Ninety-one-year-old Warren Buffett started investing when he was 11. Over the past 80 years, he’s honed his craft and made billions along the way. No wonder investors around the world watch his equity portfolio closely, hoping to glean insights that’ll help them build wealth too.
Buffett reports equity holdings quarterly for Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), the conglomerate he chairs. Investors look to Berkshire’s investments for a gauge on which stocks Buffett likes (or doesn’t). Review his latest filing and you’ll see four Dividend Aristocrats in the Berkshire portfolio — including one Buffett bought heavily in the first quarter.
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Dividend Aristocrats are S&P 500 companies that have increased their dividends for the most recent 25 consecutive years. Aristocrats must also average $5 million or more in daily trading volume and have a market capitalization of at least $3 billion.
Berkshire Hathaway’s top Dividend Aristocrat positions are Chevron (NYSE: CVX) and Coca-Cola (NYSE: KO). Together, these stocks comprise 13.73% of the company’s stock portfolio. Berkshire also has smaller positions in two other Aristocrats, Johnson & Johnson (NYSE: JNJ) and Procter & Gamble (NYSE: PG).
Buffett has owned Chevron since the second half of 2020. In the first quarter of this year, he increased his holdings by 120 million shares. Chevron is now Berkshire’s fourth-largest stock position, accounting for 7% of the portfolio.
Chevron has surged this year thanks to strong oil prices. But Buffett is not one to make short-sighted investing decisions. He’s clearly bullish on longer-term demand for oil. He also values Chevron’s size, disciplined management team, and diverse revenue-producing assets.
Chevron pays an annual dividend of $5.68 per share, yielding about 3.2%. The energy company has raised its dividend annually for 35 consecutive years.
Coke has been in Berkshire’s portfolio since early 2001. The total value of this position to Buffett is nearly $25 billion. Coke accounts for 6.7% of Berkshire’s stock holdings.
Coke holds a globally leading position in packaged beverages, on the strength of well-known brands and marketing expertise. As established as Coke is, the company has proven its ability to find growth through expansion into new markets and product innovation. No doubt Buffett appreciates Coke’s track record there and sees the growth trend continuing long-term. So far this year, KO is up about 6% — an achievement in a tough market.
KO pays an annual dividend of $1.76 per share, yielding about 2.8%. The company has raised its dividend in each of the last 61 years.
The other guys
Berkshire also owns much smaller positions in Johnson & Johnson and Procter & Gamble, which are also Dividend Aristocrats. Combined, the two stocks make up only 0.03% of the Berkshire portfolio.
Johnson & Johnson’s dividend yield is 2.54% and PG yields 2.51%. They’ve increased their dividends for 61 years and 66 years, respectively.
Why invest in Dividend Aristocrats
Companies that meet Dividend Aristocrat requirements are generally established, successful, and relatively predictable. Often, they have diverse lines of business, loyal customers, low debt, and experienced, savvy leadership teams. They don’t deliver jaw-dropping growth, but they don’t drop like hot bricks, either.
Thanks to that slow-and-steady growth profile, Dividend Aristocrats are suitable for conservative investors — like, say, retirees who need the dividend income. You could also hold Dividend Aristocrats as a counterpoint to your riskier, higher-growth stocks.
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Catherine Brock has positions in Coca-Cola, Johnson & Johnson, and Procter & Gamble. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.