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The 7 Highest-Yielding Buffett Stocks

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Berkshire Hathaway's Warren Buffett is widely regarded as the greatest investor of our time. What's not well-known is that dividend investing makes up a large part of his investments. Some of his largest holdings pay big yields, which gives the Oracle of Omaha cash to invest in good times and in bad.

Owning dividend companies is a hallmark of Buffett's. These stocks fall straight in line with his strategy of owning fundamentally strong companies whose business models provide inherent advantages against competitors -- otherwise known as "moats." Such companies can consistently reinvest cash flow at high rates of returns (as demonstrated by a high return on equity) and pay out excess cash flow to shareholders as dividends. Only fundamentally strong and well-managed companies can afford to give their shareholders cash every year.

So what companies does Buffett invest in? Well, since Buffett is an asset manager with more than $100 million in assets under management, he's required to detail his equity portfolio in a document filed with the SEC called a 13-F. The public filings available through the SEC's EDGAR website let us examine Berkshire Hathaway's holdings.

Here are his highest yielders:



Return on Equity (TTM)

GlaxoSmithKline (NYSE: GSK  ) 5.2% 36.3
M&T Bank (NYSE: MTB  ) 3.8% 10.7
ConocoPhillips (NYSE: COP  ) 3.6% 17.0
Johnson & Johnson (NYSE: JNJ  ) 3.4% 20.2
General Electric (NYSE: GE  ) 3.3% 11.6
Kraft Foods (NYSE: KFT  ) 3.3% 8.5
Procter & Gamble (NYSE: PG  ) 3.2% 18.2

Source: EDGAR filing on Aug. 15. TTM = trailing 12 months.

Let's take a closer look at what's on the list.

Buffett invested in GlaxoSmithKline and Johnson & Johnson as investors grew worried about the companies' dwindling drug pipelines. However, investors are overlooking their cash hoards, distribution networks, and experience working with the FDA, which are invaluable moats that allow them to ward off new upstarts and continually post large profits.

M&T Bank
M&T Bank is one of three banks that make up almost 20% of Buffett's portfolio. While M&T doesn't look particularly cheap at 1.1 times book value, the company consistently does well, earning a higher return on its book value than its average competitor. The company also consistently returns cash to shareholders and currently is trading with a 3.8% yield, the highest it's been since last January.

Buffett has called his investment in ConocoPhillips "a major mistake of commission." The Oracle of Omaha bought shares before the collapse of oil prices in 2008. While the investment was a mistake, Buffett's downside has been somewhat protected by the company's large dividend. ConocoPhillips shares have risen in the past year, though they are still 30% off the levels reached in 2008. One big positive for the stock: Last month, the company announced it would separate its exploration and production business from its refining business. Spinoffs have a history of outperforming the market, and this one looks promising, given Marathon Oil's recent successful similar spinoff. At $66, the price is far more attractive than 2008's $95 share price; you also have a potential catalyst with the upcoming spinoff; and you get a 3.6% dividend. There's a lot to like about ConocoPhillips.

General Electric
General Electric is a diversified machine that has consistently paid a dividend, earning those who have stuck with the company and reinvested their dividends very well off. Buffett made a large cash infusion in General Electric to help it overcome problems with its financial unit, a deal that has rewarded him handsomely. While the market wasn't happy with GE's recent earnings, there's a lot to like. GE has been expanding into the energy market with some success, and its industrial core has been doing well with its backlog at a record $189 billion. At today's price, you are paying less than 13 times for a company expected to grow 14.6% per year over the next five years, and you get a 3.3% dividend to keep you happy. What's not to like?

Consumer stocks
Buffett had protested Kraft acquiring Cadbury, but the deal went through all the same. Buffett has held most of his shares, and he'll likely be rewarded now that Kraft has announced plans to split up its North American grocery business from its snacks and candy business. The nice thing about this one is that while you wait for the spinoff, you can also collect the dividend, which is currently yielding 3.3%.

There's a lot to like about Procter & Gamble. The company is one of the best consumer staples companies in the world, with international markets making up 60% of P&G's sales and with its lineup touting many of the most recognizable household brands. Shareholders also benefit from a large dividend, currently yielding 3.2%, that it has paid since 1890 without interruption.

Foolish takeaway
In each case, Buffett's dividend-paying stocks are strong companies with wide moats, allowing them to pay dividends for years. If you hold on to strong dividend companies for years, you can also turn an initial investment into a small fortune. Consider the seven stocks above along with the 13 names from a free report from Motley Fool's expert analysts called "13 High-Yielding Stocks to Buy Today," including one named by a senior retail analyst as "the dividend play of a lifetime." Tens of thousands have requested access to this report and today I invite you to download it at no cost to you. To get instant access to the names of these 13 high yielders, simply click here -- it's free.

