Warren Buffett Bets on These 3 High-Yield Dividend Stocks
Markets have taken a pounding in recent sessions, with the S&P 500 losing nearly 8% in the last 6 days. Opinion is divided on the cause, with most pointing to the impact of the coronavirus outbreak on China’s economy and on global trade and travel patterns. It hasn’t escaped notice, however, that the sudden hit to the market has occurred just as Senator Bernie Sanders, an avowed socialist with a vigorous anti-Wall Street policy platform, has taken a commanding lead in the race for the Democratic Party Presidential election nomination.
Whatever the reason, markets have erased the gains they’ve posted so far in 2020, and fallen back to their December 2019 levels. It may not be a warning sign to get out of stocks, but it’s certainly a reminder that it’s never too late to buy into a defensive portfolio. And that will naturally bring dividend stocks to mind.
Any strong defensive investing strategy will include dividends. They ensure an income stream, even when markets turn down. Warren Buffett, certainly no stranger to smart investing, is long-term fan of dividend investing, as a look at Berkshire Hathaway’s holdings shows.
The Oracle of Omaha is bumping up his holdings when it comes to dividends, and he’s openly citing the coronavirus scare. While conceding in a recent CNBC interview that the viral outbreak is certainly “scary stuff,” Buffett adds that the long-term outlook remains strong. And when Warren Buffett says, ‘long term,’ he means just that: “We’re buying businesses to own for 20 or 30 years. We think the 20- to 30-year outlook is not changed by the coronavirus.”
Stock Screener tool, we’ve chosen three stocks with particularly high yield dividends and substantial upside potential – over 25% for the coming months. Let’s take a closer look.” data-reactid=”15″>We’ve looked into Buffett’s recent holding additions, and using the TipRanks Stock Screener tool, we’ve chosen three stocks with particularly high yield dividends and substantial upside potential – over 25% for the coming months. Let’s take a closer look.
Devin McDermott also sees the attraction in Occidental Petroleum. In his recent review of the stock, McDermott reiterated his Buy rating and gave the shares a $59 price target, implying room for a 63% upside. (To watch McDermott’s track record, click here)’ data-reactid=”20″>Morgan Stanley analyst Devin McDermott also sees the attraction in Occidental Petroleum. In his recent review of the stock, McDermott reiterated his Buy rating and gave the shares a $59 price target, implying room for a 63% upside. (To watch McDermott’s track record, click here)
McDermott wrote in his research note on OXY, “OXY attributed strong 4Q production results to reduced downtime, improved time to market, and strong base and new well performance. Relative to legacy APC operations, we had viewed reduced downtime and well performance improvement as key sources of upside to synergies […] We believe the dividend, which offers a best-in-class +8% yield, is safe with long-term growth under most scenarios.”
Suncor Energy (SU)‘ data-reactid=”35″>Suncor Energy (SU)
The second major Buffett acquisition we’re looking at is Suncor, a $45 billion player in the Canadian energy scene. Suncor is based in Calgary, Alberta, at the center of Canada’s oil sand region. The oil sands have made Alberta major producer of synthetic crude on the world markets, and are widely credited with bringing prosperity to the Plains province.
Suncor has shown remarkable resilience in weathering the low oil prices recently, and its volatility actually declined in 2019 compared to 2H18. In the most recent quarter reported, SU showed 39 cents EPS, below the 50 cents expected but still enough to keep up the 32-cent quarterly dividend with a payout ratio of 90%. The next dividend payment, set for March, will show an increase to 35 cents. The annualized payment, $1.40 per share, gives a yield of 4.8%, plenty high enough to attract attention from income-minded investors.
Income-minded investors like Warren Buffett. Buffett snapped up 4,261,031 shares in SU during Q4, and now owns more than 15 million shares in the company. It was a 39% increase of his holding, and a major commitment in the Canadian oil industry. Buffett’s full holding in Suncor is worth $437 million at today’s prices.
click here)’ data-reactid=”40″>Ollenberger puts a Buy rating and a price target of $43.65 on the stock (C$58), suggesting a strong 50% upside. (To watch Ollenberger’s track record, click here)
click here)’ data-reactid=”42″>Along with his Buy rating, Morrison gives SU shares a $53 price target (C$70). This implies a tremendous upside potential of 82% to the stock. (To watch Morrison’s track record, click here)
General Motors Company (GM)‘ data-reactid=”52″>General Motors Company (GM)
The third big Buffett move we’re looking at today is General Motors, a long-time staple of the Detroit auto industry. GM is the largest of the American automakers, and includes storied names like Cadillac and Chevrolet. And Warren Buffet just increased his holding in the company by over 2.7 million shares. Buffett is on record saying that he prefers investing in companies with simple plans, and GM offers just that: Build cars, and sell them. Pretty basic.
GM’s dividend is similar to Suncor’s, at 4.7%. The payment is 38 cents quarterly, or $1.52 annualized. The company has a 6-year history of reliable payments, and has held the dividend steady at its current level since 2016. While Buffett likes dividends that grow steadily, he has no qualms with steady payments – in his view, the key factor is reliability. And GM meets that, making regular payments and beating the both the market average and Treasury notes on yield.
GM is taking a lead in the shift towards electric vehicles, and investing heavily in non-gasoline automotive powertrains. While expensive initially, some analysts see this as a path forward, noting that political winds and likely customer choices will favor electric and other non-gasoline vehicles in the mid- to long-term for the auto markets.
click here)’ data-reactid=”58″>Unsurprisingly, given his bullish outlook on the company, Jonas puts a Buy rating on GM shares along with a $46 price target indicative of a 45% upside potential. (To watch Jonas’ track record, click here)