Buying shares in the Oracle of Omaha’s firm Berkshire Hathaway won’t net you a dime of dividend income because Warren Buffett has famously resisted paying dividends to Berkshire shareholders.
But that doesn’t mean you can’t look under the Berkshire hood to discover lots of high-paying dividend stocks that could net you an extra $6,000 a year, equivalent to $500 monthly. While Buffett won’t pay dividends, he certainly likes to buy companies that pay him a passive income.
Buy A Dividend King
Some dividends are more dependable than others. Dividend Kings are among the most stable dividends on offer, and AbbVie ranks in that category.
AbbVie is a drugmaker that has increased dividend payments for 50 years or more – the technical definition of a dividend king. Unlike the stock market, which tumbled early in 2022, AbbVie has been on a bullish run. It’s outperformed the stock market by double digits.
Not only has AbbVie’s share price been on a tear but it pays a generous 3.77% dividend too. If you invested $50,000 in the healthcare firm, the annual dividend payout would be $1,885. On a monthly basis, that comes out to $157, meaning we still need to look for another $342 to hit the $500 passive income goal. Where can we find that?
Ride The Inflation Wave
The cat is well out of the bag that inflation is running rampant. Higher oil prices affect consumers at the pump, but some firms are poised to profit from the spike. Among them is new Buffett favorite: Chevron.
Chevron is not a dividend king like AbbVie but it offers a dividend that is about as stable as they come having boosted its yield to shareholders for over 35 years.
Paying an annual yield of 3.39%, Chevron offers a yield slightly inferior to AbbVie’s.
While Buffett invested $25 billion snapping up shares of the oil firm, you could earn a reasonable payout by scooping up $50,000 worth of CVX shares. The payout on that investment annually would be $1,660, which would be equivalent to a $138 monthly payout. Keep in mind that these dividends are paid out quarterly so Chevron would pay $415 every 3 months on a $50,000 investment.
Summing the dividend payouts for AbbVie and Chevron puts the total monthly amount to $295, the quarterly payout to $885 and the annual payout at $2,655.
We need another $205 monthly to hit the $500 monthly goal, meaning we need to find another stock in Buffett’s portfolio that pays an even higher yield than Chevron and AbbVie. Fortunately, Store Capital does so.
5.52% Annual Payout From Real Estate Play
At the time of research, Store Capital paid a remarkably high yield of 5.52%. Investing the same $50,000 in Store Capital as invested in Chevron and AbbVie would yield an additional $2,760 per year, which translates to a monthly payout of $230, higher than the $205 we needed to hit our goal.
In total, investing $50,000 in each of Chevron, Store Capital and AbbVie pays out $6,300 annually, or $1,575 quarterly. That would translate to an extra $525 monthly in passive income.
Store Capital has been a favorite of Buffett’s for some time and it’s not surprising to see why. The company has built ongoing rent increases into its business model, a smart decision in an inflationary environment.
As a Real Estate Investment Trust, Store Capital is obligated to pay out 90% of its taxable income to shareholders so ongoing dividend payments can almost certainly be counted on.
While its share price has tumbled, its dividend yield has now become very enticing. If there’s a time to buy a high-yielding dividend payer with a robust business model, this is probably it.
The bottom line is investing $150,000 in total divided equally among Store Capital, Chevron and AbbVie could yield an annual passive income of $6,300 for an effective 4.2% dividend yield equivalent to $525 in extra monthly income.