Warren Buffett’s dividend income alone may ensure he need not buy any more stocks ever

Warren Buffett’s Berkshire Hathaway’s dividend income from top six companies alone in a year is estimated at roughly about $2,860 million. Warren Buffett has a total of 47 companies in his portfolio, majority of which are actually dividend paying.

Warren Buffett, chairman and CEO of Berkshire Hathaway, takes his seat to speak at the Fortune's Most Powerful Women's Summit in Washington October 13, 2015. REUTERS/Kevin Lamarque

Warren Buffett’s love for dividend paying stocks needs no elaboration. In the latest quarter alone (April-June), Berkshire Hathaway’s portfolio will be richer by an estimated $715 million due to dividends, and that too, from just six companies. Extrapolate that to a year, and it’s roughly $2,860 million. That’s if none of the companies increase their payout and Berkshire maintains its current holdings, making it a very conservative estimate. Further, this is just six companies out of the total 47 as on 30th June 2017, majority of which are actually dividend yielding.

Kraft Heinz, the single largest company in Berkshire Hathaway’s portfolio as on 30 June 2017, would yield Warren Buffett $200 million in the latest quarter from dividends alone, if the holdings remained unchanged as on the record date of August 18, 2017. Kraft Heinz formed more than 14% of the portfolio as on 30 June 2017. Similarly, Wells Fargo, the third largest bank in the United States, would yield a massive $177 million in dividends this quarter, holdings remaining unchanged. Warren Buffett’s Berkshire is now the largest shareholder in the second- and third-largest US banks, with stakes of roughly 6.6 percent in Bank of America and 10 percent in Wells Fargo & Co, according to Reuters.

The other behemoths in the portfolio include The Coca-Cola Company, International Business Machine Corporation (IBM), Phillips 66 and American Express which are estimated to yield $334 million in dividends for the last quarter for Berkshire Hathaway.

Warren Buffett loves Coke not merely an an investment, but also as a cold beverage. At Berkshire Hathaway’s annual meeting last year, Warren Buffett joked it was likely that his body is composed of one-quarter Coke. Further, he quipped that he consumes 750 calories a day from Coca-Cola, which implies that he drinks on average five cans of Coke a day.

As an investment, Coca-Cola is a longtime favorite scrip of the Oracle of Omaha. Coca-Cola one of the only two major stock positions Berkshire has held for more than 25 years (the other is Wells Fargo). It has consistently been among Berkshire Hathaway’s top holdings. In fact, 25 years ago, Coca-Cola was the largest stock holding in Berkshire’s portfolio. Warren Buffett earned a whopping $148 million from Coke alone.

It is intriguing to note that Berkshire Hathaway earns more than 80% of its total dividends from these six companies. Put differently, more than 40 companies contribute to less than 20% of the dividends earned in the quarter for Berkshire Hathaway. This is when a majority of companies in Berkshire Hathaway’s portfolio are actually dividend paying companies.

Interestingly, while Warren Buffett loves to reap dividends, he loathes paying any. In 2012, the iconic investor explained, “A profitable company can allocate its earnings in various ways (which are not mutually exclusive). A company’s management should first examine reinvestment possibilities offered by its current business — projects to become more efficient, expand territorially, extend and improve product lines or to otherwise widen the economic moat separating the company from its competitors.”

However, the burgeoning $90 billion cash pile has led the legendary investor to reconsider Berkshire’s strategy of not paying dividends. Earlier this year, he said, “When the time comes — and it could come reasonably soon, even while I’m around — and we really don’t think we can get the money out in a reasonable period of time into things we like, we have to reexamine, then, what we do with those funds. And at that time that we make a decision, it might include both, but it could be repurchases, it could be dividends.”

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