Paul Morigi
Paul Morigi
Dan Burrows says in Kiplinger Investing:
"The Berkshire Hathaway portfolio is a diverse set of blue chips and, increasingly, lesser-known growth bets. Here's a look at every stock picked by Warren Buffett and his lieutenants."
Any collection of stocks is more clearly understood when subjected to yield-based (dogcatcher) analysis. This Buffett/Berkshire batch is perfect for the dogcatcher process. Here are the February 26 data for 25 dividend paying stocks in the Kiplinger-documented collection of 41 now owned by Buffett through his Berkshire Hathaway Inc. (BRK.A), (BRK.B) firm.
Another resource consulted for this article was Dogs of the Dow which also keeps an ongoing spreadsheet of the Buffett/Berkshire stocks updated quarterly per BRK SEC filings, the next of which reports in May.
A rapid market recovery, following the Ides of March 2020 plunge, made the possibility of owning productive dividend shares reflecting the Buffett collection out of reach for first-time investors.
This February 2024 update shows that the following two of the top ten dogs of Berkshire stocks now live up to the dogcatcher ideal of paying annual dividends (from a $1K investment) exceeding their single share prices: The Kraft Heinz Company (KHC); HP Inc. (HPQ).
Six more in the top ten by yield are within $16.50 or 27.2% of the ideal, Ally Financial Inc. (ALLY) is $1.66 over-priced, BAC is just $2.94 high, Jefferies Financial Group Inc. (JEF) is $6.60 removed, Citigroup Inc. (C) is $9.68 away, The Kroger Co. (KR) is off by $13.58, and The Coca-Cola Company (KO) needs to shed $16.50 in bloated price to be ideal.
Take note that two other stocks, outside the top ten, show dividends at the current payout level from $1k invested equaling its single share price. They are, Sirius XM Holdings Inc., (SIRI) and Paramount Global (PARA).
To run down the "safer" dividends of Buffett's January pack of dogs, check out the Dividend Dog Catcher investing group site (by clicking on the last summary bullet above) after March 5.
Eight of these ten Buffett-held top dividend stocks by yield were also among the top ten gainers for the coming year based on analyst 1-year target prices. (They are tinted gray in the chart below). Thus, this yield-based forecast for Buffett dogs was graded by Wall St. Wizards as 80% accurate.
Source: YCharts.com
Estimated dividends from $1000 invested in each of these highest-yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts, produced the data points for the projections below. (Note: one-year target prices by lone analysts were not applied.) Ten probable profit-generating trades projected to February 26, 2025, were:
Paramount Global netted $297.25 based on the median of estimates from 26 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 84% greater than the market as a whole.
Jefferies Financial Group Inc. was projected to net $190.58, based on the median of target estimates from 3 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 36% greater than the market as a whole.
Chevron Corporation (CVX) netted $183.62 based on the median of estimates from 25 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 13% greater than the market as a whole.
The Kraft Heinz Co was projected to net $149.83, based on the median of target price estimates from 22 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 35% less than the market as a whole.
Ally Financial Inc. was projected to net $141.00 based on dividends, plus the median of target price estimates from 21 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 41% greater than the market as a whole.
Bank of America Corporation (BAC) was projected to net $139.69, based on the median of target price estimates from 22 analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 39% over the market as a whole.
Citigroup Inc. was projected to net $133.73 based on dividends, plus the median of target price estimates from 23 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 48% under the market as a whole.
T-Mobile US, Inc. (TMUS) was projected to net $133.28 based on a median of target price estimates from 28 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 50% under the market as a whole.
HP Inc. was projected to net $128.89, based on dividends, plus the median of target price estimates from 19 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 5% over the market as a whole.
Coca-Cola Co was projected to net $106.04 based on a median of target price estimates from 23 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 41% under the market as a whole.
The average net gain in dividend and price was estimated at 16.04% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risk/volatility 4% greater than the market as a whole.
Source: Open source dog art from dividenddogcatcher.com
Stocks earned the "dog" moniker by exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as "dogs." More precisely, these are, in fact, best called, "underdogs."
