Warren Buffett’s 10 Favorite Dividend Stocks for the Rest of 2022

In this article, we discuss Warren Buffett’s 10 favorite dividend stocks for the rest of 2022. You can skip our detailed analysis of Buffett’s investment strategy, and go directly to read Warren Buffett’s 5 Favorite Dividend Stocks for the Rest of 2022.

In one of his interviews with Business Insider, Buffett mentioned that one of the main approaches used by profitable businesses is to initiate a dividend policy to increase shareholder value. He further said that the companies should always be consistent and rational in their dividend policies, as unstable dividends will confuse the shareholders. This is also evident from Buffett’s practical investment approach, as major dividend stocks in his portfolio have been raising dividends for decades. Over the years, his hedge fund has earned billions in dividend payments and the amount is increasing with every passing year. According to a report by CNBC, Berkshire Hathaway’s stake in Apple Inc. (NASDAQ:AAPL) generated an average of $775 million annually in dividends in recent years.

At the end of Q2 2022, Berkshire Hathaway’s 13F portfolio was valued at over $300 billion, down from $363.5 billion in the previous quarter. Technology and finance made up the major portion of the portfolio in Q2. The hedge fund has a total of 47 holdings, with Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), and The Coca-Cola Company (NYSE:KO) taking up the first three positions. In addition to these, we will discuss some other favorite dividend stocks of Warren Buffett.

Our Methodology

We selected top dividend stocks from Berkshire Hathaway’s 13f portfolio as of the second quarter of 2022. The stocks are ranked according to their position in the portfolio.

Warren Buffett’s 10 Favorite Dividend Stocks for the Rest of 2022

10. McKesson Corporation (NYSE:MCK)

Berkshire Hathaway’s Stake Value: $1,043,331,000

Dividend Yield as of August 17: 0.58%

McKesson Corporation (NYSE:MCK) is a Texas-based healthcare company that distributes pharmaceuticals, medical supplies, and care management tools. Berkshire Hathaway opened its position in the company in Q1 2022 and raised its stake in the second quarter by 10%. The hedge fund owned over 3 million MCK shares, valued at over $1 billion. The company represented 0.34% of Warren Buffett’s portfolio.

On August 15, McKesson Corporation (NYSE:MCK) hit its 52-week high, gaining 50.6% year-to-date while its 12-month returns came in at 84%, as of the close of August 16. The company announced a 15% hike in its quarterly dividend to $0.54 per share in July. This marked the company’s sixth consecutive year of dividend growth. As of August 17, the stock’s dividend yield stood at 0.58%.

Appreciating the company’s strong quarterly earnings and its solid performance in its core businesses, Deutsche Bank lifted its price target on McKesson Corporation (NYSE:MCK) in August to $409 and kept a Buy rating on the shares.

At the end of Q1 2022, 59 hedge funds in Insider Monkey’s database owned stakes in McKesson Corporation (NYSE:MCK), up from 57 in the previous quarter. The collective value of these stakes is nearly $3.8 billion.

In addition to famous stocks like Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), and The Coca-Cola Company (NYSE:KO), McKesson Corporation (NYSE:MCK) is also one of Warren Buffett’s most prominent holdings.

Baron Funds mentioned McKesson Corporation (NYSE:MCK) in its Q2 2022 investor letter. Here is what the firm has to say:

McKesson Corporation is a leading distributor of pharmaceuticals and medical supplies. The company contributed to performance due to solid financial results and investor rotation into stocks trading at lower valuation multiples of earnings. We continue to believe the stock is inexpensive in light of McKesson’s strong competitive position in growing end-markets and earnings growth potential.”

9. Citigroup Inc. (NYSE:C)

Berkshire Hathaway’s Stake Value: $2,536,616,000

Dividend Yield as of August 17: 3.77%

Citigroup Inc. (NYSE:C) is an American multinational investment bank and financial services company. In July, Oppenheimer raised its price target on the stock to $86 with an Outperform rating on the shares, appreciating the company’s strong balance sheet and its shareholder return.

Warren Buffett started investing in Citigroup Inc. (NYSE:C) during the first quarter of 2022, purchasing a stake worth nearly $3 billion. In Q2 2022, his hedge fund owned over 55 million shares in the company, with a total value of over $2.5 billion. The company accounted for 0.84% of Warren Buffett’s portfolio.

On July 21, Citigroup Inc. (NYSE:C) declared a quarterly dividend of $0.51 per share, consistent with its previous dividend. The stock’s dividend yield, as of August 16, came in at 3.77%.

As of the close of Q1 2022, 88 hedge funds in Insider Monkey’s database were bullish on Citigroup Inc. (NYSE:C) and owned stakes worth over $8 billion. In addition to Berkshire Hathaway, Harris Associates was also one of the company’s most prominent stakeholders in Q1.

