The equity portfolio of Warren Buffett's investment vehicle Berkshire Hathaway (BRK.A 0.16%)(BRK.B 0.10%) is larger than the gross domestic products of many small countries. So you can imagine the rivers of dividend payments the portfolio takes in on an annual basis.
This year has been quite a gusher in that respect for Berkshire, as two of the portfolio's largest holdings declared dividend raises. Let's dig into the payout enhancements from those two big-name companies, Apple (AAPL +2.65%) and Bank of America (BAC +0.75%).
1. Apple
Of the two companies, Apple was the first to crank its distribution higher. It declared a 4% dividend raise in May, which pushed the quarterly payout to $0.24 per share. This doesn't exactly make it a high yielder at 0.5% based on the latest stock price.
Regardless, Apple is a cornerstone investment in Berkshire's stock portfolio, to the point where the tech giant comprises a whopping 49% of it. All told, the Berkshire Apple position is worth more than $178 billion at the current share price.
With that kind of commitment, you can bet that Buffett and company are among Apple's most significant and committed bulls. That belief in the company is paying off with the increased dividends -- the May raise marked the 11th year in a row it has upped the payout.
That low yield aside, in other ways Apple has been showing the characteristics of a mature dividend stock with modest growth (or even slight declines, as the company has reported in recent quarters).
Yet the foundational iPhone, now in its 15th (!) iteration, continues to be a hot seller, and services revenue keeps climbing to new highs. Meanwhile, as ever, management is doing a good job of keeping up those comparatively quite lofty net margins (26% in the most recently reported quarter).
We should never thoughtlessly copy the moves of a popular investor or portfolio manager. But Apple is a strong company that generates geysers of cash, and is happy to return a bit of it to its investors.
NASDAQ: AAPL
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2. Bank of America
Any guesses as to which storied lender has the second-highest weighting in Berkshire's hallowed equity portfolio? Correct! It's Bank of America (BAC +0.75%), which comprises just under 9% of the total. After the Federal Reserve's recent set of (broadly quite successful) bank stress tests, Bank of America declared a dividend raise of 9%, to $0.24 per share per quarterly distribution. These days, that yields 3%.
The health of a bank is due to prudent management, of course, but it also depends rather heavily on the health of its economy.
Yes, Americans remain worried about inflation eating into their paychecks, but for the most part growth continues to be in the cards. When an economy is thriving, business and individual confidence tend to rise, and those entities are inclined to borrow more money. That, of course, is the core activity of traditional banks.
As a highly visible lender in the U.S., Bank of America has been reaping the benefits of being a major operator in the economy.
In its latest reported quarter, the company managed to increase both its loans and leases outstanding and its credit/debit card spend by around 3% from a year earlier. Not coincidentally, total revenue also advanced by that figure. Combined with increased efficiency engineered by a good management team, net income rose at a sturdy 10% clip.
NYSE: BAC
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Meanwhile, within the bank's results were some very encouraging developments. For example, it managed to increase its count of relationships in the lucrative global wealth and investment management segment by 20%. And its global markets division produced 8% growth in securities sales and trading revenue.
As long as the U.S. economy is more or less humming along, Bank of America should continue to do well. And Buffett and his team will continue to own plenty of it.
