Justin Pope, The Motley Fool
5 min read
In This Article:
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Berkshire Hathaway doesn't pay dividends, but Buffett loves investing in companies that do.
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Buffett gravitates toward consumer-facing brands and core economic industries, like financial services and energy.
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Berkshire owns several blue chip dividend stocks that can benefit your portfolio if you buy and hold them.
Legendary investor and multibillionaire Warren Buffett has spent six decades leading Berkshire Hathaway. The company hasn't paid a dividend to shareholders for almost its entire existence, but don't let that trick you into believing that Buffett doesn't like dividend stocks.
In reality, Buffett loves receiving dividends -- just not paying them.
If you look at Berkshire Hathaway's $280 billion-plus stock portfolio, the top eight holdings represent about 75% of the portfolio -- they all pay dividends. A company that pays a growing dividend is typically healthy and profitably growing, which is music to the ears of long-term investors like Buffett. Dividends also represent firm returns, cash in hand, without needing to sell any shares.
Here are his five top dividend picks, ranked by their position size in Berkshire Hathaway's portfolio, and how they can bring stability to your portfolio.
The iPhone revolutionized the technology sector and made Apple (NASDAQ: AAPL) one of the world's largest companies. Berkshire Hathaway didn't invest in Apple until roughly a decade after the first iPhone launched, but it's still been one of Buffett's best picks. It's still Berkshire's largest holding despite Buffett trimming much of his stake last year for a hefty profit.
There are over 2.35 billion active iOS devices worldwide. Apple's user base is a massive distribution network for subscription services, consistently generating huge revenue streams as people upgrade old devices. Apple reinitiated its dividend in 2012 and has raised it every year since. Buffett has referred to Apple as Berkshire's best stock and quipped that people would rather give up their second vehicle than their iPhones.
U.S. consumers love credit cards, which has made American Express (NYSE: AXP) a lucrative investment for Berkshire. Berkshire has owned it since Buffett bought the stock in 1991. Credit cards represent easily accessible capital, and American Express has built its brand around businesses and high earners.
The company is a lender and, therefore, sensitive to the economy. It has opted against dividend increases during tough times to protect its business and has only cut the dividend once in the late 1990s. However, American Express' dividend generally grows over time and is one of Buffett's longest-standing investments.
