Warren Buffett is the CEO of Berkshire Hathaway (BRK.A -1.27%) (BRK.B 0.18%), a massive conglomerate. The company is basically Buffett's investment vehicle, which he uses to buy publicly traded stocks and even entire companies. Here are two high-yield investment ideas from Buffett's portfolio of public and private investments that you may want to buy hand over fist as August gets underway.
1. Chevron's clouds are clearing
Chevron (CVX -0.16%) is a large integrated energy company. That means that it has exposure to the entire energy value chain, from the upstream (production) through the midstream (pipelines) and on to the downstream (chemicals and refining). This helps to smooth out the inherent ups and downs of the commodity-driven energy sector. Chevron has a globally diversified portfolio, which allows it to focus its investments and efforts in the areas that offer the highest returns. Overall, it is a well-run business.
That said, it has been facing some headwinds over the past few years. The list includes a long-stalled acquisition (Hess) and the fact that its investments in Venezuela had become something of a political football. The stock was out of favor for those reasons, both of which held back growth, and Chevron's dividend yield was much higher than that of its closest peer, ExxonMobil (XOM -1.96%). The merger has now been completed, and the situation around Venezuela, while not solved, is clearer.
With the path cleared for improved performance, Chevron, one of the publicly traded stocks Buffett owns, looks like an attractive energy choice. Notably, despite the improving outlook, Chevron's 4.3% yield is still higher than Exxon's 3.5% yield. If you invest for the long term and prefer dividend stocks, following Buffett's lead with Chevron is likely to be a winning choice. It has increased its dividend every year for 38 consecutive years!
Image source: The Motley Fool.
2. Buffett loves the midstream, you can buy in with Enterprise
Buffett doesn't just buy public companies with Berkshire Hathaway. He also buys entire companies. One area he's invested in quite heavily is the midstream. That makes sense for Buffett, given the reliable cash flows pipeline operators generate from the fees they collect from customers. Basically, customers pay for the use of the energy infrastructure that midstream companies own. Demand for the transportation services provided is more important than the price of the commodities flowing through the pipeline system.
You can't invest directly in the midstream business within Berkshire Hathaway, but you can buy a North American midstream giant like Enterprise Products Partners (EPD -0.81%). The big draw here for income investors will be the master limited partnership's (MLP's) lofty 6.9% distribution yield. The distribution backing that yield has been increased annually for 26 consecutive years.
That said, there's more to like about Enterprise than just the yield and distribution history. For example, the MLP sports an investment grade rated balance sheet, and its distributable cash flow covers the distribution by a strong 1.7x. There is a lot of leeway for adversity before a distribution cut would be in the cards. On top of that, Enterprise has $5.6 billion worth of capital investments in the works to keep the top and bottom lines growing.
While you can't invest directly in the midstream investment Buffett has made, you can buy Enterprise. It is an industry-leading player and a highly reliable income stock that lets you invest "like" Buffett, even if you can't perfectly mimic his investment.
Think long term, like Buffett does
Here's the key: Buffett buys stocks and then holds them for the long term so he can benefit from the growth of the businesses he owns. If you buy Chevron or Enterprise, don't think about that investment as a short-term play. That would be a misunderstanding of how Buffett thinks. Instead, think of these two high-yield energy stocks as core long-term holdings that will reward you well for sticking around in both good times and bad ones.
