Investing

5 Blue Chip Dividend Stocks Make Up a Massive 75% of Warren Buffett's Portfolio

Lee Jackson

Published: January 11, 2024 11:05 am

If any investor has stood the test of time, it’s Warren Buffett, and with good reason. For years, the “Oracle of Omaha” has had a rock star-like presence in the investing world, and his annual Berkshire Hathaway shareholders meeting draws thousands of loyal fans who are investors. Known for his long buy-and-hold strategies and his massive portfolio of public and private holdings, he remains one of the preeminent investors in the entire world.

One of the reasons for Berkshire Hathaway’s stunning success over the years is that Warren Buffett always tried to stay with stock ideas he understood, which has proven to be a winning hand. In addition, many companies pay solid and reliable dividends in their portfolio.

Long-time investors and Buffett mavens are familiar with his quote, “His favorite holding for an S&P 500 stock is forever”, so it’s not surprising to report that for all of the success and stature Berkshire Hathaway has in the investment world, that 5 top companies make up just over 75% of the fund’s total holdings. While much more concentrated than most portfolio managers would ever consider, the strategy has worked for Berkshire Hathaway investors for years and likely will in the future.

American Express

This stock has been strong and pays a 1.27% dividend. American Express Company (NYSE: AXP) provides charge and credit payment card products and travel-related services worldwide.

The company operates through three segments:

• Global Consumer Services Group
• Global Commercial Services
• Global Merchant and Network Services.

Its products and services include:

• Payment and financing products
• Network services
• Accounts payable expense management products and services
• Travel and lifestyle services.

The company’s products and services also comprise:

• Merchant acquisition and processing
• Servicing and settlement
• Point-of-sale marketing
• Information products and services for merchants
• Fraud prevention services and the design and operation of customer loyalty programs

Berkshire Hathaway owns 151,610,700 shares, which is 20.8 % of American Express’s float, and 8% of the portfolio.

Apple

It’s almost hard to comprehend that the legacy technology giant makes up a stunning 47% of the Berkshire Hataway portfolio with 915,560,382 shares and holds nearly 6% of Apple’s stock. Apple Inc. (NASDAQ: AAPL) designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide.

The company offers:

• The iPhone, a line of smartphones
• Mac, a line of personal computers
• iPad, a line of multi-purpose tablets
• Wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod

Apple also provides AppleCare support and cloud services and operates various platforms, including the App Store, allowing customers to discover and download applications and digital content, such as books, music, video, games, and podcasts.

In addition, the company offers various services, such as:

• Apple Arcade, a game subscription service
• Apple Fitness+, a personalized fitness service
• Apple Music, which gives users a curated listening experience with on-demand radio stations
• Apple News+, a subscription news and magazine service
• Apple TV+, which offers exclusive original content
• Apple Card, a co-branded credit card
• Apple Pay, a cashless payment service

Apple Investors are paid a modest 0.52% dividend.

Bank of America

The company will post fourth-quarter results this week and pay a solid 2.81% dividend. Bank of America Corporation (NYSE: BAC) is a ubiquitous presence in the United States, providing:

• Various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations, and governments in the United States and internationally
• operating 5,100 banking centers, 16,300 ATMs, call centers, and online and mobile banking platforms.

Bank of America has expanded into several new US markets, with scale globally positioning them ideally to benefit from accelerating loan growth over the next two years.  Moreover, unlike smaller peers, scale allows the bank to substantially increase investment over the next few years without notably jeopardizing returns, driving further market share gains.

Warren Buffett owns 1,032 852,006 bank shares, 13% of the float, and 9.6% of Berkshire Hathaway’s portfolio.

Chevron

This integrated giant is a safer way for investors looking to get positioned in the energy sector and pays a rich 4.04% dividend. Chevron Corporation (NYSE: CVX) engages in integrated energy and chemicals operations worldwide through its subsidiaries.

The company operates in two segments:

• Upstream
• Downstream

The Upstream segment is involved in the following:

• Exploration, development, production, and transportation of crude oil and natural gas;
• Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
• Transportation of crude oil through pipelines
• Transportation, storage, and marketing of natural gas, as well as operating a gas-to-liquids plant

The Downstream segment engages in:

• Refining crude oil into petroleum product
• Marketing crude oil, refined products, and lubricants
• Manufacturing and marketing renewable fuels
• Transporting crude oil and advanced products by pipeline, marine vessel, motor equipment, and rail car
• Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives

Chevron announced in the fall that it has entered into a definitive agreement with Hess Corporation (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion.

Berkshire Hathaway owns 5.9% of Chevron’s outstanding stock with 110,248,289 shares, and the energy giant makes up 4.5% of the portfolio.

The Coca-Cola Company

This company remains a top Warren Buffet holding as he owns a massive 400 million shares, 9.3% of the float and 6.7% of the portfolio. The Coca-Cola Company (NYSE: KO) is the world’s largest beverage company, offering consumers more than 500 sparkling and still brands.

Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the Company’s portfolio features 20 billion-dollar brands, including:

• Diet Coke
• Fanta
• Sprite
• Coca-Cola Zero
• Vitaminwater
• Powerade
• Minute Maid
• Simply
• Georgia
• Del Valle

Globally, they are the No. 1 provider of sparkling beverages, ready-to-drink coffees, and juice drinks.

Through the world’s most extensive beverage distribution system, consumers in more than 200 countries enjoy the company’s beverages at a rate of more than 1.9 billion servings a day. It’s also important to remember that the company owns almost 20% % of Monster Beverage (NASDAQ: MNST), which continues to deliver big numbers.

Investors are paid a very dependable 3.06% dividend.

Warren Buffet’s penchant for only owning the stock of companies he understands inside and out makes sense now for growth and income investors worried about the potential for a steep market decline. While they could sell off in a significant correction, they will hold on far better than most, and many of these top companies (except Apple) are offering the best entry points and dividends in some time.