Greedy Dogs Of Berkshire Hathaway Chase 8 Mid-Year Dividend Buys

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 July 17 data for 32 dividend-paying stocks in the Kiplinger-documented collection of 49 currently owned by Buffett through his Berkshire Hathaway 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 August.

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 July 2022 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 its single share prices: STORE Capital Corporation (STOR); Verizon Communications Inc. (VZ); The Kraft Heinz Co (KHC); Paramount Global (PARA); Ally Financial (ALLY); HP Inc. (HPQ).

Three more are within $5.00 or 10% of the ideal: Citigroup Inc. (C) at 9.85%; U.S. Bancorp (USB) at 8.14%; Bank of New York Mellon (BK) at 10.05%. Those are the stocks showing price decreases that would pay dividends at current payout levels from $1k invested, equaling their single share prices.

Actionable Conclusions (1-10): Analysts Estimated 21.1% To 47.68% Net Gains For Ten Top Buffett-Held Dividend Stocks Come July 2023

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 to July 17, 2023 were:

Ally Financial Inc. was projected to net $476.83, 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 41% higher than the market as a whole.

Celanese Corp (CE) netted $452.36 based on the median of estimates from twenty-one analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 28% greater than the market as a whole.

Paramount Global was projected to net $432.14, based on the median of target price estimates from twenty-eight analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 16% over the market as a whole.

Bank of America Corp (BAC) was projected to net $321.02, based on dividends, plus the median of target price estimates from twenty-four analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 42% greater than the market as a whole.

Chevron Corp (CVX) netted $310.25 based on the median of estimates from twenty-seven analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 14% greater than the market as a whole.

Visa Inc (V) was projected to net $255.34 based on a median of target price estimates from thirty-three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 10% under the market as a whole.

Apple Inc (AAPL) was projected to net $233.13, based on the median of target price estimates from thirty-nine analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 19% greater than the market as a whole.

Mondelez International Inc (MDLZ) was projected to net $220.43 based on dividends, plus the median of target price estimates from twenty-two analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 39% under the market as a whole.

Royalty Pharma plc (RPRX) was projected to net $217.65, based on a median of target price estimates from eleven analysts, plus dividends, less broker fees. A beta number was not available for RPRX.

Occidental Petroleum Corp (OXY) was projected to net $211.02 based on dividends, plus the median of target price estimates from twenty-five analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 92% greater than the market as a whole.

The average net gain in dividend and price was estimated at 31.02% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risk/volatility 23% over 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”.

49 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

Top ten Buffett-held stocks selected 7/18/22 by yield represented six of eleven Morningstar sectors.

First place went to the lone real estate company STORE Capital Corp [1]. Thereafter, the first of two communication services companies placed second, Verizon Communications Inc [2]. The other communications company placed seventh, Paramount Global [7].

Next, the lone consumer defensive sector representative placed third, The Kraft Heinz Co [3].

Taking fourth was one from the energy sector, Chevron Corp [4]. Then, four dogs from the financial services sector, placed fifth, sixth, eighth, and ninth: Citigroup Inc [5] U.S. Bancorp [6], Ally Financial Inc [8], and Bank of New York Mellon Corp [9].

Finally, a lone industrials representative placed tenth, United Parcel Service (UPS) [10], to complete the July Buffett/Berkshire top ten batch of dividend dogs, by yield.

Actionable Conclusions: (21-30) Top-Ten July Berkshire/Buffett Dogs Showed 21.02%-45.21% Upsides, While (31) None Showed A Downside

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 12.81% Advantage For 5 Highest Yield, Lowest Priced, Of 10 Top Buffett-Collected Dividend Stocks To July 2023

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 7/18/22 showing the highest dividend yields represented six of eleven Morningstar sectors.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Buffett-Held Dogs (31) Delivering 28.94% Vs. (32) 25.65% Average Net Gains by All Ten Come July 18, 2023

$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 12.81% more gain than $5,000 invested as $.5k in all ten. The third lowest-priced selection, Ally Financial Inc, was projected to deliver the best analyst-estimated net gain of 47.68%.

The five lowest-priced top-yield Buffett-backed dividend dogs as of July 18 were: Paramount Global; STORE Capital Corp; Ally Financial Inc; The Kraft Heinz Co; Bank of New York Mellon Corp, with prices ranging from $24.52 to $42.77.

Five higher-priced Buffett-picked dividend dogs as of July 18 were, U.S. Bancorp; Citigroup Inc; Verizon Communications Inc; Chevron Corp; United Parcel Service, whose prices ranged from $46.68 to $180.08.

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 two stocks ready for pick-up at the start of the article, here is a reprise of the list at the end:

This July 2022 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 its single share prices: STORE Capital Corp; Verizon Communications Inc; The Kraft Heinz Co; Paramount Global; Ally Financial; HP Inc.

Three more are within $5.00 or 10% of the ideal: Citigroup Inc at 9.85%; U.S. Bancorp at 8.14%; Bank of New York Mellon at 10.05%. Those are the stocks showing price decreases that would pay dividends at current payout levels from $1k invested equaling their single share prices.

Price Drops or Dividend Increases Could Get All Ten Dogs of Berkshire 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 five fair-priced dogs in the top ten (STOR, VZ, KHC, PARA, and ALLY), plus five out-of-bounds-priced stocks (CVX, C, USB, BK, and UPS). The outliers need to trim prices between $3.80 and $102.06 to realize the 50/50 goal for share prices equaling 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, and inflationary times.

Market action is the key. Five more only need to drop 57% 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.

Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.

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