According to Warren Buffett, "All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies." Luckily for us everyday investors, you don't need Berkshire Hathaway's resources to separate good companies from businesses that are best avoided. Just look for dividend payers that keep raising their payouts.
Berkshire Hathaway doesn't pay a dividend itself, but the vast majority of stocks that it owns do. Buffett's such a big fan of dividend payers that a majority of Berkshire's holdings are concentrated in a handful of dividend-paying stocks. You might be surprised to learn that, at recent prices, just two stocks make up 57.7% of Berkshire's stock portfolio.
NASDAQ: AAPL
Key Data Points
Buffett is betting big on Apple
Buffett's been at the helm of Berkshire since 1965, but one of its biggest investments of all time didn't enter the equity portfolio until 2016. That was the year Berkshire began building an enormous stake in Apple (AAPL +1.08%), which has quickly become the conglomerate's largest holding.
Apple's stock price has risen a stunning 627% since the end of the first quarterly period that Berkshire disclosed its stake in the company. Plus, its quarterly dividend payout has risen about 68% over the same timeframe.
AAPL Dividend data by YCharts
Huge gains plus subsequent purchases have increased Berkshire's Apple stake to a staggering $181 billion at recent prices, or about 48% of Berkshire's equity portfolio. The stock offers an uninspiring 0.5% yield at recent prices, but Buffett's accumulated around 915 million shares of the stock so quarterly payouts are significant.
Berkshire's Apple holdings will deliver $220 million worth of dividend payments in February and probably more in the subsequent quarter. The highly profitable company generated nearly $100 billion in free cash flow over the past 12 months and needed just 15% of this sum to meet its dividend commitment.
New investors who want to follow Buffett's lead can look forward to increasing profits and a rising dividend payout from Apple for at least another decade. Sales of iPhones aren't growing very fast, but Apple boasts more than 2 billion active devices. Selling high-margin services to those users drove earnings per share 13% higher in its fiscal fourth quarter that ended Sept. 30.
Bank of America is dull but reliable
Buffet is sitting on more than 1 billion shares of Bank of America (BAC +0.73%), or BofA. At 9.3% percent of the equity portfolio, it's Berkshire's second-largest holding.
For decades, Buffett has told anyone who will listen that he believes in the U.S. economy's ability to grow over time. He loves to buy bank stocks after they've been beaten down because he knows these cyclical businesses benefit from periods of economic growth that tend to last much longer than the recessions that separate them.
Interest BofA receives from loans rose much faster in 2023 than the interest it pays to its huge deposit base. An improved net interest margin helped third-quarter earnings per share rise 11% year over year.
BAC Dividend data by YCharts
At recent prices, BofA shares offer a 2.8% dividend yield and a chance for a much higher yield on your original investment in the years ahead. The bank held its dividend in place in 2020, but it's still up by 60% over the past five years.
Despite all the rapid payout bumps in recent years, BofA met its dividend obligation over the past 12 months with just 20.7% of the free cash flow its lucrative banking operation generated. That means there's plenty of room to raise its dividend a lot further in the years ahead. Buying the stock now to hold for the long run looks like a smart move.