Dan Dzombak can be found on his Twitter account: @DanDzombak. He does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Johnson & Johnson and GlaxoSmithKline. Motley Fool newsletter services have recommended buying shares of Procter & Gamble, Johnson & Johnson, and GlaxoSmithKline, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (64)

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 August 16, 2011, at 7:05 PM, mikecart1 wrote:

    Foolish takeaway, Buffet is losing his mind based on statements made earlier this week about taxing the rich.

  • Report this Comment On August 16, 2011, at 7:15 PM, jtcairns wrote:

    If Buffet is such a fan of dividends, how come Berkshire doesn't pay any?

  • Report this Comment On August 16, 2011, at 7:19 PM, ProfMAD wrote:

    Regarding GE, memories are too short. I have a position in a DRIP managed by BoNY-Mellon that was worth $150,000 at the end of Jack Welch's tenure as CEO. After he left, the Immelt regime consistently and persistently destroyed value, most recently cutting the dividend (in 2005?). At current prices, my position is worth $73,000.

    This sorry tale testifies to several facts: some companies' reputations never catch up with reality; DRIPS do not defend stockholders against value destruction by determined managers; and loyalty is stupid.

  • Report this Comment On August 16, 2011, at 7:34 PM, ProfMAD wrote:

    Unlike Mr. mikecart1, I view Mr. Buffet as a sane and DECENT man. His position on taxing the risk, that they should be willing to share the burden of recovery, had only one major omission.

    This is that the sell side argument in favor of tax relief for the rich, to the effect that they are the economy's investors, is totally vacuous. Investment is driven by forecasts of growing future consumption. In a recession, consumption projections do not support investment spending and tax concessions to the rich merely increase saving and wealth inequality.

  • Report this Comment On August 16, 2011, at 8:36 PM, shsscar wrote:

    RE: GE.....I dumped GE in Nov '08 at 20.80; I won't be revisiting that one so long as Immelt is still there. Today its trading a little above 16 and going no where. No thanks.

  • Report this Comment On August 16, 2011, at 10:53 PM, DonkeyJunk wrote:

    The lesson to be learned by those who dumped GE?

    Buy at the high point when the majority of stocks are outrageously overvalued and sell once they've come back to earth.

    Invest in the prototypical CEO: those who value performance, but are perfectly happy to put hundreds of thousands out of work to improve the bottom line and take the credit for the success of all arms of business--ditch the CEO who transforms the business and prepares it for the next century.

    Slashing unsustainable dividends to stabilize the company, then steadily rebuilding those dividends as the company regains its strength, is unacceptable.

    Pay lip service to going long, but bow out when the going gets rough, regardless of forward projections.

    Sell rather than double down on good investments with promising futures.

    I feel sorry for those of you who purchased GE at its peak and in a period of transition and waited until the nadir to unload them again, but the arguments against grabbing more shares now, after a summer that was particularly brutal, are completely unconvincing.

  • Report this Comment On August 17, 2011, at 6:21 AM, Pietrocco wrote:


    What happened to Sanofi, which yields more than most company you mentioned?

    Has Warren sold his position?

    Thanks for clarifying.



  • Report this Comment On August 17, 2011, at 10:05 AM, bullishperson wrote:


    There is a mistake in your article. You refer to Buffett as a money manager.

    "So what companies does Buffett invest in? Well, since Buffett is an asset manager with more than $100 million in assets under management, he's required to detail his equity portfolio in a document filed with the SEC called a 13-F." I believe he is a $100BILLION investor not a million investor" A small difference ha!

  • Report this Comment On August 17, 2011, at 11:03 AM, GETRICHSLOW2 wrote:

    I like buffet and have studied his ways but his recent comments on taxing the rich have me concerned about his mental condition. Someone who understands numbers and math like he does should be able to see the wealther folks already pay more simply by earning more and falling into the higher percentage brackets. Also, I have yet to find anyone who can define exactly what "rich" is.

    I would not touch G.E. now or in the near future. After years of cooking the books under his majesty Welch, it finally bit them on the rear in 2008. Having to cut the dividend after a thirty something year run of increases and borrow billions from Buffet at an astounding 10% rate, are indications of just how much of a mess they were in. With a debt level nearly four times the value of the company, they should not even be paying a dividend at all.

    There are many many better opportunities out there.

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