GL - Buffett's 4 Dividend Buys For December

2023-12-26 16:17:29 ET

Summary

• The article discusses the dividend-paying stocks in Warren Buffett's Berkshire Hathaway portfolio.
• It highlights three stocks - The Kraft Heinz Co, Ally Financial Inc, and HP Inc - that have annual dividends exceeding their single share prices.
• The article also provides projected net gains for ten top Buffett-held dividend stocks by December 2024.
• Analyst-augured top-ten net-gains from Buffett’s December dividend dogs ranged 9.62%-21.31% from GL, KHC, DEO, KO, JEF, OXY, AON, TMUS, KR, and top pick CVX per YCharts data.
• $5k invested in the lowest-priced five top-yield Buffett/BKH-held December dividend dogs showed 6.45% LESS net-gain than from $5k invested in all ten. Big (higher-priced) Berkshire-collected dogs led Buffett’s December dividend payers.

Foreword

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 December 22 data for 27 dividend paying stocks in the Kiplinger-documented collection of 45 now owned by Buffett through his Berkshire Hathaway Inc. (BRK.A) firm.

Another resource consulted for this article was dogsofthedow.com which also keeps an ongoing spreadsheet of the Buffett/Berkshire stocks updated quarterly per BRK SEC filings , the next of which reports in February.

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 December 2023 update shows that the following three 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 Co ( KHC ); Ally Financial Inc ( ALLY ); and HP Inc ( HPQ ).

Five more in the top ten by yield are within $15.40 or 26.4% of the ideal, BAC is just $2.46 high, Jeffries Financial Group Inc ( JEF ) is $5.25 removed, Citigroup ( C ) is $5.26 away, The Kroger Co ( KR ) is off by $11.08, and Coca-Cola ( KO ) needs to shed $15.39 in bloated price to be ideal. Another stock, outside the top ten, shows dividends at the current payout level from $1k invested equaling its single share price, that is Sirius XM Holdings Inc ( SIRI ), which is back in the Buffet batch after a one year absence.

To run-down the "safer" dividends of Buffett’s December pack of dogs, check-out the Dividend Dog Catcher investing group site (by clicking on the last summary bullet above) after December 30.

Actionable Conclusions (1-10): Analysts Estimated 9.62% To 21.31% Net Gains For Ten Top Buffett-Held Dividend Stocks Come December, 2024

Six 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 these Buffett dogs was graded by Wall St. Wizards as 60% accurate.

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 December 22, 2024 were:

Chevron Corp ( CVX ) netted $213.05 based on the median of estimates from 24 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 11% greater than the market as a whole.

The Kroger Co was projected to net $147.73, based on the median of target price estimates from 21 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 53% less than the market as a whole.

T-Mobile US Inc ( TMUS ) was projected to net $143.13 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 47% less than the market as a whole.

Aon PLC ( AON ) netted $139.76 based on the median of estimates from 414 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 8% less than the market as a whole.

Occidental Petroleum Corp ( OXY ) was projected to net $131.55, 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 62% over the market as a whole.

Jefferies Financial Group Inc was projected to net $130.85, 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 42% greater than the market as a whole.

Coca-cola Co was projected to net $129.28 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 42% under the market as a whole.

Diageo PLC ( DEO ) was projected to net $125.99 based on dividends, plus the median of target price estimates from 7 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 36% less than the market as a whole.

The Kraft Heinz Co was projected to net $109.36, based on the median of target price estimates from 21 analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 28% under the market as a whole.

Globe Life Inc ( GL ) was projected to net $96.17 based on dividends, plus the median of target price estimates from 9 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 22% under the market as a whole.

The average net gain in dividend and price was estimated at 13.67% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risk/volatility 12% less than the market as a whole.

The Dividend Dogs Rule

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."

34 Buffett Holdings By Target Gains

27 Buffett Picks By Yield

Actionable Conclusions (11-20): 10 Top Buffett-Held Stocks By Yield Are The Dogs of Berkshire-Hathaway

Top ten Buffett-held stocks selected 12/22/23 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 [9]; The Kroger Co [10].

Then four from the financial services sector placed second, fifth. seventh, and eighth: Citigroup Inc [2], Ally Financial Inc [5], Jefferies Financial Group Inc [7], and Bank of America [8].

Then, in third place was the energy sector member, Chevron Corp [3]. One from the technology sector, placed fourth, HP Inc [4], to complete the December Buffett/Berkshire top ten dividend dogs.

Actionable Conclusions: (21-30) Top-Ten December Berkshire/Buffett Dogs Showed 8.97%-18.31% Price Upsides, While (31) Six -1.16% to -6.97% Downsiders Trailed the Pack This Month

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.

Analysts Forecast A 35.44% Disadvantage For 5 Highest Yield, Lowest Priced, Of 10 Top Buffett-Collected Dividend Stocks To December, 2024

Ten-top Buffett/Berkshire dividend dogs were culled by yield for this update. Yield (dividend/price) results provided by YCharts did the ranking.

As noted above, top ten Buffett-chosen dividend dogs screened 12/22/23 showing the highest dividend yields represented four of eleven Morningstar sectors.

Actionable Conclusions: Analysts Projected 5 Lowest-Priced Of The Top Ten Highest-Yield Buffett-Held Dogs (31) Delivering 6.59% Vs. (32) 10.2% Average Net Gains by All Ten Come December 22, 2024

$5000 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 35.44% LESS gain than $5,000 invested as $.5k in all ten. The tenth lowest-priced selection, Chevron Corp, was projected to deliver the best analyst-estimated net gain of 21.31%.

The five lowest-priced top-yield BKB stocks December 22 were: HP Inc; Bank of America Corp; Ally Financial Inc; The Kraft Heinz Co; Jefferies Financial Group Inc, with prices ranging from $30.18 to $39.91.

Five higher-priced Berkshire-backed dividend dogs as of December 22 were: The Kroger Co; Citigroup Inc; Coca-Cola Co; Diageo PLC; Chevron Corp, whose prices ranged from $45.14 to $151.05.

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%).

Afterword

If somehow you missed the suggestion of the six stocks ready for pick-up, and the four emerging ideal picks at the start of the article, here is a reprise of the list at the end:

This November 2023 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.

One more is within $2.46 or 7.36% of the idea, Bank of America Corp. 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 the "safer" dividends of Buffett’s December pack of dogs, check-out the Dividend Dog Catcher investing group site (by clicking on the last summary bullet above) after December 30.

Price Drops or Dividend Increases Could Get All Ten Dogs of Buffett Back to "Fair Price" Rates For Investors

The charts above retain the recent dividend amount and adjust 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 three fair priced dogs in the top ten, plus seven out-of- bounds-priced stocks. The seven outliers need to trim prices between $2.46 and $82.54 to realize the 50/50 goal for share prices equaling dividend payouts from $10k invested.

The alternative, of course, would be for these companies 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 57% 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.

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