Investing

Warren Buffett's Highest Dividend Yields Outpacing Dow and Other Yields

Jon C. Ogg

Published: August 23, 2016 10:45 am

Last Updated: January 13, 2020 4:20 am

Investors love chasing the holdings of the top investment gurus, and that certainly applies to Warren Buffett. After Berkshire Hathaway Inc. (NYSE: BRK-A) recently released its top equity holdings, 24/7 Wall St. wanted to see what were the top holdings with the highest dividend yields in the Oracle of Omaha’s equity portfolio. It turns out that the highest Buffett stock yields absolutely blow away the yields of most Dow stocks and what investors can make in bonds. Many of these stocks are also expected to see their share prices rise in the year ahead as well.

One thing that investors have to understand is that Buffett himself has refused to pay out a dividend to Berkshire Hathaway shareholders. He would rather use that capital to make acquisitions to grow the Berkshire Hathaway empire. Still, one common trait that is common among Buffett’s top stock holdings is that he absolutely loves dividends being paid to him as a method of growing capital on top of operating earnings.

In an effort to avoid the basic screening errors, 24/7 Wall St. took precautions in evaluating what a high dividend holding is. If it was a foreign issuer with a variable dividend, that was eliminated. If it was a preferred share or a small remnant stock position, it also was screened out. This was we know where Buffett’s money is really focusing on dividends.

So the median Dow Jones Industrial Average yield is now about 2.8%. That is above the 30-year Treasury yield of 2.25% and nearly double the 1.54% yield of the 10-year Treasury. After looking at the top five modified yield Buffett stocks, investors would see an average yield of 3.81% — a full point higher than the median Dow dividend.

Color has been added on each of these stocks, with trading history, how each Buffett stake looks in the grand scheme of things, and what the yield would be. These are the five top dividend yields of the top Warren Buffett stocks, ranked in order of which yields are the highest.

GM

At a whopping 4.77%, General Motors Corp. (NYSE: GM) is currently the top dividend yield. Buffett and Berkshire Hathaway own 50 million shares of the U.S. auto giant. This would be worth some $1.6 billion today, but that is tiny when considering its $50 billion market cap. Buffett and his portfolio managers are obviously looking past the peak-auto trend of 2016, and this dividend was raised to where it is the highest of the Buffett common stocks with a 4.77% yield.

GM shares were recently trading near $32. The stock has a 52-week trading range of $26.69 to $36.88 and a consensus analyst target price of $36.65.

Verizon

Berkshire Hathaway owns a stake of 15 million Verizon Communications Inc. (NYSE: VZ) shares, but that stake had been raised a year earlier. Verizon is not a huge stake for Berkshire Hathaway at all, with a value of almost $800 million. That is puny compared to its $215 billion market cap. Still, investors of this defensive stock today are paid a yield of 4.30%.

Shares of Verizon were trading above $52, with a consensus target price of $54.17 and a 52-week range of $42.20 to $56.95.
IBM

International Business Machines Corp. (NYSE: IBM) was listed as the same 81.232 million shares in June, and it is by far a top five holding of Berkshire Hathaway. The value of this stake today is $13 billion, and Berkshire Hathaway owns almost 8.5% of the company. IBM has recovered handily from its lows and its market cap is $154 billion. Investors who decide to buy today would be paid a yield of 3.50%.

Big Blue stock was recently trading around $161, with a 52-week range of $116.90 to $164.95 and a consensus target price of $156.10.

Phillips 66

The Phillips 66 (NYSE: PSX) stake was increased, rising to almost 15% of the company at 78.782 million shares as of June 30. Buffett himself picked this holding and has talked up his stake and the future of this play on energy not being price-dependent on oil. Its share price has slid but would still be worth $6.1 billion today, versus a market cap of $40.5 billion. Investors can now buy in cheaper than Buffett bought in, generating a yield today of 3.27% from one of the world’s top refining plays.

Phillips 66 shares recently traded at $78. The consensus target price is $84.20, and the 52-week range is $70.40 to $94.12.

Coca-Cola

For years and years now, the Coca-Cola Co. (NYSE: KO) stake has been the same 400 million shares, and Buffett’s adjusted cost basis ultimately is going to become zero, after you tally up decades worth of dividends. Investors today can buy the beverage giant’s shares and collect a 3.20% dividend yield, from a mega-cap worth $189 billion, and they aren’t even having to pay through the nose to buy the stock. Buffett’s stake in today’s pricing is worth some $17.6 billion.

Shares of Coca-Cola were last trading above $43, with a 52-week range of $37.84 to $47.13 and a consensus target price of $47.76.

A runner-up here is none other than Wells Fargo & Co. (NYSE: WFC). This is Buffett’s top bank stock, and the stake has grown to a massive 479.704 million shares, worth more than $23.3 billion in today’s terms. Wells Fargo’s market cap is $245 billion and it has been reported that Buffett wants to have permission to have his passive stake rise above the 10% threshold per SEC rules. Wells Fargo’s dividend yield is 3.13%, and what matters here is that the bank is most likely to keep raising its dividend ahead without Fed interference.

Wells Fargo shares have been trading north of $48. The consensus price target is $53.00. The 52-week range is $44.50 to $56.34.