Berkshire Hathaway (NYSE:BRKa), led by CEO Warren Buffett, continues to see significant gains from its investment strategy focusing on profitable, brand-name businesses. The company is set to collect over $6 billion in dividend income over the next 12 months, with dividend stocks playing a crucial role in the firm's success.
Since Buffett took control of Berkshire Hathaway in 1965, the company's Class A shares have seen an aggregate gain of over 4,400,000%, doubling the annualized total return of the S&P 500 as of December 31, 2022. This has drawn attention from both professional and everyday investors.
Berkshire Hathaway's $358 billion portfolio has substantial stakes in several high-yielding dividend stocks such as Chevron (NYSE:NYSE:CVX), Johnson & Johnson (NYSE:JNJ), and Citigroup (NYSE:NYSE:C).
Earlier this year, Chevron's board approved a $75 billion share repurchase program and increased the company's payout for the 36th consecutive year. This decision comes as Chevron continues to benefit from a tight global oil supply due to pandemic-related underinvestment and ongoing geopolitical tensions.
Johnson & Johnson, although a relatively small position for Berkshire Hathaway, has increased its base annual payout for 61 consecutive years. The healthcare conglomerate has been steadily shifting more of its net sales to high-margin pharmaceuticals, fueling these dividend increases.
Citigroup offers the highest nominal yield in Berkshire Hathaway's portfolio at 5.1% as of September 7, 2023. The bank is benefiting from the Federal Reserve's aggressive rate-hiking cycle, which boosts their net-interest income on outstanding variable-rate loans.
However, one of Berkshire Hathaway's longest-held investments, Coca-Cola (NYSE:NYSE:KO), offers a yield to cost that is over 11 times greater than Citigroup's nominal yield. Buffett began building a stake in Coca-Cola in 1988 and, as of June 30, 2023, Berkshire Hathaway held 400 million shares. Coca-Cola has been increasing its base annual payout for 61 consecutive years, and based on the $1.84 per share the beverage company is expected to pay over the next 12 months, Berkshire Hathaway is set to generate a 56.7% yield relative to its cost basis.
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