Warren Buffett loves dividend stocks. The top holdings in the Berkshire Hathaway portfolio all pay dividends, but that's just one common theme among those blue chip stocks. They're also big names within their respective industries, and they are solid investments that any investor can justify putting in a portfolio and hanging on to for years.
The top five holds in Berkshire's portfolio are Apple (NASDAQ: AAPL), Bank of America (NYSE: BAC), American Express (NYSE: AXP), Coca-Cola (NYSE: KO), and Chevron (NYSE: CVX). Collectively, they account for about three-quarters of all of Berkshire's holdings. Here's how much they make up individually, their dividend yields, and what makes these stocks exceptional long-term investments.
Apple: 43.1%
The iPhone and iPad maker Apple needs no introduction. It's routinely one of the top stocks in the world in terms of market cap, and its position atop the Berkshire Hathaway portfolio remains fixed. It would be a seismic development for Berkshire to drastically reduce its holdings of Apple.
Buffett has long been fond of Apple, once saying that it is "probably the best business I know in the world."
Apple's dividend yields a modest 0.5%, but it has also increased that dividend over the years. And with Apple continuously generating incredibly large sums of free cash flow every year, there's little doubt that the dividend will continue to rise over time. In its most recent fiscal year, which ended on Sept. 30, 2023, Apple reported free cash flow of just under $100 billion, and it spent just $15 billion on its dividend.
For buy-and-hold investors, it's hard to imagine a safer stock to own than Apple. While its growth rate has struggled lately, with the launch of phones that employ artificial intelligence capabilities, there could soon be another big growth catalyst coming for the business.
Bank of America: 10.1%
Berkshire has recently been selling off some shares of Bank of America, but it still remains one of the company's top holdings. As one of the top bank stocks in the U.S., Bank of America is an incredibly sound investment to hang on to today.
While there will be volatility depending on the state of the economy, it's a great way to bet on America, which Buffett always advocates for. If the economy is doing well, Bank of America will be in a good position to generate strong numbers as well.
Its numbers have been solid. In its most recent quarter, which ended in June, Bank of America generated $25.4 billion in revenue (net of interest expense), which rose by 1% year over year. It also marked the 22nd consecutive quarter where its consumer banking business grew, with the addition of approximately 278,000 new customer checking accounts.
Bank of America stock pays a dividend yielding 2.5%, which is higher than the S&P 500 average of 1.4%. With the stock trading at just 1.2 times its book value, it also makes for an attractive value buy for long-term investors.
American Express: 9.4%
Credit card issuer American Express is the third-largest holding in Berkshire's portfolio, slightly trailing Bank of America. Buffett is a fan of credit card stocks, and American Express' strong numbers make it a solid investment to buy and hold.
In July, it reported another strong quarter of growth, prompting it to raise its guidance for earnings per share. Revenue of $16.3 billion was up 9% organically, and the company's adjusted earnings grew by 21% year over year.
Similar to Bank of America, American Express is another example of how investors can bet on the success of the U.S. by investing in the credit card issuer's stock. American Express pays a more modest yield of 1.1%, but between its attractive growth numbers and decent dividend, it can give you multiple ways to make money from this investment.
Coca-Cola: 6.7%
Soft drink giant Coca-Cola is another big brand among the top holdings in Berkshire's portfolio. There are few things more iconic for consumers than the Coca-Cola logo, which is a staple in households all over the world. While it may seem like Coca-Cola's business should have peaked years ago, the company has been expanding into water, coffee, and other beverage businesses in order to grow its sales and profits. Today, the company has over 200 different brands in its portfolio.
The company's vast distribution network puts it in a great position to grow whatever new business line it chooses to focus on. The strength of its business gives the company a significant advantage over competitors. Despite its already massive size, Coca-Cola has managed to grow its top line by 39% in three years to $45.8 billion. With strong profit margins of 23%, it reported $10.7 billion of that as net income last year.
Coca-Cola is the only Dividend King on this list, having raised its payouts for more than 60 consecutive years. And with a yield which is already fairly high at 2.9%, this can be an ideal stock for dividend investors to hang on to for not just years, but decades.
Chevron: 4.8%
Rounding out the top five on Berkshire's list is oil and gas giant Chevron. Although there's a push for greener, electric vehicles in the world, there's still a strong need for the company's fuel, and that could remain the case for years to come. Investing in Chevron gives investors a great way to take advantage of a business that can benefit from inflation.
As oil prices have risen, Chevron has seen its revenue and profits take off. While there can be volatility in its earnings due to its exposure to commodity prices, adding Chevron to your portfolio can be a good way to hedge some risk and add some valuable diversification with a top oil and gas stock. In each of the past three years, the company has generated a profit of at least $15 billion, reaching as high as $35 billion in 2022, when crude oil prices topped more than $100 per barrel.
Chevron's 4.1%-yielding dividend is close to three times the S&P 500 average. If you're a dividend investor seeking diversification, it can make for an excellent stock to hold in your portfolio.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.
These 5 Dividend Stocks Account for 74% of Warren Buffett's $399 Billion Portfolio was originally published by The Motley Fool