Buffett the Dividend Investor

Warren Buffett has long been an investor interested in dividends. A quick look at the Berkshire Hathaway (NYSE: BRK-B  ) 2007 annual report shows just how serious Buffett is about dividends. Just take a look at some of his huge stakes in dividend payers:

Company

Number of Shares

Recent Dividend Yield

Estimated Annual Dividend Income

Wells Fargo (NYSE: WFC  )

303 million

5.2%

$412 million

Coca-Cola (NYSE: KO  )

200 million

3.4%

$304 million

Procter & Gamble (NYSE: PG  )

101 million

2.5%

$162 million

American Express (NYSE: AXP  )

152 million

3.4%

$109 million

Those dividend payouts total nearly $1 billion, and they're just a few of many dividend payers in the portfolio. A recent filing with the SEC, for example, reveals a newer position of some 84 million shares of ConocoPhillips (NYSE: COP  ) , sporting a recent yield of 3.8% and paying Buffett $158 million annually. His dividend-paying stocks generate a not-insignificant chunk of the company's income.

Better still, Buffett has held on to his dividend payers for many years, thus earning rather huge effective yields. (Read how my dividends are bigger than yours for more on effective yields.) Coke's dividend has increased tenfold during the 20 years that Buffett has held it. Hanging on to strong and growing companies for years, if not decades, is what many successful dividend investors do. (Indeed, having dividend payers in your portfolio can help you sleep at night, too, especially in these volatile days.)

One blogger, Dobromir Stoyanov, recently suggested that Buffett is a typical dividend investor because he trimmed his position in Bank of America (NYSE: BAC  ) after it cut its dividend by 50%. I'm not so sure about that. The cutting of a dividend alone shouldn't drive a dividend investor to sell -- especially if the cut still leaves the stock with a yield above 7%, as is the case with Bank of America.

Most important to an investor is whether the company seems healthy and what its growth prospects are, as well as whether there are more attractive investments. It may just be that Buffett thought he'd get more bang for some of his bucks in ConocoPhillips than in Bank of America.

Consider investing in steady dividend payers. For recommendations, I encourage you to test-drive, for free, our Motley Fool Income Investor newsletter, featuring many firms with dividend yields higher than 6%.

Here are some of my colleagues' thoughts on the attractiveness of our current market:

Longtime Fool contributor Selena Maranjian owns shares of Coca-Cola and Berkshire Hathaway. Bank of America is a Motley Fool Income Investor pick. Coca-Cola, Berkshire Hathaway, and American Express are Motley Fool Inside Value picks. Berkshire Hathaway is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Berkshire Hathaway and American Express. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.


Read/Post Comments (4) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 25, 2008, at 4:34 PM, SteveTheInvestor wrote:

    You're likely correct in regards to BAC. I dumped it some time ago, for probably some of the same reasons. The fact that the stock has dropped almost 70% in the last year may have something to do with it, indicating significant problems. Oh, and perhaps a payout ratio above 200% even after the dividend cut. I think the yield is actually more like 11% currently. It's obvious very few believe in the stock if it's sporting that kind of yield. My guess is another cut is coming.

  • Report this Comment On November 25, 2008, at 7:52 PM, cquarnstrom wrote:

    How can one assume from the facts given that Buffet sold BAC merely due to a dividend cut. He never comments on the reasons for his stock moves, and says he will not. He also sold Freddie Mac near its all time peak. Maybe the multi-billionaire knows something that a journalist writing for chump change doesn't!!

  • Report this Comment On November 25, 2008, at 8:14 PM, dividendgrowth wrote:

    BAC was a Lou Simpson purchase as it only shows up in GEICO's portfolio. But Lou saw his mistakes and has now cut back his stakes.

    I think BAC is the next candidate after Citi for NATIONALIZATION!

  • Report this Comment On December 17, 2008, at 1:17 PM, sagitarius84 wrote:

    I would have appreciated a link to Dobromir Stoyanov's blog:

    http://www.dividendgrowthinvestor.com/2008/10/warren-buffett...

    Best Regards,

    D.S.

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