The famed Oracle of Omaha, Warren Buffett, and his Berkshire Hathaway (BRK.A) are world-known for making major value investments that generate significant income and capital gains. In the just-released 13F filing with the SEC, Buffett's Berkshire Hathaway reported some changes in its investment portfolio, worth $75.3 billion at the end of first quarter 2012. The company disclosed brand new positions in General Motors (GM) and Viacom (VIAB) and boosted its stakes in 13 more companies. Here are four dividend-paying stocks that continue to fare well with Warren Buffett.
The Bank of New York Mellon Corporation (BK) is a $25.5 billion global financial services corporation, also known as the oldest banking company in the U.S. and the world's largest deposit institution. The company has $325.3 billion in assets, which makes it the 11th largest banking institution in the United States.
This dividend-paying company has a dividend yield of 2.4%, which is 70 basis points below the average yield on its industry as a whole and 40 basis points above the yield on the S&P500. The company's payout ratio stands at a low 24%. The bank's main competitors, namely Barclays (BCS), State Street Corporation (STT), and BlackRock (BLK), yield 2.06%, 2.18%, and 3.29%, respectively. The company boasts attractive valuation, with a current P/E of 10.1 and a forward P/E of 9.4, below the industry's averages of 11.4 and 10.1.
In the first quarter 2012, Berkshire Hathaway increased its stake in The Bank of New York Mellon by 3,813,551 shares at an average price of $22 a share. At the end of the quarter, including the newly added shares, the company reported owning a total of 5,806,610 shares, worth $122.7 million at current stock prices. The stock of The Bank of New York Mellon is currently trading at $21.13 a share, below Berkshire Hathaway's acquisition cost basis.
Wal-Mart (WMT) is a multinational retail operator of discount department store and warehouse store chains in the United States and internationally. This $203 billion retail giant has total annual revenues of $447 billion and sits on $6.6 billion in cash. The dividend aristocrat has a dividend yield of 2.70%, which is 60 basis points above the average yield on its peers and 70 basis points above the yield on the S&P500. The company's payout ratio is at a low 32%. The retailer's main rivals, including Target (TGT) and Costco (COST), yield 2.20% and 1.10%, respectively. The company has appealing valuation, with a current P/E of 13.1 and a forward P/E of 12.2, below the corresponding industry ratios of 15.7 and 13.5.
In the first quarter of 2012, Berkshire Hathaway bought 7,671,000 shares of Wal-Mart at an average price of $61 a share. At the end of the quarter, the company reported owning some 26,763,842 shares of Wal-Mart, which translates into a $1.59 billion stake. Shares of Wal-Mart are currently trading at $59.35, below Berkshire Hathaway's average acquisition price per share in the first quarter.
Wells Fargo & Company (WFC) is a $170 billion multinational financial services company engaged in banking, insurance, investments, mortgage banking, and other banking operations. The company has $1.33 trillion in assets and is the 4th largest banking institution in the United States. This financial giant sits on $363 billion in cash and pays a quarterly dividend, with a dividend yield of 2.60% and the dividend payout ratio of only 20%.
Wells Fargo's main rivals, including JP Morgan (JPM), Citibank (C), and Bank of America (BAC), have dividend yields of 3.15%, 0.10%, and 0.50%, respectively. The bank has attractive valuation, boasting current and forward P/Es of 11.2 and 9.6, below the industry's averages of 11.4 and 10.1.
In the first quarter of 2012, Berkshire Hathaway added 10,631,300 shares of Wells Fargo at an average price of $31 a share. At the end of the same quarter, the company reported a stake of 162,500,228 shares in Wells Fargo. This stake equals some $5.24 billion at current share prices. The company's stock is currently changing hands at $32.24 a share, slightly above Berkshire Hathaway's average acquisition cost per share in the first quarter.
International Business Machines (IBM) is a multinational technology company that provides computers, software, servers, and consulting services. This IT giant has a market capitalization of $231 billion and a stockpile of cash totaling $11.9 billion. The company pays an annual dividend with a current yield of 1.70%, which is 20 basis points above the industry's average, but 30 basis points below the yield on the S&P500.
The company's peers, namely Hewlett Packard (HPQ) and Microsoft (MSFT), are currently yielding 2.15% and 2.60%, respectively. Dell (DELL) does not pay any dividends. IBM has a low dividend payout ratio of 22%, slightly above the industry's average of 17%. The company is attractive on valuation, with a current P/E of 14.4 and a forward P/E of 13.1, below the industry's ratios of 19.5 and 15.3.
In the first quarter 2012, Berkshire Hathaway acquired 489,769 shares of IBM at an average price of $195 a share. At the end of the same quarter, the company reported a total stake of 64,395,700 shares, which translates into a $97.48 million position in IBM. IBM's stock is currently trading at $199.04 per share, 2.07% above Berkshire Hathaway's average acquisition cost per share in the first quarter.