Warren Buffett needs no introduction.
Over the years, the Oracle of Omaha has consistently emphasized the importance of owning businesses with strong, sustainable competitive advantages that can generate reliable streams of revenue and profits.
What he doesn’t say as often is his love for dividends.
To be clear, his company Berkshire Hathaway (NYSE: BRK.B) does not pay a dividend.
But while Buffett may not like paying dividends, he certainly does not mind receiving them.
Sustainable streams of income
In recent years, Berkshire Hathaway has increased its holdings in dividend-paying stocks.
Today, the company’s top five holdings by value are all dividend-paying stocks, namely Apple (NASDAQ: AAPL), Bank of America (NYSE: BAC), Chevron (NYSE: CVX), Coca-Cola (NYSE: KO), American Express (NYSE: AXP).
From the quintet above alone, his company receives a staggering amount of income.
Apple, for instance, has paid US$832 million in dividends to Berkshire Hathaway over the past 12 months.
Not to be outdone, Bank of America and Chevron have also sent cheques worth US$888 million and US$964 million to Buffett’s desk over the same period.
Coca-Cola and American Express, two of his older holdings, are responsible for US$704 million and $302 million, respectively, in dividends.
When you tally up all the figures, the top five stock positions provide an eye-popping US$3.7 billion in dividends to the Oracle of Omaha every year.
If success is measured by dividend income received, there is little doubt that Buffett has done well for himself and his shareholders.
Why Buffett is still invested in dividend stocks for 2023
For the Oracle of Omaha, dividends are an attractive way to generate income from his investments without having to sell the underlying stocks.
At the same time, dividends can also provide a measure of stability for a portfolio.
Unlike the price of a stock, which can be volatile and subject to market fluctuations, dividends are generally paid out on a regular schedule.
This can provide a predictable source of income for investors and can help smooth out the ups and downs of the stock market.
Speaking of predictability, companies that pay dividends are often mature, well-established businesses with strong financials.
These businesses are often more resilient under challenging economic environments. In the event of a downturn, they can weather the storm and continue paying dividends to shareholders.
The above are just some of the reasons why dividend-paying stocks remain a viable option for investors looking to generate income.
A confession for a bright future
At this point, we have a confession to make.
More than half of the article above was written by ChatGPT, an artificial intelligence (AI) powered conversational chatbot that is capable of accomplishing various tasks, including writing.
Impressed? Well, ChatGPT can write poems too:
“In the world of finance, a legend stands tall,
His name is Warren Buffett, the Oracle of Omaha.
With a keen eye for value, he’s made a fortune,
And a reputation for wisdom that’s second to none.
One secret to his success is his love of dividends,
A reliable stream of income that never ends.
He looks for companies with strong, sustainable moats,
That can generate profits and share them with their shareholders in votes.
Apple, Bank of America, Coca-Cola too,
These are just a few of the stocks that he’s accrued.
In a world of uncertainty, dividends provide a steady hand,
A way to generate income without having to sell a single gram.
So if you want to invest like Warren Buffett does,
Consider dividend-paying stocks and watch your portfolio rise above.
For with a love of dividends, you’ll never go wrong,
And you too can join the ranks of investing’s elite, where you belong.”
New developments such as ChatGPT are a timely reminder that amazing, new innovations are still happening despite the uncertainty in the economic environment as we head into 2023.
You just need to keep your eyes open for the next major growth trends.
Get Smart: Being an optimist
There are more pessimists today than there are optimists.
That’s why we prefer to look on the bright side — in our eyes, the world does not need more pessimists today.
Staying in touch with the latest developments is what we do across our portfolios at The Smart Investor.
Not sure where to park your money in 2023? Give dividend stocks a try. You don’t need a lot of capital to start a stream of passive income. Our latest guide will show you how to invest and where to find the juicy dividends in SGX. Click here to download the report for FREE.
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Disclosure: Chin Hui Leong owns shares of Apple and Berkshire Hathaway.