Warren Buffett has never pushed for his own Berkshire Hathaway (BRK.A -1.05%) (BRK.B -0.83%) to initiate a dividend program. He has always maintained that the best ways for Berkshire to reward shareholders are through investing cash in other companies and in Berkshire itself through buybacks.
But don't think for a second that Buffett doesn't like the companies he invests in to pay dividends. Berkshire raked in nearly $3.8 billion in dividends in 2019 from its 10 largest holdings. The giant conglomerate has also added several strong dividend stocks to its portfolio this year.
Not all of the Berkshire-owned stocks pay great dividends. However, here are three Warren Buffett dividend stocks you can buy right now.
Image source: The Motley Fool.
1. AbbVie
Buffett loaded up on big pharma stocks for Berkshire in the third quarter. One of the biggest new positions was AbbVie (ABBV 0.54%).
AbbVie boasts one of the most impressive dividend track records on the market. It's a Dividend Aristocrat, with 49 consecutive years of dividend increases including the time the company was part of Abbott Labs. Since being spun off from Abbott in 2013, AbbVie has increased its dividend by 225%. Its dividend yield currently stands at a mouth-watering 4.85%.
Some investors have soured on AbbVie because the company's top-selling drug Humira faces biosimilar competition in the U.S. beginning in 2023. After all, sales of the drug that's generated nearly half of AbbVie's total revenue so far in 2020 will likely begin sinking soon. But Warren Buffett has always looked to the long-term and not just the immediate future.
Buffett likely realized that AbbVie remains in a solid position thanks to new autoimmune disease drugs that should take the baton from Humira. The Oracle of Omaha also was almost certainly aware of AbbVie's blood cancer drugs delivering fast-growing sales and its overall financial strength. AbbVie probably won't be a huge growth story in the near term, but it should provide solid total returns over the long run to patient investors.
2. Bank of America
Bank of America (BAC -3.53%) has been a longtime holding for Berkshire Hathaway. It's no secret that Buffett has liked big banks for quite a while. And Bank of America stands as one of his favorites, with Berkshire owning nearly 11% of the company.
The financial services company ranked as the third-largest source of dividends for Berkshire last year, contributing $682 million in dividends to the conglomerate's coffers. Bank of America cut its dividend during the Great Recession period and didn't provide any dividend hikes for a few years afterward. However, the company has increased its dividend payout by an impressive 260% over the last five years. Its dividend now yields close to 2.5%.
A struggling economy combined with low interest rates isn't a great recipe for success for a big bank. Bank of America, though, appears to be in a strong position to soar once the pandemic ends and the economy recovers. Warren Buffett is no doubt banking (pun fully intended) on that happening.
Bank of America should even be a winner in the "war on cash" in the coming years. The company has ramped up its online and digital operations more significantly than most of its rivals. Increasing profits from a major trend such as the shift from physical currency to digital payments should help ensure that Bank of America's dividends continue to flow and grow.
3. Pfizer
Pfizer (PFE -0.85%) is another recent big pharma addition to Berkshire's holdings. And, like AbbVie, Pfizer is a great dividend stock.
No, Pfizer isn't a Dividend Aristocrat like AbbVie is. You can blame the company's dividend cut more than a decade ago related to its acquisition of Wyeth. However, Pfizer has steadily raised its dividend every year since 2010. Its dividend currently yields around 3.6%.
Pfizer will soon reduce its dividend a little, but investors shouldn't be concerned. The coming cut stems from the company's merger of its Upjohn unit with Mylan to form Viatris. This deal was a smart move for Pfizer because it will enable the company to return to solid growth after several dismal years weighed down by sinking sales of older drugs.
With Upjohn gone, Pfizer's lineup includes several growth drivers such as blood thinner Eliquis and rare disease drug Vyndaqel. Of course, the company also could soon add a blockbuster COVID-19 vaccine to the mix. Buffett won't just get attractive dividends with Pfizer; he'll likely get attractive growth, too. Investors who aren't legendary billionaires can benefit from both as well.
