Warren Buffett Owns 6 High-Yield Dividend Stocks. Here's the Best of the Bunch.
Warren Buffett is a lot of things, but an income investor isn’t one of them. The multibillionaire doesn’t need extra income. Neither does Berkshire Hathaway, which boasts the eighth-largest market cap of any U.S. company.
However, Buffett does like dividend stocks. Berkshire Hathaway’s portfolio even includes six high-yield dividend stocks (with a high yield defined as one that’s at least twice that of the S&P 500.)
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Let’s go down the list of Buffett’s high-yield six-pack, from highest to lowest forward dividend yield. Kraft Heinz ranks at the top, with a yield of 5.23%. Berkshire owns so much of the food company that it’s listed among the conglomerate’s subsidiaries on its website.
Chevron (NYSE: CVX) takes the No. 2 spot. The oil and gas giant pays a forward dividend yield of 4.09%. It’s also Berkshire’s fifth-largest holding.
Diageo trails behind Chevron, with a yield of 3.47%. The British alcoholic beverage maker is one of Berkshire’s smallest positions, making up less than 0.1% of its total portfolio.
Next up is Ally Financial (NYSE: ALLY). The bank’s forward dividend yield is 3.37%. Buffett initiated a position in Ally in the first quarter of 2022.
Holding down the sixth position is another bank — Citigroup (NYSE: C). The financial services company offers a forward dividend yield of 3.27%. Like Ally, Buffett first bought Citigroup in early 2022.
Coca-Cola (NYSE: KO) is the caboose on our list, with a yield of 3.1%. However, the large food and beverage company is No. 1 in another key category as the stock Buffett has owned for the longest period.
We’ve seen how these six stocks stack up against each other with dividend yields. How do they compare on other fronts?
Coca-Cola boasts the most impressive dividend track record. The company has increased its dividend for 62 consecutive years, making it a part of the elite group of stocks known as Dividend Kings. Chevron has a great track record as well, with 37 consecutive years of dividend increases.
The high-yield bank stocks stand out based on valuation. Ally Financial sports a low forward price-to-earnings ratio of 7.9. Citigroup’s forward earnings multiple is around 9.4. However, Kraft Heinz isn’t too much higher, with shares trading at roughly 9.8 times forward earnings.
Ally and Citigroup also could have the best growth prospects over the near term if Wall Street is right. The average earnings growth projection for Ally next year is 48.9%, based on LSEG‘s survey of analysts. The consensus earnings growth for Citigroup next year is nearly 22.1%. Chevron comes in third place in this category, with analysts forecasting 9.2% earnings growth.
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