Diamond Hill Capital mentioned Citigroup Inc. (NYSE:C) in its Q1 2022 investor letter. Here is what the firm has to say:

“Shares of Citigroup declined in the quarter as investors became increasingly negative on capital markets activity. The company is also continuing to divest certain consumer banking geographies which may be dilutive to earnings in the near term.”

8. The Bank of New York Mellon Corporation (NYSE:BK)

Berkshire Hathaway’s Stake Value: $3,018,027,000

Dividend Yield as of August 17: 3.29%

The Bank of New York Mellon Corporation (NYSE:BK) is a New York-based investment banking services holding company. The company has been regularly paying dividends for the past 21 years while maintaining an 11-year streak of dividend growth. On July 15, the company announced an 8.8% hike in its quarterly dividend to $0.37 per share. The stock’s dividend yield stood at 3.29%, as of August 17.

The Bank of New York Mellon Corporation (NYSE:BK) has been a part of Berkshire Hathaway’s portfolio since 2010 when the hedge fund purchased a stake worth over $54 million in the company. In Q2 2022, the hedge fund owned over 72.3 million BK shares, valued at over $3 billion. The company represented 1% of Warren Buffett’s portfolio.

In August, Deutsche Bank raised its price target on The Bank of New York Mellon Corporation (NYSE:BK) to $46, expecting a strong rebound in the banking stocks in the second half of the year.

At the end of Q1 2022, 54 hedge funds in Insider Monkey’s database owned stakes in The Bank of New York Mellon Corporation (NYSE:BK), growing from 49 a quarter earlier. The combined value of these stakes stood at over $4.5 billion.

Ariel Investments mentioned The Bank of New York Mellon Corporation (NYSE:BK) in its Q4 2021 investor letter. Here is what the firm has to say:

“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.

This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. Smaller positions in The Bank of New York Mellon Corporation (BK) also benefited from higher rates, principally with their ability to invest customer cash.”

7. Occidental Petroleum Corporation (NYSE:OXY)

Berkshire Hathaway’s Stake Value: $9,335,408,000

Dividend Yield as of August 17: 0.82%

Occidental Petroleum Corporation (NYSE:OXY) is a Texas-based chemical industry company that specializes in the exploration of hydrocarbon and manufactures petrochemicals in the US. Berkshire Hathaway first started investing in the company during the third quarter of 2019 and sold off its entire OXY stake during Q2 of 2022. The hedge fund again initiated its position in the company in Q1 2022, and currently owned a stake worth over $9.3 billion. The company represented 3.11% of Warren Buffett’s portfolio.

Occidental Petroleum Corporation (NYSE:OXY) currently pays a quarterly dividend of $0.13 per share, raising it by 1200% this February. As of August 17, the stock’s dividend yield stood at 0.82%.

In July, Truist lifted its price target on Occidental Petroleum Corporation (NYSE:OXY) to $105 and kept a Buy rating on the shares, appreciating the performance of the energy sector.

The number of hedge funds tracked by Insider Monkey owning stakes in Occidental Petroleum Corporation (NYSE:OXY) grew to 67 in Q1 2022, from 58 in the previous quarter. These stakes have a total value of over $12.6 billion. Ken Griffin, Rajiv Jain, and Carl Icahn were some of the company’s most prominent stakeholders in Q1.

6. The Kraft Heinz Company (NASDAQ:KHC)

Berkshire Hathaway’s Stake Value: $12,419,712,000

Dividend Yield as of August 17: 4.12%

An American food corporation, The Kraft Heinz Company (NASDAQ:KHC) is one of the oldest holdings of Berkshire Hathaway as the hedge fund started investing in the company during the third quarter of 2015. In Q2 2022, the fund owned over 325.6 million KHC shares, valued at over $12.4 billion. The company represented 4.13% of Warren Buffett’s portfolio.

The Kraft Heinz Company (NASDAQ:KHC) has been offering dividends to shareholders for a long time, even before the merger of Kraft and Heinz in 2015. Currently, it pays a quarterly dividend of $0.40 per share, with a dividend yield of 4.12%, as of August 17.

In July, Stifel upgraded The Kraft Heinz Company (NASDAQ:KHC) to Buy from Neutral, with a $43 price target. Analysts are also positive about other dividend stocks like Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), and The Coca-Cola Company (NYSE:KO).

At the end of Q1 2022, 35 hedge funds tracked by Insider Monkey owned investments in The Kraft Heinz Company (NASDAQ:KHC), down from 39 in the previous quarter. The collective value of these investments is over $13.4 billion.

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Disclosure. None. Warren Buffett’s 10 Favorite Dividend Stocks for the Rest of 2022 is originally published on Insider Monkey.

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