Even though Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) doesn’t pay a dividend, it’s clear that CEO Warren Buffett is a big fan of companies that cut investors in on their profits through regularly delivered cash checks. In fact, each of the 10 largest stock holdings in Berkshire’s portfolio pays a reliable dividend.
Even more striking, while Buffett has argued that most investors should limit their exposure to risk and volatility through diversification, the composition of his company’s stock portfolio is heavily concentrated around just a handful of dividend-paying stocks. In fact, just two of these companies account for roughly 37% of Berkshire’s stock holdings. Read on as two Motley Fool contributors offer up a look at Buffett’s two biggest dividend-paying bets — Apple (NASDAQ: AAPL) and American Express (NYSE: AXP).
Keith Noonan (Apple): Paying a dividend is typically a good sign that a company is generating reliable profits, and Apple has frequently ranked as the world’s most profitable business over the last decade. But with a dividend yield of roughly 0.5%, Apple stock sports a relatively small dividend at today’s prices. On the other hand, the stock still generates a substantial amount of dividend income for Berkshire Hathaway.
As of its last public disclosure, Berkshire owned 300 million shares of Apple — accounting for roughly 23% of its total stock portfolio. With the stock paying an annual dividend of $1 per share, Berkshire’s current position in the company will generate $300 million in dividend income over the next year, even if the tech giant doesn’t boost its payout.
And given that Apple has increased its dividend each year since initiating a payout in 2012, there’s a good chance that it will once again hike its dividend this year. But it is possible that the dividends Berkshire receives from Apple will wind up being less than $300 million.
With a market cap of approximately $3.36 trillion, as of this writing, Apple is the world’s largest company. Last year, it also ranked as the world’s second-most profitable company — trailing behind only oil giant Saudi Aramco. But despite another year of strong profits, Berkshire has been significantly reducing the size of its Apple holdings.
Berkshire has sold more than 615.5 million shares of Apple stock since the beginning of 2024, reducing its position in the company by roughly 67%. The fact that Apple still remains the investment conglomerate’s largest holding suggests that Buffett and his advisors still think that Apple is a great company, but Berkshire appears to have some valuation concerns for the tech giant and the broader market.
So while Berkshire’s overall stock portfolio is still relatively concentrated in terms of its holdings, some recent sales of Apple and other long-standing portfolio mainstays have meant that it has become more diversified. The stock sales have also helped the company build up a record cash and short-term bond position of more than $334 billion, so it has plenty of resources as Buffett and his advisors see opportunities.
Jennifer Saibil (American Express): American Express is one of Buffett’s longest-held and favorite stocks. He has praised it many times in many ways, from extolling its global brand that “travels” to its reliable dividend. Representing roughly 14% of Berkshire’s stock portfolio, it’s the investment conglomerate’s second-biggest holding.
Buffett owns all three of the big credit card network stocks, which include Visa and Mastercard, but American Express holds a special spot in the Berkshire Hathaway portfolio, and it stands out from the other networks in several ways.
Amex charges annual fees to users of most of its cards, and 70% of new card acquisitions in 2024 were for fee-based products. The fee model creates a cycle of loyalty as well as a recurring revenue stream, with a high rate of renewals. Fee income increased 19% year over year in the 2024 fourth quarter, and most of it goes straight to the bottom line. Revenue was up 10% year over year in the 2024 fourth quarter, and earnings per share increased 16%.
It targets an affluent clientele who can pay those fees and appreciates American Express’ exclusive rewards program. These customers also tend to spend more than the average consumer, especially on travel and entertainment. This group is resilient in the face of economic challenges like inflation, fueling growth for American Express even under adverse conditions.
Another way American Express is differentiated is in its closed-loop model. Instead of partnering with issuing banks, like most of its competitors, it acts as its own bank. But more than providing the credit for its cards, the bank segment provides varied revenue streams from all of its banking products and brings a lot of cash into the organization. Net interest income increased 18% year over year in 2024 to $4 billion.
American Express has extended efforts to court younger card members, and this crucial step is what will lead it into the future. Millennial and Gen Z customers are already its biggest spenders by age group, and they’ll grow along with the company, driving higher growth.
Finally, American Express pays a growing dividend that yields 1% at the current price, providing passive income for long-term investors.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $284,402!*
-
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $41,312!*
-
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $503,617!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Continue »
*Stock Advisor returns as of March 24, 2025
American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express and Apple. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool has a disclosure policy.
37% of Warren Buffett’s $290 Billion Berkshire Hathaway Portfolio Is Invested in These 2 S&P 500 Dividend Stocks was originally published by The Motley Fool
