Warren Buffett is hanging on to these stocks for stable income — you could too
In a world of historically low interest rates, investors would be wise to look out for dividend stocks offering attractive — but stable — dividend yields.
High-yield dividend stocks have the potential to
Offer a plump income stream in both good times and bad times.
Provide much-needed diversification to growth-oriented portfolios.
Outperform the S&P 500 over the long haul.
Of course, there’s no better place for investors to find solid high-yield stock picks than the portfolio of Berkshire Hathaway CEO Warren Buffett.
So with that in mind, let’s take a look at three stocks in Berkshire’s portfolio with an annual dividend yield of at least 3%.
1. Organon
With a solid dividend yield of 3.3%, biosimilars (copies of drugs used to treat diseases) and women’s health drugs specialist Organon leads off our list.
Organon became a part of Berkshire’s portfolio when drug giant Merck spun off the shares in June, but given the company’s competitive advantages and tailwinds in the women’s health space, Organon could easily become a long-term holding for Buffett.
In the most recent quarter, Organon said women’s health and biosimilars revenue increased 19% and 43%, respectively.
“Looking beyond 2021, we remain confident in our ability to organically grow revenue in the low to mid-single digit range, as LOE risk will largely be behind us and Women’s Health and Biosimilars are positioned to deliver double digit growth,” said CEO Kevin Ali.
Organon shares are flat since being spun off and currently trade at a cheapish price-to-earnings ratio of 4.9.
2. Store Capital
Next up, we have retail-oriented REIT Store Capital, which boasts a healthy dividend yield of 4.0%.
It’s no secret that retailers were hit hard during the COVID-19 pandemic, but Store’s dividend continues to be supported by healthy cash flows and a stable roster of large corporate tenants (more than 70% of its tenant base generates annual revenue of over $50 million).
In the most recent quarter, the company’s adjusted funds from operations — a key metric in the real estate space — clocked in at a solid $135.6 million.
“Collectively, our strong portfolio performance, origination activity and financial results have enabled us to raise our 2021 AFFO guidance from $1.90 to $1.96 per share to a range of $1.94 to $1.97,” said President and CEO Mary Fedewa.
Store Capital shares trade at a price-to-book of 1.7 versus 4.4 for the S&P 500.
3. The Kraft Heinz Company
Rounding out our list is packaged food giant Kraft Heinz Company, which currently offers a tasty dividend yield of 4.4%.
Kraft Heinz’s dividend is backed by massive scale advantages and a portfolio of well-known brands — including Heinz ketchup, Jell-O and Philadelphia cream cheese. And with the top-line continuing to benefit from the trend of consumers eating at home, Kraft Heinz looks well-positioned for the next few years.
In Kraft’s latest quarter, the company topped analyst estimates even amid inflationary pressures as demand for its packaged meals remained strong.
“Our second quarter results serve as a strong indicator that our Kraft Heinz team will not only deliver a stronger 2021 than we initially anticipated, but will come out of the global pandemic much stronger than we entered,” said CEO Miguel Patricio.
Kraft shares have fallen 17% over the past three months, making it an especially delicious-looking value opportunity.
Cash is king
There you have it: three attractive high-yield dividend stocks sitting in Berkshire Hathaway’s portfolio.
While growth stocks make most of the financial headlines, generating regular income should be a top priority for risk-averse investors.
Of course, you don’t have to limit yourself to the stock market to do that.
For instance, this investing service makes it possible to lock in a steady rental income stream by investing in premium real estate properties — from commercial developments in LA to residential buildings in NYC.
You’ll gain exposure to high-end properties that big-time real estate moguls usually have access to, and you’ll receive regular payouts in the form of quarterly dividend distributions.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
