Buy 7 October Buffett Dividend Dogs And Watch One More

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Foreword

Dan Burrows and Kyle Woodley say 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 (dog catcher) analysis, this Buffett/Berkshire batch is perfect for the dogcatcher process. Here is the October 24 data for 31 dividend paying stocks in the Kiplinger-documented collection of 47 owned by Buffett through his Berkshire-Hathaway (BRK.A) (BRK.B) firm as of 8/15/22.

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 November.

A rapid market recovery after the Ides of March 2020 plunge made the possibility of owning productive dividend shares reflecting this collection less viable for first-time investors.

This October 2022 update shows that the following seven top dogs of Berkshire stocks now live up to the dogcatcher ideal of paying annual dividends (from a $1K investment) exceeding its single share prices: STORE Capital Group (STOR); Paramount Global (PARA); U.S. Bancorp (USB); Citigroup Inc (C); Ally Financial Inc (ALLY); The Kraft Heinz Co (KHC); HP Inc (HPQ).

One more is within $3.37 or 5.8% of the ideal: Bank of New York Mellon (BK) at 5.96%. That one stock is showing price decreases that would pay dividends at current payout levels from $1K invested equalling their single share prices.

Actionable Conclusions (1-10): Analysts Estimated 22.52% To 42.85% Net Gains For Ten Top Buffett-Held Dividend Stocks Come October, 2023

Four 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 40% accurate.

Source: YCharts.com

Estimated-dividends from $1,000 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 October 24, 2023 were:

Paramount Global was projected to net $428.46 based on dividends, plus the median of target price estimates from 25 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 55% greater than the market as a whole.

General Motors Co (GM) netted $413.87 based on the median of estimates from 22 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 20% greater than the market as a whole.

Celanese Corp (CE) netted $396.04 based on the median of estimates from 21 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 26% greater than the market as a whole.

Ally Financial Inc was projected to net $336.83, based on the median of target estimates from 18 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 34% higher than the market as a whole.

Mastercard Inc (MA) was projected to net $311.52, based on the median of target price estimates from 35 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 8% greater than the market as a whole.

Visa Inc (V) was projected to net $300.93 based on a median of target price estimates from 31 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 8% under the market as a whole.

U.S. Bancorp was projected to net $293.69, based on a median of target price estimates from 22 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 3% under the market as a whole.

Activision Blizzard Inc (ATVI) was projected to net $283.22, 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 48% under the market as a whole.

Citigroup Inc was projected to net $281.12, 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 59% greater than the market as a whole.

The Kroger Co (KR) was projected to net $225.24 based on dividends, plus the median of target price estimates from 17 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 49% under the market as a whole.

The average net gain in dividend and price was estimated at 32.71% on $10K invested as $1K in each of these ten stocks. These gain estimates were subject to average risk/volatility 22% over the market as a whole.

Source: Open source dog art from dividenddogcatcher.com

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”.

47 Buffett Holdings By Target Gains

Source: YCharts.com

30 Buffett Picks By Yield

Source: YCharts.com

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

Top ten Buffett-held stocks selected 10/24/22 by yield represented seven of eleven Morningstar sectors.

First place went to the lone real estate company STORE Capital Corp [1]. Then, the one communication services company placed second, Paramount Global [2].

Four dogs from the financial services sector, placed third, through fifth, and ninth: U.S. Bancorp [3], Citigroup Inc [4] Ally Financial Inc [5], and Bank of New York Mellon Corp [9].

Next, the lone consumer defensive sector representative placed sixth, The Kraft Heinz Co [6].

One from the technology sector, placed seventh, HP Inc [7]. The lone industrials stock placed eighth, United Parcel Service (UPS) [8].

Finally, taking tenth, was one from the energy sector, Chevron Corp (CVX) [10], to complete the October Buffett/Berkshire top ten dividend dogs, by yield.

Actionable Conclusions: (21-30) Top-Ten October Berkshire/Buffett Dogs Showed 21.24%-41.38% Upsides, While (31) One Showed a Downside of -2.75%

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.

Analysts Forecast A 3.83% Advantage For 5 Highest Yield, Lowest Priced, Of 10 Top Buffett-Collected Dividend Stocks To October 2023

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 10/24/22 showing the highest dividend yields represented seven of eleven Morningstar sectors.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Buffett-Held Dogs (31) Delivering 21.98% Vs. (32) 21.17% Average Net Gains by All Ten Come October 24, 2023

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 3.83% more gain than $5,000 invested as $.5K in all ten. The very lowest-priced selection, Paramount Global, was projected to deliver the best analyst-estimated net gain of 42.85%.

Source: YCharts.com

The five lowest-priced top-yield Buffett-backed dividend dogs as of October 24 were: Paramount Global; Ally Financial Inc; HP Inc; STORE Capital Corp; The Kraft Heinz Co, with prices ranging from $19.09 to $36.52.

Five higher-priced Buffett-picked dividend dogs as of October 24 were, of New York Mellon Corp; US Bancorp; Citigroup Inc; United Parcel Service; Chevron Corp, whose prices ranged from $40.84 to $173.13.

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 20% to 90% 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 seven stocks ready for pick-up at the start of the article, here is a reprise of the list at the end:

This October 2022 update shows that the following seven 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: STORE Capital Group; Paramount Global; U.S. Bancorp; Citigroup Inc; Ally Financial In; The Kraft Heinz Co; HP Inc.

One more is within $3.37 or 5.8% of the ideal: Bank of New York Mellon at 5.96%. That one stock is showing price decreases that would pay dividends at current payout levels from $1K invested equalling their single share prices.

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

Source: YCharts.com

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 seven fair priced dogs in the top ten (STOR, PARA, USB, C, ALLY, KHC, HPQ), plus three out-of-bounds-priced stocks (UPS; BK; CVX). The outliers need to trim prices between $2.37 and $97.77 to realize the 50/50 goal for share prices equalling 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, and inflationary times.

Market action is the key. One more only needs to drop 5.8% to become a Buffett Ideal dividend dog.

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.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexArb; YCharts; finance.yahoo.com; analyst mean target price by YCharts. Open source dog art from dividenddogcatcher.com

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