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Warren Buffett's Berkshire Hathaway famously hasn't paid dividends to its investors since 1967 (two years after Buffett took over the company). Fortunately for Berkshire Hathaway's continued success, the company receives billions of dollars in dividends from its own investment portfolio.
Berkshire Hathaway should reap a $6 billion dividend payout from its combined investments in 2024. The following three stocks alone contribute about $2.8 billion to that total — offering a prime example of how investing in stable, time-tested businesses can give investors a sturdy foundation, even in a wildly fluctuating economy.
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1. Bank of America Corp (NYSE:BAC)
Bank of America is one of the world's leading financial institutions. While some banks struggled in 2023, Bank of America benefited from the Federal Reserve's rapid cycle of interest rate hikes, which helped the bank earn $13.9 billion in net interest income in the same year. As inflation continues to persist, the bank is in a good position to continue benefiting from interest trends in 2024.
Warren Buffett bet on Bank of America's success in the first quarter of 2024, increasing Berkshire Hathaway's Bank of America holdings by 22.9 million shares. Per Berkshire's most recent financial reports, it now owns over 1.03 billion Bank of America shares, which represents an investment of over $35.1 billion and a 13.29% stake in the bank. At this point, Berkshire Hathaway is Bank of America's largest stakeholder.
Annually, Bank of America pays dividends of $0.96 per share, so Berkshire Hathaway is poised to rake in $992 million in dividends from Bank of America alone. And if banking trends continue, that amount will only grow. Bank of America has increased annual shareholder dividends for several years in a row. The current dividend yield is about 2.82%.
2. Occidental Petroleum (NYSE:OXY)
Occidental Petroleum is a gas exploration and production company. While it isn't among the top companies in the oil market, it does have a strong presence in the United States, the Middle East, North Africa, and Latin America.
Tightening global supplies of crude oil in 2023 from various factors, including the war in Ukraine, helped the company earn more from each barrel it sold. Occidental Petroleum's success attracted significant investments from Berkshire Hathaway. Warren Buffett boosted his company's ownership stake in Occidental Petroleum Corp to about 23.6% after buying about 3.7 million shares in March 2023. Berkshire Hathaway owns about 224 million Occidental common shares.
Occidental Petroleum pays annual dividends of $0.72 a share. This means that Berkshire Hathaway is expecting around $161 million in dividends from common shares this year, which represents a 1.26% dividend yield. Berkshire Hathaway also owns over 84,000 Occidental Petroleum preferred stocks valued at $10 billion. Preferred stocks typically have higher dividend yield, and Occidental Petroleum pays 8% in annual yield on its preferred stocks, generating an additional $800 million for a total of $961 million.
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3. Apple (NASDAQ:AAPL)
Apple is a multinational technology company known for its innovative consumer electronics, software, and online services. Apple's strong brand loyalty helps the company maintain a robust financial performance. With more than 1.46 billion active iPhone users worldwide, the company's growth potential makes it a valuable addition to any investment portfolio.
Apple bounced back from a dip in its 2023 fiscal year, reporting a revenue of $119.58 billion in the first quarter of its 2024 fiscal year, which ended on Dec. 30, 2023. This rebound was largely driven by the sales of its flagship product, the iPhone, as well as growth in its services business and commitment to stock buybacks.
Warren Buffett's Berkshire Hathaway holds a significant stake in Apple that only grew larger in 2023. Berkshire Hathaway bought 20.4 million Apple shares in the first quarter of 2023 to increase its total Apple holdings to 916 million shares valued at about $169 billion. This represents about 5.62% of issued Apple stocks.
Apple pays an annual dividend of $0.96 per share, which means Berkshire Hathaway is set to receive about $879 million in dividends in 2024. Given the steady growth of Apple's business and its large 46.1% stake in Berkshire Hathaway's portfolio, this investment is likely to continue yielding significant returns.
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Bottom line
When times are tough (and today's times certainly qualify), it pays to have a reliable source of cash flow — which is exactly what Buffett has done with these three stocks. And sure, most of us don't have the massive cash reserves or diverse investment portfolio of Berkshire Hathaway. Still, it's a smart financial move to follow Buffett's lead by investing in a handful of steady, stable, dividend-paying companies. As always, consider your own investment goals and risk tolerance when making investment decisions.
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