Warren Buffett has always been a big fan of dividends. The evidence is right there in Berkshire Hathaway's (BRK.A 0.64%) (BRK.B 0.54%) equities portfolio, which is filled with lots of high-yielding stocks. Dividends create passive income for investors that can help build wealth over time. It's also not a bad thing to offset some of your higher-growth stocks with more reliable passive income.
Some of Berkshire's stakes are worth billions of dollars, so the dividends can deliver the company hundreds of millions of dollars every year. Here are the three highest-yielding dividend stocks in Buffett and Berkshire's portfolio.
1. Store Capital
Real estate investment trust (REIT) Store Capital (STOR) gets its name from the properties it buys and runs: single-tenant operational real estate. Store manages properties in a variety of sectors including retail, manufacturing, auto, early education, and much more. Its portfolio includes close to 2,800 properties.
It's no surprise that Store, as a REIT, pays the largest dividend in Berkshire's portfolio -- REITs are known specifically for their large dividend yields. In fact, REITs must pay out at least 90% of their annual taxable income to shareholders. At Friday's prices, Store has a 5.0% dividend yield. Like many other REITs, Store got hit very hard by the COVID-19 pandemic, and while the stock has been recovering, its price is still below pre-pandemic levels.
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2. Verizon Communications
Telecom giant Verizon Communications (VZ 0.88%) is a relatively new stock in Buffett's portfolio, with Berkshire taking an $8.6 billion stake at the end of 2020. Since Berkshire bought Verizon, the stock has not fared well. However, Buffett is by nature a long-term value investor, so the fact that Verizon trades at a more of a discount in the sector could be appealing to him.
In the fourth quarter of 2021, Verizon reported $1.11 earnings per share on total revenue of more than $34 billion, beating analyst estimates. The company also guided for earnings in 2022 that exceeded what analysts had been projecting. Additionally, Verizon has been ramping up new business lines like network-as-a-service, so it looks to be on solid footing. As of Friday, the stock carries an attractive 4.8% dividend yield.
3. Kraft Heinz
Berkshire and the investment firm 3G Capital teamed up in 2013 to buy Heinz for more than $23 billion. Eventually, they would merge the company with Kraft to create Kraft Heinz (KHC 0.57%), which is famously known for condiments like ketchup and other popular food brands like Philadelphia Cream Cheese. Since then, Kraft Heinz has gone on to become the fifth-largest position in Berkshire's portfolio.
Kraft Heinz is frequently called out as one of the biggest mistakes Buffett has made in recent years, and the Oracle of Omaha has even acknowledged that he paid too much for Heinz. Still, Buffett's holdings in Kraft Heinz today represent more than a quarter of the company's total market cap, so Berkshire has a lot of incentive to see the stock turn it around. Meanwhile, the company pays out a strong 4.4% yield for investors to collect as it continues to try to get the stock price moving.
