For investors, it pays to own lots of different types of stocks depending on the environment, but Warren Buffett holds a special place in his portfolio for the ones that regularly pay him.
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Dividend stocks are investments that regularly return a portion of their earnings to shareholders. In this sense, dividend-paying stocks can be similar to bonds, yet have the potential for much higher returns. For novice investors who aren’t working with a $100 billion fortune to invest, dividend-paying stocks can be a great option, especially during a volatile stretch for the markets. “A diversified portfolio of dividend-growing stocks provides income in the form of dividends that should grow over time to offset the impact of inflation,” explained Ford Donohue, a financial advisor at Homrich Berg. “We also believe that consistent dividend growth is a sign of a sound business model, balance sheet strength, and strong corporate governance, all of which should lead to the growth of the underlying business over time and increase the chances of capital appreciation of a stock,” he added.
Buffett has long sung the praises of dividend-paying stocks. In 2023 alone, he is expected to make a total of $5.7 billion in cash from the dividend-paying stocks in his portfolio, according to Dow Jones Market Data of Berkshire Hathaway’s filings. This includes $1 billion in dividends from Chevron in 2023 as the oil producer increases dividend payments for the 36th year in a row.
Here are 5 of Warren Buffett’s dividend paying stocks that are going to make him billions in 2023:
1. Chevron (NYSE: CVX)
The oil producer saw huge gains in 2022 as oil prices skyrocketed during the energy shortage caused by Russia’s invasion of Ukraine. Its total returns for last year were up 58% and the company paid out $5.68 per share in dividends to its shareholders last year. Year to date, the company’s stock is down about 10% this year so far due to market volatility. Chevron’s annual dividend yield is 3.86%. On February 15, 2023, Chevron raised its quarterly dividends from $1.42 to $1.51, so its yearly dividend yield is expected to be higher in 2023 than it was last year. According to an analysis of analyst ratings of the stock, it currently has an overweight rating from most analyst, meaning investors can feel good about buying the stock. Its median projected price target is $192 per share, and the stock currently trades at $157 as of May 12.
Last year, Bank of America paid $0.86 out to shareholders in dividends, up from $0.78 annually in 2021, even as the stock dropped 24% amid a tumultuous stock market environment. Its yearly dividend yield is 3.21% and in September 2022 the company raised its quarterly dividend payments from $0.21 to $0.22. Year to date, the bank’s stock is down another 10% amid a chaotic banking crisis. According to an analysis of research notes of the stock, 10 analyst give the stock an overweight rating and 11 say you should currently hold the stock. Its median projected price target is $35, while the stock currently trades at $27.
3. Apple (NASDAQ: AAPL)
In 2022, Apple paid its shareholders $0.91 in dividends per share. This year, the tech company’s stock has risen 30% so far in 2023. On May 12, 2023, the company raised its quarterly dividend payments to $0.24 from $0.23. In November 2020, the company cut its quarterly dividend payments from $0.82 to $0.205 amid the Covid-19 pandemic. However, since then the company’s dividend payments have been steadily rising again year by year, with its dividend yield totaling 0.55%. According to an analysis of 42 analyst ratings, analysts overall give the stock a an overweight rating, which means you should be comfortable having it in your portfolio.
The beverage behemoth paid out $1.76 in dividends per share last year, and this year is on track to pay its shareholders more in 2023. On March 16, 2023, the company raised its quarterly dividend payments from $0.44 to $0.46. In an analysis of analyst ratings for the stock, 13 analyst gave the stock a buy rating and 8 gave the stock a hold rating. The stock’s projected average price target is $70, and the stock currently trades at $64.
Last year, the food conglomerate able to pay out about $1.60 in dividends per share to its shareholders. The stock’s dividend yield is 3.94%, and the company has been consistently paying shareholders $0.40 per share every quarter since March 2019, when it cut its dividends from $0.625 after the stock tanked because the company was subpoenaed by the SEC because of its accounting policies. However, analysts still give the beverage consumer the benefit of the doubt moving forward despite the fact that dividend payments have plateaued in recent years as food and beverage staples fare comparatively well during an economic downturn. According to an analysis of analyst notes, 7 give the company a buy rating while 13 say to hold the stock.
Like any investment, dividend-paying stock can carry risk. If the company is not meeting expectations and its growth slows, it will stop paying out dividends and the stock can plummet. But if you invest in blue-chip, profitable companies, you can be on your way to imitating Buffett himself.
This story was originally featured on Fortune.com
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