Source: YCharts.com
Source: YCharts.com
Top ten Buffett-held stocks selected 2/26/24 by yield represented four of eleven Morningstar sectors.
In first place was one of four consumer defensive sector representatives The Kraft Heinz Co [1]. The others placed sixth, ninth, and tenth: Coca-Cola Co [6]; Diageo plc (DEO) [9]; The Kroger Co [10].
Then, in second place was the lone energy sector member, Chevron Corp [2]. Next, one from the technology sector, placed third, HP Inc [3],
Finally, four from the financial services sector placed fourth, fifth, seventh, and eighth: Citigroup Inc [4], Ally Financial Inc [5], Jefferies Financial Group Inc [7], and Bank of America [8] to complete the February Buffett/Berkshire top ten dividend dogs.
Source: YCharts.com
To quantify top-dog rankings, analyst median price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high-yield metrics, analyst median price target estimates became another tool to dig out bargains.
Ten top Buffett/Berkshire dividend dogs were culled by yield for this update. Yield (dividend/price) results provided by YCharts did the ranking.
Source: YCharts.com
As noted above, top ten Buffett-chosen dividend dogs screened 2/26/24 showing the highest dividend yields represented four of eleven Morningstar sectors.
Source: YCharts.com
$5,000 invested as $1k in each of the five lowest-priced stocks in the top ten dividend Buffett-selected kennel by yield were predicted by analyst 1-year targets to deliver 14.35% more gain than $5,000 invested as $.5k in all ten. The fifth lowest-priced selection, Jefferies Financial Group Inc., was projected to deliver the best analyst-estimated net gain of 29.06%.
Source: YCharts.com
The five lowest-priced top-yield BKB stocks on February 26 were: HP Inc.; Bank of America Corp; The Kraft Heinz Co; Ally Financial Inc; Jefferies Financial Group Inc., with prices ranging from $28.80 to $41.23.
Five higher-priced Berkshire-backed dividend dogs as of February 26 were: The Kroger Co; Citigroup Inc.; Coca-Cola Co; Diageo PLC; Chevron Corp, whose prices ranged from $47.26 to $154.45.
The distinction between five low-priced dividend dogs and the general field of ten reflected Michael B. O'Higgins' "basic method" for beating the Dow. The scale of projected gains, based on analyst targets, added a unique element of "market sentiment" gauging upside potential. It provided a here-and-now equivalent of waiting a year to find out what might happen in the market. Caution is advised, since analysts are historically only 15% to 85% accurate on the direction of change and just 0% to 15% accurate on the degree of change (within 2.5%).
If somehow you missed the suggestion of the four stocks ready for pick-up, and the six emerging ideal picks at the start of the article, here is a reprise of the list at the end:
This February 2024 update shows that the following four top dogs of Berkshire stocks now live up to the dogcatcher ideal of paying annual dividends (from a $1K investment) exceeding their single share prices.
Source: YCharts.com
More is within $1.66 or 4.61% of the ideal, Ally Financial Inc. That stock shows the smallest price decrease that would pay dividends at the current payout level from $1k invested equal to its single share price.
To run down all the "safer" dividends of Buffett's February pack of dogs, check out the Dividend Dog Catcher investing group site (by clicking on the last summary bullet above) after March 5.
Source: YCharts.com
The charts above retain the recent dividend amount and adjust the share price to produce a yield (from $1K invested) to equal or exceed the single share price of each stock. As you can see, this illustration shows the two fair priced dogs in the top ten, plus eight out-of-bounds-priced stocks. The eight outliers need to trim prices between $1.66 and $89.86 to realize the 50/50 goal for share prices equaling dividend payouts from $10k invested.
The alternative, of course, would be for these companies to raise their dividends. That, of course, is a lot to ask in these highly disrupted, dollar-flooded, understaffed, short-supplied, inflationary, and pre-recession times.
Market action is the key. Mr. Market needs to drop up to 59% for all ten to become Buffett Ideal dividend dogs.
The net gain/loss estimates above did not factor in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.
Stocks listed above were suggested only as possible reference points for your Buffett/Berkshire batch stock purchase or sale research process. These were not recommendations.