Warren Buffett has given Berkshire Hathaway (BRK.A -0.34%) (BRK.B -0.01%) shareholders a lot through the years. Most importantly, under his direction, Berkshire has handily beaten the market.
However, there's one thing that Oracle of Omaha hasn't given Berkshire shareholders -- a dividend. That doesn't mean that Buffett doesn't like dividends. Actually, quite a few of Berkshire's equity holdings offer solid dividends. Some of them are better picks than others, though. Here are three Buffett dividend stocks to buy in February.
Image source: The Motley Fool.
1. AbbVie
AbbVie (ABBV 0.98%) offers one of the juiciest dividends of all the stocks in Berkshire's portfolio with a yield north of 4.1%. Even better, the big drugmaker places a high priority on growing its dividend. AbbVie ranks as a Dividend Aristocrat with 49 consecutive years of dividend increases.
Buffett almost certainly also likes AbbVie's valuation. The stock trades at under 9.6 times expected earnings. That's dirt cheap compared to the S&P 500's forward earnings multiple of 20.3.
There is a reason for that attractive valuation, though. AbbVie's top-selling drug, Humira, faces biosimilar competition in the U.S. beginning next year. Investors are concerned that the company's revenue and earnings will take a significant hit.
However, AbbVie has been preparing for the day when Humira's sales would fall for a long time. The company has multiple other growth drivers in its lineup, notably including newer autoimmune-disease drug Skyrizi and cancer drug Venclexta. AbbVie should be able to return to growth quickly after 2023. And its dividends shouldn't be impacted at all.
2. Bank of America
Bank of America's (BAC 1.70%) dividend yield of around 1.8% isn't especially high. But the financial services company has definitely rewarded investors with dividend growth. Over the past 10 years, Bank of America's dividend payout has increased by a whopping 2,000%.
You'll get a lot more than just a dividend with this bank stock, though. Last year, Bank of America's shares soared 47%. The stock could be a great one to own in 2022 as well.
One of the reasons behind the stock market's volatility so far this year is that investors expect interest rate hikes are on the way. The Federal Reserve has been quite clear that it plans to increase rates. Bank of America stands to benefit from these higher interest rates because the company will make more money from its loans to customers.
While the banking sector can be viewed as somewhat stodgy, Bank of America has been on the cutting edge of introducing new technology. CEO Brian Moynihan even said in the Q4 conference call that the company's digital transformation "is foundational to everything we do." This technological prowess should keep Bank of America at the forefront of financial services for a long time to come.
3. Johnson & Johnson
Johnson & Johnson (JNJ 0.29%) claims one of the most impressive dividend track records among the stocks owned by Berkshire Hathaway. The healthcare giant is a Dividend King with 59 consecutive years of dividend increases. Its dividend yield stands at close to 2.5%.
A major shake-up is on the way for Johnson & Johnson, but it should be a good one. The company plans to spin off its consumer health business as a stand-alone entity. J&J will be left with its pharmaceutical and medical device units.
This move will leave Johnson & Johnson with a lower dividend payout than it has now. However, investors who hold onto shares of both companies after the spin-off should receive at least the same combined dividend as they did before the transaction.
The best aspect of the spin-off is that it could cause J&J's share price to increase. The pharmaceutical segment is the company's biggest growth driver, followed by the medical device segment. Buffett has owned Johnson & Johnson stock for a long time. He (and other investors) could soon have more robust growth in addition to a solid dividend.
