1 Overlooked Secret to Warren Buffett's Phenomenal Success

He may not like paying dividends, but he sure likes receiving them. You should, too. Follow Warren Buffett to high quality dividend paying stocks

May 5, 2014 at 12:00PM

Warren Buffett's company, Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) famously does not pay a dividend, but following Buffett's portfolio can lead you to some great dividend opportunities. Morgan Housel wrote a insightful piece on how to become a successful investor, including this gem from Buffett's partner Charlie Munger "carefully look at what the other great investors have done."

What's interesting when you study Buffett's portfolio is while he may not like paying dividends, he sure likes receiving them. Buffett's eight largest holdings all together pay Berkshire more than $1.8 Billion in dividends.

Keep this table in mind next time you hear someone saying something like "Buffett got it all wrong on IBM." Scale matters in total returns, IBM's share price has not done all that much in the short time Berkshire has owned its stake, but I think $258 million (and growing) yearly dividend income gives at least some comfort back in Omaha. 

Berkshire earns over $1 Billion each year from Wells Fargo and Coca Cola alone. That is almost $3m each day. Dividends add life to your portfolio. 

That is great for Berkshire, Buffett and their shareholders, but what about individual investors? Berkshire's top eight holdings is a good watchlist for high quality, dividend paying companies. The current S&P 500 dividend yield is 1.9%. All of the eight companies with the exception of American Express pay out above the market average. An equally weighted basket of the eight stocks would yield 2.4%. That is over 25% higher yield than the market average from a set of stocks that are higher quality as well.

Not only does this basket of eight Berkshire holding earn more quality income than the market, the income grows over time.

Many of Berkshire's largest holdings have excellent track records. Current income of $1.8 Billion is nice, but $1.8 Billion that grows every year is nicer still.

For the rest of us, we'll be starting off way smaller bases of capital and income, but investing is not a game where you get points for degree of difficult. Instead learn from the best. The basic approach of finding high quality companies that pay well covered and growing yields is something that an investor of any size can and should learn from.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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