Warren Buffett likes dividends. Sure, his own Berkshire Hathaway doesn't pay dividends and has never done so. However, Buffett has ensured Berkshire's portfolio is loaded with dividend stocks.
Berkshire has positions in 12 stocks that offer dividend yields at least twice the yield of the S&P 500 (my criterion for a high yield). Here is every high-yield dividend stock Buffett owns -- ranked from worst to best.
Worst
It wasn't easy choosing Buffett's worst high-yield dividend stocks. However, there are three that fell to the bottom of the pile.
12. Diageo
The cut-off for making the list was a dividend yield of 2.6%. Diageo(NYSE: DEO) barely qualified with its yield of 2.7%. Shares of the beverage alcohol maker aren't overly expensive, but they aren't dirt cheap either with a forward earnings multiple of nearly 16.5. Diageo's stock performance has been dismal, especially with the broader market soaring.
11. Sirius XM Holdings
Buffett likes Sirius XM Holdings(NASDAQ: SIRI). It was one of only three stocks he bought in the fourth quarter of 2023. However, the satellite radio operator offers a dividend yield of 2.74%, on the low end of the high yielders in Berkshire's portfolio. Sirius XM's share price has plunged so far in 2024. I don't expect impressive growth from the company going forward.
10. HP
HP's (NYSE: HPQ) dividend yield of 3.65% almost pushed it higher in my ranking. However, this stock seems to be mediocre at best. I'm not surprised that Buffett slashed Buffett's position in the tech stock by nearly 78% in Q4.
Good but not spectacular
Four other high-yield dividend stocks owned by Buffett look solid. They're not spectacular, though.
9. Jefferies Financial Group
Jefferies Financial Group(NYSE: JEF) has been a big winner over the last 12 months with its stock soaring close to 50%. Its valuation is attractive with shares trading at under 12.4 times forward earnings. The main knock against this financial services company is its relatively low dividend yield (compared to others on the list) of 2.72%.
8. Ally Financial
Another financial services stock, Ally Financial(NYSE: ALLY), has delivered greater returns than Jefferies over the last 12 months. Factoring in its strong growth prospects makes Ally's price-to-earnings-to-growth (PEG) ratio of 0.91 look especially appealing. However, Ally nearly didn't make it on the list with its dividend yield of 2.6%.
7. Kraft Heinz
Kraft Heinz(NASDAQ: KHC) checks off several boxes for investors. Its dividend yield of 4.34% is the highest of any stock in Berkshire's portfolio. The stock is cheap with a forward earnings multiple of under 12.1. Kraft Heinz markets a wide range of well-known brands that customers keep buying. The reason it's not higher on the list is the company's growth prospects are underwhelming.
6. Mitsui
In his latest letter to Berkshire shareholders, Buffett mentioned eight companies that he thought Berkshire would own "indefinitely." Mitsui(OTC: MITSF)(OTC: MITSY) was one of them. The Japanese conglomerate operates in a wide range of businesses. Its stock is attractively valued. The sole factor preventing Mitsui from ascending to the upper echelon of the list is its dividend yield of 2.67%, which falls short of the yields offered by the top-rated Buffett stocks.
Best of the bunch
Five high-yield dividend stocks in Berkshire's portfolio are the best of the bunch, in my opinion. They are:
5. Citigroup
Citigroup(NYSE: C) is one the cheapest stocks Buffett owns based on its forward earnings multiple of under 10.5. That's an impressive valuation especially considering the bank stock has jumped around 40% over the last 12 months. Those gains have caused Citigroup's dividend yield to fall, but at 3.35% it's still at a level many income investors will like. I think the company's investments in technology will pay off over the long run.
4. The Coca-Cola Company
Buffett loves The Coca-Cola Company(NYSE: KO) and its soft drinks. Coca-Cola has been in Berkshire's portfolio longer than any other stock. Buffett views Coke as one of the stocks Berkshire will never sell. It's a Dividend King with 62 consecutive dividend increases. Coke's dividend yield currently stands at 3.17%. There's no way I could have left this stock out of the top tier.
3. Marubeni
Marubeni(OTC: MARUF)(OTC: MARUY) is another "forever stock" for Berkshire. Buffett likes the Japanese trading company's diversification and shareholder-friendly policies. That diversification and its dividend yield of 3.29% enabled Marubeni to edge past Coca-Cola in my ranking.
2. Sumitomo
All the good things I just said about Marubeni also apply to Sumitomo(OTC: SSUM.F)(OTC: SSUM.Y). The primary advantage this Japanese stock holds over its peers Marubeni and Mitsui is a higher dividend yield of 3.41%.
1. Chevron
Why does Chevron(NYSE: CVX) take the top spot among Buffett's high-yield dividend stocks? First and foremost is its dividend. Chevron's dividend yield of 4.13% is the second-highest in Berkshire's portfolio. The oil and gas giant has increased its dividend for 37 consecutive years. It's cheap with shares trading at less than 12.4 times forward earnings.
I think Chevron was one of the three stocks Buffett bought in Q4 because he expects oil prices to increase. So do I. I also predict that the company could profit over the long term from its investments in carbon capture technology.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Ally is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Berkshire Hathaway and Chevron. The Motley Fool has positions in and recommends Berkshire Hathaway, Chevron, HP, and Jefferies Financial Group. The Motley Fool recommends Diageo Plc and Kraft Heinz. The Motley Fool has a disclosure policy.
