Sitting behind the likes of Elon Musk, Jeff Bezos, Bernard Arnault, and Bill Gates, Warren Buffett is the fifth richest person in the world, with a net worth of around $126 billion. The legendary investor has built his wealth through strategic investment, which has included investing in fairly-priced, high-dividend paying blue-chip companies.
Through his holding company, Berkshire Hathaway, Buffett’s largest investments can be found in Apple, Bank of America, Coca-Cola, American Express, and Kraft Heinz.
In addition, three other big dividend stocks Buffett currently holds are Verizon Communications, Chevron, and the U.S. Bancorp. Here, we will analyze these three big dividend stocks to help you determine if they should be added to your investment portfolio too.
3 Big Dividend Stocks Buffett Owns
Warren Buffett has invested in numerous dividend aristocrats over his long investing career. Over the last several years, three stocks that have provided Buffett’s company, Berkshire Hathaway, with some nice dividend yields are:
- Verizon Communications,
- Chevron, and the
- U.S. Bancorp.
Should these three dividend stocks be added to your investment portfolio too?
1. Verizon
Founded in 1983, Verizon Communications is an American multinational telecommunications conglomerate and a corporate component of the Dow Jones Industrial.
The company is headquartered in New York City. At the end of Q4 2021, Verizon Communications reported revenue of $133.6 billion, an operating income of $32.5 billion, and a net income of $22.6 billion.
Essentially, Verizon Communications is divided into two main operating segments, the Verizon Consumer Group and the Verizon Business Group.
The Verizon Consumer Group segment is centered around consumer-focused wireless and wireline communications services and products.
Verizon Communications is also the parent company of the wireless carrier company Verizon which is the largest wireless carrier in the United States.
In comparison, the Verizon Business Group segment is centered around providing wireless and wireline communications and services, corporate networking solutions, and security and managed network services.
Verizon Communications began trading on the New York Stock Exchange in 2000 under the stock ticker VZ. The stock began trading at an initial public offering or IPO price of around $45 per share. As of April 2022, VZ stock is trading at around $54 per share.
The company’s market cap is currently around $228 billion. In addition, the stock’s 52-week low is $49.69, and its 52-week high is $59.85. VZ stock has long proven to be a top dividend-paying stock, routinely providing a 5% annual return to shareholders.
The company has been able to continually pay out a steady dividend to shareholders. One factor that has made Verizon Communications a top dividend stock is that the company is among a small group of companies that controls the telecommunications industry across the United States. In addition, Verizon Communications has strong financials that supports its steady dividend payments.
A discounted cash flow analysis reveals fair market value of $71.70 per share for Verizon, representing 32% upside from current levels at the time of writing.
2. Chevron
Founded in 1879, the Chevron Corporation is an American multinational corporation headquartered in San Ramon, California.
Chevron is involved in every aspect of the oil and natural gas industries and is the second-largest oil company in the United States, sitting right behind ExxonMobil.
Like all oil and natural gas companies, Chevron is currently benefiting from the rising energy prices. However, success is nothing new for the Chevron company.
Chevron has a long history of success, as well as a long history of paying top dividend prices to its shareholders. The company has raised its dividend annually for 36 consecutive years.
The company ended with a strong Q4 2021 financially, with CEO Mike Wirth describing 2021 as “one of our most successful years ever.” In addition, the future of the company is looking bright, and Chevron has recently raised its free cash flow projections through 2026.
Chevron began trading on the New York Stock Exchange in 1985 under the stock ticker CVX. The stock began trading at an IPO price of around $8 per share.
The company’s market cap is currently around $338 billion. In addition, the stock’s 52-week low is $92.86, and its 52-week high is $174.76. CVX has routinely been able to provide around a 3% annual return to its shareholders.
According to our research, Chevron has an intrinsic price per share of $192.09, suggesting almost 12% upside opportunity in share price in addition to an attractive dividend.
3. U.S. Bancorp
Founded in 1868, the U.S. Bancorp company is a bank holding company headquartered in Minneapolis, Minnesota.
The U.S. Bancorp is the parent company of the U.S. Bank National Association and is the fifth-largest banking institution in the United States.
The company has long proven to be a dividend aristocrat with a balance sheet positioned to withstand almost any economic downturn.
The company began trading on the New York Stock Exchange in 1984 at an IPO price of around $1.50 per share.
The company’s market cap is currently around $75 billion. Its 52-week low is $49.78, and its 52-week high is $63.57. USB has routinely been able to provide around a 3.5% annual return to its shareholders, making the stock a strong pick for long-term investors.
From a valuation perspective, U.S. Bancorp has a fair market value of $63.01 per share, suggesting USB share price could rise by almost 20% from current levels.
Each of the three dividend-paying stocks outlined above would make nice additions to any investment portfolio. With Verizon Communications providing shareholders with a roughly 5% annual dividend yield, Chevron paying shareholders a roughly 3% annual dividend yield, and U.S. Bancorp offering shareholders a roughly 3.5% annual dividend yield, a blend of all three offers both attractive yield and diversification across sectors to mitigate stock specific risk.
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