JEF - Buffett's 6 Dividend Buys For October

2023-10-20 13:55:53 ET

Summary

• This Buffett holdings list from Kiplinger first appeared 8/21/23 on-line. Kiplinger, YCharts and Dogs of The Dow all track this Buffett/Berkshire batch. Here is your update from 10/17/23 YCharts data.
• 32 of 48 current Berkshire-Hathaway-owned-stocks pay dividends. As of 10/17/23 the top-ten ranged 3.05%-5.08% by annual-yield and 45 of 48 ranged 0.83% to 64.28% per broker-estimated target-price-upsides.
• Analyst-augured top-ten net-gains from Buffett’s October dividend dogs ranged 27.43%-64.38% from MDLZ, C, ALLY, LPX, KHC, DHI, PARA, COF, KR, and top pick GM per YCharts data.
• $5k invested in the lowest-priced five top-yield Buffett/Berkshire-held October dividend dogs showed 8.74% more net-gain than from $5k invested in all ten. Little (lower-priced) Berkshire-collected dogs led Buffett’s October 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 October 17 data for 32 dividend-paying stocks in the Kiplinger-documented collection of 48 owned by Buffett through his Berkshire-Hathaway 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 November.

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 October 2023 update shows that the following six 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: The Kraft Heinz Co ( KHC ); Citigroup Inc ( C ); Ally Financial Inc ( ALLY ); HP Inc ( HPQ ); Jeffries Financial Group Inc ( JEF ); Bank of America Corp ( BAC ).

One more in the top ten by yield is within $12.00 or 21% of the ideal, Coca-Cola Co ( KO ). The other three stocks show $77 to $90 potential price decreases that would result in dividends at the current payout level from $1k invested equaling their single share prices.

To run down the 'safer' dividends of Buffett's October pack of dogs, check out the Dividend Dog Catcher investing group site (by clicking on the last summary bullet above) after October 26.

Actionable Conclusions (1-10): Analysts Estimated 27.43% To 64.38% Net Gains For Ten Top Buffett-Held Dividend Stocks Come October 2024

Three 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 30% 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 for October 17, 2024, were:

General Motors Co ( GM ) netted $643.84 based on the median of estimates from 23 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 38% greater than the market as a whole.

The Kroger Co ( KR ) was projected to net $400.68, based on the median of target price estimates from 20 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 52% less than the market as a whole.

Capital One Financial Corp ( C OF) was projected to net $386.39, based on the median of target estimates from 20 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 46% greater than the market as a whole.

Paramount Global ( PARA ) was projected to net $370.47 based on a median of target price estimates from 27 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 68% greater than the market as a whole.

D.R. Horton Inc ( DHI ) was projected to net $343.25 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 56% greater than the market as a whole.

The Kraft Heinz Co was projected to net $310.24, 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 32% under the market as a whole.

Louisiana-Pacific Corp ( LPX ) was projected to net $302.86, 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 73% over the market as a whole.

Ally Financial Inc was projected to net $293.11 based on dividends, plus the median of target price estimates from 16 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 34% over the market as a whole.

Citigroup Inc netted $277.86 based on the median of estimates from 22 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 54% more than the market as a whole.

Mondelez International Inc ( MDLZ ) was projected to net $274.28 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 36% under the market as a whole.

The average net gain in dividend and price was estimated at 36.04% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risk/volatility 25% greater 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".

45 Buffett Holdings By Target Gains

32 Buffett Picks By Yield

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

The top ten Buffett-held stocks selected 10/17/23 by yield represented six of eleven Morningstar sectors.

In first place was one of two consumer defensive sector representatives The Kraft Heinz Co [1] the other placed ninth, Coca-Cola Co [9].

Then four from the financial services sector placed second, third, seventh and eighth, Citigroup Inc ( C ) [2], Ally Financial Inc [3], Jefferies Financial Group Inc [7], and Bank of America [8].

Meanwhile, the lone industrials member of the top ten placed fourth, United Parcel Service ( UPS ) [4]. One from the technology sector, placed fifth, HP Inc [5]. Then, in sixth place was the energy sector member, Chevron Corp ( C VX) [6].

Finally, healthcare placed tenth, represented by Johnson & Johnson ( JNJ ) [10], to complete the October Buffett/Berkshire top ten dividend dogs.

Actionable Conclusions: (21-30) Top-Ten October Berkshire/Buffett Dogs Showed 23.79%-64.19% Price Upsides, While (31) No 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 for digging out bargains.

Analysts Forecast An 8.74% Advantage For 5 Highest Yield, Lowest Priced, Of 10 Top Buffett-Collected Dividend Stocks To October 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, the top ten Buffett-chosen dividend dogs screened 10/17/23 showing the highest dividend yields represented six of eleven Morningstar sectors.

Actionable Conclusions: Analysts Projected 5 Lowest-Priced Of The Top Ten Highest-Yield Buffett-Held Dogs (31) Delivering 24.37% Vs. (32) 22.41% Average Net Gains by All Ten Come October 17, 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 8.74% more gain than $5,000 invested as $.5k in all ten. The fourth lowest-priced selection, The Kraft Heinz Co, was projected to deliver the best analyst-estimated net gain of 31.02%.

The five lowest-priced top-yields on October 17 were: Ally Financial Inc; HP Inc; Bank of America Corp; The Kraft Heinz Co; Jefferies Financial Group Inc, with prices ranging from $25.40 to $34.18.

Five higher-priced Berkshire-backed dividend dogs as of October 17 were: Citigroup Inc; Coca-Cola Co; Johnson & Johnson Inc; United Parcel Service Inc; Chevron Corp, whose prices ranged from $41.20 to $167.59.

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 October 2023 update shows that the following six 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 $12.00 or 21% of the ideal: Coca-Cola Co. That stock shows the smallest ($11.19) 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 September pack of dogs, check out the Dividend Dog Catcher investing group site (by clicking on the last summary bullet above) after September 26.

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 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 six fair priced dogs in the top ten, plus four out-of-bounds-priced stocks. The four outliers need to trim prices between $11.19 and $90.00 to realize the 50/50 goal for share prices equaling dividend payouts from the $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 56% 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.

The 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.

For further details see: