Buffett the Dividend Investor

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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%.

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