Warren Buffett’s Long-Term Dividend Holds
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Warren Buffett has made a name for himself by snatching up companies at deep discounts and holding until he’s captured as much value as possible. Anyone familiar with the famed investor knows that he is more apt to buy and hold versus making swift trades; he even advocated the exchanges being open only once per quarter (as opposed to daily) for traders to buy and sell.
With that in mind, we’ve analyzed his list of holdings to see which of his longer-term positions have netted him serious gains in dividends on their path to reaching his valuations. We define “long-term” as an investment horizon that is a year or greater. Our research has shown that famed investors and hedge funds are very good at picking stocks. For example, the most popular small-cap stocks among hedge funds beat the S&P 500 index by 18 percentage points per year (see the details). In this article we took a look at some of Buffett’s highest yielding dividend stocks that he’s seen fit to keep around in his portfolio.
One of his highest-producing positions comes in the form of pharmaceutical giant GlaxoSmithKline (NYSE: GSK). The stock traded sideways for most of 2012, finding difficulty gaining upward momentum due to consistent minor earnings misses and subsequent downgrades. However, despite the relatively flat performance in the past year, Buffett was able to pocket the four quarterly dividends, giving him a total yield of 5.1%. He kept his activity in the stock non-existent, opting to sit on his 1.5 million shares and not add to or take away from the position. GSK’s next ex-dividend is on the twentieth of this month, giving an investor plenty of time to “be like Buffett” and go long before this next dividend passes him by. Fellow billionaire Ken Fisher has nearly 8 times the position that the Omaha investor does (see the rest of his top holdings here).
ConocoPhillips (NYSE: COP) used to be a $2+ billion position for Berkshire Hathaway, but a declining stock price plus a 4 million share divestment brought on a roughly one-third drop in total value from Q3 2011 to Q3 2012. The global oil concern saw a significant plummet in valuation in May 2012 after spinning off the downstream portion of its operations to Phillips 66 and has been on a mission to rebuild value since. Despite the split, COP continued to pay out a dividend of $0.66 a quarter, creating a total dividend yield of 4.6%. As long as the company places an importance on growth and can maneuver potentially negative changes in commodity prices, we see upside in the play, just as Buffett still does. David Dreman of Dreman Value Management joined Buffett by selling some of his position towards the end of 2012.
International media and marketing company Gannett Co (NYSE: GCI) gave impressive performance stretching back a year, netting a double-digit rise in share price spurred along by consistent earnings beats every single quarter. While overall sentiment is still positive for the stock, some analysts are becoming tepid as Gannett’s core business (newspaper sales) has seen more competition from the likes of News Corp. and falling circulation numbers from consumers. However, the stock continues to earn investors like Buffett a yield of 4.1%, which, when matched with the startling performance of the stock last year, means a respectable growth and income investment for those who have been in on a longer-term scale. Billionaire David Harding upped his position by 30% according to his last 13F filings.
Sanofi SA (NYSE: SNY) is another high-dividend healthcare play on our list, earning a still-respectable yield of 3.6%. Once again, the stock provided significant gains on both the income and growth fronts for Buffett, despite their last quarterly earnings report showing negative growth in revenue versus the same quarter a year prior. Forward price-to-earnings ratios show a decline versus the same ratio calculated with the last twelve months earnings. We expect the stock price to come down to meet the reduced P/E numbers, as SNY will have to battle government regulations and increased distribution of generics in 2013. Abrams Capital Management maintains a $50 million position in the stock.
Last on our list of Buffett’s long-term dividend plays is General Electric (NYSE: GE). GE barely made our list, as Berkshire Hathaway cut their position by almost 90% going into their Q3 13F filing last year. The fund started with roughly $140 million invested in the stock, yet only $13 million is left after they unwound that trade. Buffett is most likely taking profits here, as the stock has given a 25% return since the start of 2011. Additional income was given in GE’s 3.4% dividend yield. Steve Cohen of SAC Capital Advisors mirrored Buffett’s approach and reduced his bullish call position by over 60%.
This article is written by Eric Winter and edited by Meena Krishnamsetty. Meena has a long position in COP. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!