Quick, can you name a famous investor who earns billions of dollars in dividends every year from publicly traded companies? If you said Warren Buffett, you identified a star stock picker at the top of the list.
Buffett and his investment vehicle Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) are huge on dividend-paying stocks. So much so that the company is expected to withdraw nearly $ 4 billion in such payments this year.
With that in mind, here’s a look at two particularly attractive Buffett dividend stocks that can also inject a significant stream of regular income into your portfolio: Verizon Communications (NYSE: VZ) and STORE Capital (NYSE: STOR).
Until a few years ago, the former Buffett mostly avoided tech stocks. That changed with the arrival of Ted Weschler and Todd Combs as investment managers at Berkshire Hathaway. Since then, the two relatively young men have been instrumental in taking Berkshire’s stake in Apple (NASDAQ: AAPL). Combs was likely the decision maker in his purchase of a cloud-based data storage and analytics service provider Snowflake (NYSE: SNOW).
It’s likely that one or both of them were also the triggers for the company’s biggest investment in the telecoms industry today, with rock-solid incumbent Verizon which also happens to be a dividend payer. reliable.
Operating in a business with constant and significant cash flow thanks to its nearly 95 million wireless retail connections, the business has a lot of money for a high dividend.
Paying for one has been a long-standing habit of Verizon. She and her predecessors have disbursed quarterly since the mid-1980s. Over the past 10 years, that amount has grown from just under $ 0.49 per share to the current level of nearly $ 0.63. . This gives a hearty dividend yield of 4.5% on the most recent closing price.
Meanwhile, Verizon is confidently building its 5G network, which, when fully expanded, is expected to deliver blazingly fast internet connection speeds to its customers. Yes, it’s an expensive business, but with nearly $ 130 billion in revenue and free cash flow approaching $ 24 billion last year, the company has more than enough for this dividend that will appeal to shareholders. .
Of the roughly 50 stocks in Berkshire Hathaway’s publicly traded portfolio, there is only one real estate investment trust (REIT): STORE Capital.
The company is focusing on the retail sector, which has been hit hard by the pandemic. But the damage was contained by the REIT’s exposure limitation strategy: none of its tenants contributes more than 3% of the company’s total rental income.
That, added to an aggressive expansion program that has allowed the company to expand its portfolio to more than 2,700 properties across the United States, has kept it on track for growth. The growth in rental income was slowed last year due to the pandemic, but still increased (by 3% compared to 2019).
If the company’s recently released second-quarter figures are any indication, better times are ahead: rental income grew 15% year-over-year. Meanwhile, STORE Capital’s adjusted operating funds (AFFO, the most important profitable item for REITs) jumped 25% during that one-year period.
For REITs, since they are required to pay out substantially all of their profits as shareholder compensation, higher profitability equals higher dividend. As STORE Capital continues to develop its business, its earnings also increase. Since declaring its first dividend after its IPO in 2014, the REIT’s payout has swelled from just over $ 0.11 per share to $ 0.36 currently. At the current price of the share, this is a generous 4.1%.
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