Take anyone's prediction about the future with a grain of salt. Better yet, make that an entire shaker of salt. No one knows for sure what will happen.
Still, there can sometimes be information that allows us to envision outcomes that are somewhat likely based on what's known right now. And it can be fun to attempt to peer into the proverbial crystal ball.
With that in mind, I've been looking at Warren Buffett's Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) portfolio to try to identify his most likely winners in the new year. I predict that these will be Buffett's three top dividend stocks in 2024.
1. D.R. Horton
Let me acknowledge right out of the gate that D.R. Horton(NYSE: DHI) doesn't offer a fantastic dividend. No one is going to jump up and down about the company's dividend yield of around 0.8%. But I think that D.R. Horton's growth prospects in 2024 could be worth getting excited about.
Buffett first bought D.R. Horton shares last year. The stock has already made Berkshire plenty of money after skyrocketing more than 60% over the last 12 months. Even after this impressive gain, though, D.R. Horton remains attractively valued with a forward price-to-earnings multiple of only 11.3.
I picked D.R. Horton as a top Buffett dividend stock for 2024 for one primary reason: There's an ongoing housing shortage in the United States. D.R. Horton ranks as the largest homebuilder in the country based on volume, a distinction it's held for more than 20 years. It's arguably in as good of a position to profit from addressing the housing shortage as any company around.
The Federal Reserve signaling multiple interest rate cuts this year is icing on the cake, in my view. Lower interest rates would likely boost the sales of new homes. Again, D.R. Horton stands to benefit.
2. Mitsui
Income investors will find more to like with another Buffett stock. Mitsui's (OTC: MITSF)(OTC: MITSY) dividend yield currently stands at a hair under 3%. The stock also should have plenty of room for growth, in my view.
Berkshire has owned Mitsui since August 2020 and added more shares last year. It's one of five Japanese trading houses that Buffett and his late business partner Charlie Munger saw as great investment opportunities. They were right. Mitsui stock jumped nearly 28% in 2023 and has more than doubled since Berkshire opened its position.
I suspect that economic conditions will work in Mitsui's favor this year. The global economy is heavily influenced by how the U.S. economy fares. With inflation coming down, unemployment levels remaining low, and the possibility (or perhaps even probability) of lower interest rates, Mitsui's near-term prospects look promising.
Of course, we could say the same thing about any of the other four Japanese stocks that Buffett owns. I chose Mitsui for this list, though, because it's virtually tied with Itochu as Berkshire's biggest position among the group but has a more attractive valuation.
3. Occidental Petroleum
Occidental Petroleum(NYSE: OXY) is another Buffett stock that offers a relatively puny dividend. Its yield of 1.2% isn't horrible, but it's well below the S&P 500 average. However, Occidental is clearly one of Buffett's favorite stocks right now. I think his confidence is well-placed.
Granted, Occidental hasn't performed well over the last 12 months. Some of that can be chalked up to investors shifting to high-growth stocks. Uncertainty about the economy also likely weighed on Occidental.
But, as already mentioned, the economic outlook for 2024 could be better than previously expected. Occidental's valuation -- shares trade at less than 11.6 times forward earnings -- could cause more investors to take a second look. Also, oil price forecasts for this year reflect moderate increases from the current price levels.
I also anticipate that Berkshire will continue to scoop up more shares, potentially boosting the stock. The conglomerate secured regulatory approval to acquire up to 50% of Occidental. Its stake currently stands at 27.8%.
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Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
