Friday, October 31, 2008

Warren Buffett – The Ultimate Dividend Investor

Warren Buffett is the greatest investor in America. The famous value investor topped Forbes richest individuals list in 2008, overthrowing his pal Bill Gates from Microsoft from his twelve year period of holding this title. Investors have long followed Buffett’s advice on stock selection, economic issues and his pure genius common sense and business acumen. In a previous post I highlighted the individual holdings in Buffett’s Berkshire Hathaway portfolio as of June 30, 2008. This was a timely post, as Buffett recently made some major headlines when he announced that he was buying american stocks. Before investors follow Buffett's advice, they should understand the nature of the stocks that are in the Berkshire's portfolio.

It seems to me that out of 38 holdings in BRK-A’s portfolio 12 companies are dividend aristocrats, one is a dividend champion and three are dividend achievers. Only 5 of his holdings do not play any dividends at all. One of its holdings’ business purpose (CDCO.ob) is limited to the orderly runoff or sale of its remaining assets. Based off current dividend payments for the stocks in his portfolio, Berkshire Hathaway makes $1.65 billion in dividend income per year. You could open the spreadsheet from this link as well.


I am not at all surprised that the Oracle of Omaha has almost half of his portfolio in good quality dividend growers. Most companies that have managed to increase their dividends for long periods of time are ones that have wide moats as well as excellent competitive advantages in the marketplace. Having these qualities leads to rising earnings which tend to support a steady pace of increase in dividends.

On a cautious note however, I would do my own homework before investing in any stocks that Berkshire Hathaway owns. Some of his holdings like Bank of America (BAC) recently cut their payments by 50% which prompted a massive drop in the stock.

This article was included on Fierce Financial Tips: The Carnival of Personal Finance #178, Struwwelpeter Edition

Relevant Articles:

- Warren Buffet - The richest investor in the World
- Why do I like Dividend Aristocrats?
- Dividend Conspiracies
- Bank of America (BAC) Dividend Analysis
- Cincinnati Financial – An insurance stock to own
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6 comments:

  1. STOCKMANMARCOctober 31, 2008 at 1:31 PM

    Very informative, thanks

    I wonder if Buffet re-invests the dividends or uses the cash for other purchases.

    STOCKMANMARC

    ReplyDelete
  2. AnonymousOctober 31, 2008 at 1:42 PM

    Stockmanmarc,

    That's a very good question. I think that his company keep the dividends and uses them to invest in new ventures.

    Thanks for stopping by!

    DGI

    ReplyDelete
  3. mpNovember 2, 2008 at 7:31 PM

    hey, what's your contact email dividend grw investor?
    -Mark

    ReplyDelete
  4. market follyNovember 3, 2008 at 8:04 AM

    nice table, thanks for posting it

    ReplyDelete
  5. AnonymousNovember 6, 2008 at 10:05 PM

    Thanks for posting the table and writing a post about Berkshire's dividend earners. Very interesting and something many never think about.

    $1.65 in dividends is some nice passive income.

    Cheers.

    Ethan

    ReplyDelete
  6. billyticketsDecember 27, 2008 at 5:34 PM

    What is remarkable is 70% of the dividends pass through TAX FREE for Warren. Being a Dividend investor has made me financially independent.Check me out at http://www.squidoo.com/Creating-Dividend-machine

    ReplyDelete

Questions or comments? You can reach out to me at my website address name at gmail dot com.

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