The Oracle of Omaha – Warren Buffett – is known as one of the most successful stock investors on the planet. He not only aims to buy undervalued companies but he also targets ones that pay generous dividends. Indeed, he has a long history of owning high-yield dividend stocks that meet his investment criteria. Here’s a look at three of Buffett’s highest yielding investments.
The Kraft Heinz Company (KHC) Pays A 4.16% Dividend
The Kraft Heinz company is probably best known for its ketchup. The truth, of course, is that the firm offers so much more than that.
The Kraft Heinz Company is a massive food and drinks organization. It is the third-largest such company in North America and the fifth-largest such company in the world. It owns dozens of global brands and is responsible for the production of hundreds of products that are consumed by billions across the planet.
The sheer size of this company – combined with its positioning as a food staple – makes it a strong investment candidate. Berkshire Hathaway owns more than 325 million shares in the company, a number that is, to date, worth north of $11 billion in total investment.
KHC is a popular stock owned by hedge funds across the world – in fact, it is one of the 30 most popular stocks owned by hedge funds. It is also worth noting that KHC stocks accounted for 4.08% of Berkshire’s overall portfolio at the end of 2020, making it one of the largest positions held by Berkshire.
Its ownership was so significant that Berkshire had a special section about the stock in its annual 2020 letter to investors – something that it did not do for companies other than the most significant ones it owned.
One of the reasons for this stock’s popularity is not only its reliability and global positioning but its dividend. As of this writing, KHC offers a dividend of 0.40 USD a share, which translates to a 4.16% total dividend yield.
Kraft continues to do well this year, outperforming expectations and increasing its overall guidance. Inflationary pressures are driving its price higher but also encouraging more to invest in it, given its position in the food and drink market.
Verizon (VZ) Dividend Offers Almost 5% Annually
Verizon is an international communications conglomerate. It has a variety of holdings related to the communications industry, including phones, cellular phones, internet access, retail, and more. It is also one of the newer stocks in Berkshire’s portfolio, with Buffett purchasing 147 million shares of the stock in late 2020. This was a massive haul for Buffett, and his initial purchase made Verizon the 7th biggest overall portfolio held by Berkshire.
Verizon remains a relatively stable and high-performing company. It has shown consistent growth across a variety of metrics, and its various business units continue to expand. A survey of analysts covering the stock shows a Hold consensus rating but leans more towards a Buy rating.
Furthermore, Verizon remains a strong dividend offering. The company offers a dividend of $0.64 per share. As of this writing, that gives the stock a 4.94% dividend yield, making it one of the stronger dividend offerings in Berkshire’s portfolio. Verizon has also shown long-term dedication to its dividend, either holding it steady or increasing it since 2010. This is good news for dividend-oriented investors.
It is worth noting that Verizon holds a variety of assets that have typically attracted long-term, value investors like Buffett. It exceeded 4th quarter 2021 projections and released 2022 guidance that beat analysts’ estimates. It is also still offering a variety of new lines of service and demand has risen, particularly as individuals come to rely more on technology to work remotely. All of these trends would seem to spell good news for Verizon.
Store Capital (STOR) Dividend Exceeds 5% Per Year
Generally speaking, Real Estate Investment Trusts (REITs) are a class of investment that offer high dividends. This makes sense, as they are required to turn 90% of their profits over to investors in the form of dividend payouts.
Buffett and Berkshire Hathaway are invested in Store Capital, owning about 9% of the REIT. Store Capital was founded in 2011 and is headquartered in Scottsdale, Arizona. It runs single-tenant real estate, including real estate in a variety of sectors. The company’s entire portfolio spans more than 2,800 properties.
STOR offers a quarterly dividend of $0.39 a share, which, as of this writing, is roughly a 5.16% dividend yield. Its recent quarterly profits exceeded Wall Street estimates, and the stock has been increasing since this announcement. The consensus analyst rating on this stock has been a Hold.
It is important to note that STOR is the largest REIT owned by Buffett, and Berkshire Hathaway made an 18.6 million purchase of the company back in 2017. STOR’s strategy is not to just buy and hold real estate property but to buy property in areas where such capital is limited. As a result, it has historically enjoyed better-than-average returns on its investment, and it uses this strategy to generate profits that it then returns to investors and further invests.
Its niche – the middle-market sector – has done well in today’s market, and this may help to explain why the REIT has not only done well but attracted investments from others, like Buffett.