $900 million.
All signs indicate that there is something special here. We will be following Buffett’s investment in Synchrony closely, and would not be surprised if the Oracle of Omaha adds more shares in the near future.
In addition to Warren Buffett’s investment in Synchrony Financial, Buffett’s other notable portfolio addition in the quarter was a $377 million investment in STORE Capital (STOR), a triple net lease REIT with a market capitalization of ~$4 billion. We investigated Buffett’s investment in this REIT in a previous Sure Dividend article:
Warren Buffett also added to his stakes in the Bank of New York Mellon (+50%), General Motors (+20%), and Apple (though only slightly, +0.6%).
Berkshire reduced its holdings in the following companies:
- Wells Fargo: this is likely some position trimming to keep