While Berkshire Hathaway (NYSE: BRK-B)(NYSE: BRK-A) doesn't pay a dividend, Warren Buffett's company's portfolio is chock-full of dividend stocks. We asked our Motley Fool contributors what they thought was Warren Buffett's best dividend stock for 2015. Read on for more.
Dan Dzombak: Coca-Cola (KO 0.91%) is Warren Buffett's second largest holding, but I think it is his best dividend stock in 2015.
Coca-Cola makes up 15.4% of Berkshire Hathaway's portfolio, behind Wells Fargo at 23% of the portfolio and just ahead of American Express at 13% of the portfolio.
Coca-Cola is a dividend aristocrat, having raised its dividend every year for the past 52 years, and now has a forward yield of 3.26%. The company has raised its dividend about 9% annually the past three years, and there is still plenty of room to raise the dividend as the company continues to grow -- its payout ratio is only 66%. Now while some stocks in Buffett's portfolio may have higher yields, none have as dominant a business as Coca-Cola's.
The Coca-Cola brand is one of the best brands in the world, coming in at #3 on Interbrand's ranking of the most valuable brands in the world. Beyond Coca-Cola, the company has 16 more billion-dollar revenue brands, and over 20 more with at least $500 million in revenue.
Not only does Coca-Cola have some of the best brands in the world, the company also has one of the best distribution networks in the world. This is a competitive advantage that protects Coca-Cola from upstarts, but also provides a great business opportunity. That is because the distribution network enables Coca-Cola to invest in small but promising brands, fit the brands into Coca-Cola's distribution networks, and reap the rewards for years to come. Coca-Cola has done this with Honest Tea, Hansen's Natural Sodas, Monster Beverage, Keurig Green Mountain, and, most recently, McCloskey Select Farms.
This combination of brands built up over decades and a top-notch worldwide distribution network mean you can count on dividends from Coca-Cola for years to come.
Matt Frankel: One dividend stock from Warren Buffett's portfolio that you should consider buying right now is ExxonMobil (XOM 1.63%). Thanks to weakness in oil prices, shares are about 20% lower than their highs of last summer -- but even with lower oil prices, there is good reason to buy ExxonMobil.
First off, as the largest public integrated oil company, ExxonMobil has an advantage over its competitors in terms of cost advantages and operational efficiency (economies of scale).
Second, the company has the cash and the credit to pretty much buy whatever it wants. ExxonMobil is one of only three U.S. companies with a AAA credit rating (Johnson & Johnson and Microsoft are the others), and it actually has better credit than the U.S. government. It uses this prestigious credit rating to borrow money very cheaply, and in fact just completed a new $8 billion debt offering which it could use to acquire some of the smaller companies in its sector at a discount.
Finally, although nobody knows what the price of oil will do in the future, with the price of oil at six-year lows, I'm confident that there is more room to the upside than to the downside at this point. Most experts agree that oil prices will eventually recover somewhat from their current levels -- they just disagree on when and how much.
Looking back to the 2008 financial crisis, the strongest banks in the sector were able to take advantage of the situation, acquiring rivals at a discount and coming out of the crisis better than they went in. The same thing could happen with ExxonMobil as a result of the current collapse in oil prices.
Dan Caplinger: Warren Buffett has demonstrated an affinity for bank stocks, with his largest holding being one of the biggest banks in the country. Yet even though the smaller US Bancorp (USB 1.26%) makes up just 3% of his reportable portfolio, it has some potential advantages over its larger rival that make it a more promising pick for investors.
Unlike many of its big-bank peers, US Bancorp has maintained a reputation for remaining in touch with mainstream America. As one of the nation's biggest providers of financial services to small businesses, US Bancorp counts about 1.3 million small-business customers among its ranks, and it's the third largest provider of Small Business Administration loans, beating out two much larger financial institutions. Despite going through the financial crisis, US Bancorp did a good job of keeping its focus on its core businesses, and that dedication has shown in its industry-leading returns on equity and efficiency ratios.
With a dividend yield of just 2.2%, US Bancorp won't necessarily make the top list of bank stocks in terms of how much it pays out to shareholders. Yet its smaller size gives US Bancorp more room to grow, and that could lead to further dividend growth in the future as well. Overall, US Bancorp has great prospects that make it a solid pick within Buffett's portfolio.
