Berkshire Hathaway CEO Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." According to analysis from Dow Jones Market Data, Berkshire is on track to generate more than $5.7 billion in dividend income this year alone. Not too shabby for cash that the Oracle of Omaha's company is earning while its key executives and analysts are catching some shuteye.
While Berkshire Hathaway itself doesn't pay a dividend, the investment conglomerate is heavily invested in companies that regularly return cash to shareholders in the form of cash payouts. Read on for a look at two dividend-paying companies that account for roughly 53.7% of Buffett's company's stock portfolio.
Buffett's biggest bet generates major income for Berkshire
Keith Noonan: Based on the Berkshire Hathaway's most recent public disclosures, Apple (AAPL -0.35%) accounts for roughly 47.6% of the investment conglomerate's total stock portfolio. With Apple paying an annual dividend of roughly $0.96 per share, Buffett's company is on track to score big income from its holdings. Given that Buffett's company owns roughly 915.56 million shares of the tech giant's stock, Berkshire is on track to generate at least $879 million in dividend income over the next year.
On the other hand, it's fair to say that Apple's current payout probably won't delight investors who are seeking big dividend yield right off the bat. The company's stock yield just over 0.5% at current prices. Even though Apple boasts a relatively small yield at current prices, the stock remains one of Berkshire's biggest income generators. Buffett's company is also getting a much better yield on its holdings than Apple's current share price might imply.
Apple has increased its dividend every year since it initiated a payout in 2012, and Berkshire first purchased shares in the first quarter of 2016. The company has increased its dividend roughly 31% over the last five years, and 120% over the last decade. With macroeconomic pressures hitting and the company investing to lay the foundations for future growth initiatives, dividend growth has been slower lately. But there's a good chance the tech giant will eventually return to more aggressive payout growth somewhere down the line.
In addition to being the world's most valuable company, Apple is also in the uppermost echelons when it comes to profitability. The company's dominance in the mobile hardware market and contributions from its software businesses and other products allow the tech giant to serve up incredible earnings, and it's likely that strong earnings will continue paving the way for more dividend growth.
The Oracle of Omaha is a fan of Coca-Cola
Parkev Tatevosian: Warren Buffet owns a whopping 400 million shares of Coca-Cola (KO) stock in his Berkshire Hathaway portfolio. That sum makes up 6.1% of the overall portfolio. Can you blame the Oracle of Omaha for investing in this excellent dividend stock? Coca-Cola is one of the most recognizable brands in the world, and it pays passive income investors a healthy dividend.
Indeed, between 2013 and 2022, Coca-Cola's dividend per share increased from $1.12 to $1.76. More importantly, in its most recent year, Coca-Cola's dividend per share of 1.76 was below its earnings per share of $2.19. That's critical because, much like a household, a company can't support a dividend payment above its earnings in the long run. Sure, it can compromise in the short term by borrowing money or using savings to pay dividends above earnings, but eventually, savings will run out, and it will exhaust borrowing capacity.
KO PE Ratio (Forward 1y) data by YCharts
Of course, Buffet, being the expert investor he is, understands this. It's undoubtedly one of the reasons he remains willing to hold 400 million Coca-Cola shares and collect the $1.76 dividend per share. Given that Coca-Cola's stock price is not expensive at a forward price-to-earnings ratio of 18.88, it might not be a bad idea for investors to own a few shares of Coca-Cola stock.
