Warren Buffett's Top 3 Dividend Stocks: Are They Buys Now? – The Motley Fool

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Warren Buffett doesn’t buy stocks for their dividends. However, the legendary investor hasn’t complained about receiving dividend payments to boost Berkshire Hathaway‘s (BRK.A 0.01%) (BRK.B 0.13%) coffers, either.
Berkshire makes a lot of money from dividends. Here are Buffett’s top three dividend stocks (based on their weights in Berkshire’s portfolio), and whether or not they’re good picks to buy now.
Apple (AAPL 0.59%) ranks by far as the biggest holding for Berkshire, making up 42.7% of the conglomerate’s portfolio. The tech giant doesn’t offer a high dividend yield. However, the sheer size of Berkshire’s stake — over 915.2 million shares, including those owned by its New England Asset Management (NEAM) subsidiary — means that Apple generates a significant amount of dividend income for Buffett’s company.
In his latest letter to Berkshire Hathaway shareholders, Buffett revealed that Apple paid $785 million in dividends to Berkshire in 2021. The total should be even greater in 2022, since Berkshire bought additional shares of Apple earlier this year.
Unfortunately, those dividend payments won’t help all that much in cushioning the negative impact of Apple’s dismal stock performance so far in 2022. The company’s share price has tumbled nearly 20% year to date, primarily as the result of economic concerns.
In terms of shares owned, Bank of America (BAC 0.32%) is Buffett’s top dividend stock. Berkshire Hathaway holds over 1 billion shares of the big bank, including NEAM’s position. Bank of America makes up 10% of Berkshire’s total portfolio, making it the company’s second-largest holding after Apple.
Bank of America’s dividend yield of nearly 2.8% is attractive. The company also should have no problems keeping the dividends flowing with its low payout ratio of 26%. Berkshire should easily receive in the ballpark of $900 million in dividend payments from BofA this year.
Like Apple, though, Bank of America hasn’t been a winner in 2022 when it comes to stock performance. Its shares have plunged more than 30% as investors worry about the potential of a recession.
Buffett has led Berkshire to significantly increase its position in Chevron (CVX -0.89%) this year. Berkshire’s NEAM subsidiary has also piled into the energy stock. Overall, Chevron ranks as Berkshire’s third-largest holding, making up 7.4% of its total portfolio.
Chevron is actually Buffett’s top dividend stock, based on dividend income generated for Berkshire. The huge oil and gas company should pay out nearly $930 million in dividends to Berkshire this year.
Buffett also has more to like about Chevron than its 3.9% dividend yield. The stock has delivered a year-to-date gain of over 20%, placing Chevron among the best performers of 2022 so far in Berkshire’s portfolio. 
Just because a great investor like Warren Buffett likes a stock doesn’t necessarily mean that it’s a good pick for all investors. Are Apple, Bank of America, and Chevron stocks worthy of consideration right now?
Apple could see its sales decline if the economy enters a recession. However, the company’s prospects should remain strong over the long term. My view is that Apple is a good stock to buy on the dip and hold over the next decade and beyond.
Bank of America will likely benefit from rising interest rates. However, a weak economy could cause the number of new loans to decrease and defaults to increase. But with the company’s shares trading below 8.5 times expected earnings, I think that Bank of America is a smart pick.
Chevron’s fortunes hinge, in large part, on oil and gas prices. The company is ramping up efforts to provide more energy to Europe. That could especially pay off with the recent damage to the Nord Stream pipelines that deliver natural gas from Russia.
Global-market dynamics will continue to work in Chevron’s favor, in my opinion. The stock remains a great alternative, especially for income investors.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Apple, Bank of America, and Berkshire Hathaway (B shares). The Motley Fool has positions in and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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