3 Bill Gates Stocks For Income

Following the investment decisions of successful investors is one sure-fire way of hitting the stock market jackpot over time. And they don’t come much more successful than the famed head of Microsoft (MSFT), Bill Gates. So what dividend stocks has the former Microsoft chief got in his portfolio – and will they make a suitable fit for your own income investing goals?

Gates Can Expect $11.5 Million From UPS

Bill Gates obviously likes to hedge his bets; not only does the Gates Foundation own a fairly large stake in UPS (UPS) – 2.8 million shares, worth $583 million, making up 2.44% of the Bill & Melinda Gates Foundation Trust Holdings portfolio – but he also holds a large chunk of Fedex (FDX) stock too – 1.49 million shares, adding up to a slightly lower 1.87% of the Foundation’s securities.

It’s not surprising that UPS is Gates’ 8th largest holding and a dividend stalwart for the Foundation, since the shipping and supply chain company paid out an uninterrupted dividend to its shareholders since 1969.

And while it’s not a Dividend Aristocrat by virtue of having held its dividend static for a couple of those years, the business is a reliable payer – UPS continued its dividend throughout the pandemic crisis, something that not every company either managed or wanted to do.

UPS’s dividend doesn’t have a large yield at just 2.26%, but it keeps its dividend payout ratio reasonable at under 50%. However, its yield was much higher not so long ago, and you only have to go back to the Second Quarter of 2020 to find a yield almost twice as high as it is today, at a little over 4%.

Indeed, UPS’s stock price appreciation during 2021 really undersold its dividend metrics throughout that time; United Parcel Service was trading at $217 in early May, compared to its relative lows in the first half of 2020 where it dropped under $90 at one point.

At a forward dividend rate of $4.08, Bill Gates can expect to receive around $11.5 million in income from UPS this year alone.

Investors seeking to follow in his footsteps might like to wait awhile to find a better entry point for this stock. UPS has been falling recently, losing nearly 10% this last month. But make no mistake – for a steady, reliable dividend share, UPS is one of the best.

Crown Castle International Corp. (REIT): 3% Yield

Crown Castle (CCI) is a real estate investment trust that owns and operates a portfolio of cell towers with over 12,000 route miles of fiber.

The company generates revenues by leasing its Smart Cells and Fiber Solutions to telecom carriers under long-term agreements, after which those carriers sign up individual customers that use the towers’ communication grid.

CCI can sign up more than one carrier to any particular tower node, meaning that revenues scale rapidly with multiple carriers.

As there are only three other cell tower REITs in the United States, Crown Castle International sits in a privileged position with little competitive pressure from rivals.

The company has recently diversified its business by expanding into the small cells and fiber market too, which is a major component of the technology behind the nascent 5G broadband cellular network roll-out.

Shares in Crown Castle increased over 9% this year, although they’ve dropped slightly since July, from all-time highs of $204 to where then stand today at $172.

CCI’s current dividend yield of 3.05% will please investors, as will its multi-year history of continued dividend payment increases.

Indeed, Crown Castle International only began rewarding shareholders with a quarterly dividend in 2014 – after it first converted to a REIT – in which time investors have seen its annual payout increase from $2.92 to $4.93 in 2020.

The company’s FFO payout ratio is modest for a typical REIT at 79%, suggesting the business will have no problem meeting its dividend obligations in the years to come. And with his 5.09 million shares of CCI, Bill Gates can look forward to an annual dividend return of more than $27 million.

The future’s looking good for Crown Castle too: with the wider deployment of 5G technology being a major growth trend for the business, the firm expects a 12% AFFO per share growth for the full year 2021, and predicts its diverse portfolio of towers and small cells will ensure its dividend will continue growing by 7-8% per annum. 

There’s also a big opportunity for CCI overseas since the market for independent tower providers is woefully underserved.

Territories such as Western Europe and Asia Pacific offer huge growth possibilities in this respect, and a recent article by Cohen & Steers highlighted the fact that private infrastructure operators also enjoy higher margins on their business too – giving just one more reason to be optimistic about CCI’s chances going forward.

Source: Unplash

Almost 10% Of Gates Holdings In Caterpillar Inc.

If UPS just misses out on being a Dividend Aristocrat, then Caterpillar (CAT) certainly goes some way in making up for it on our list.

The construction-equipment manufacturer is Bill Gates’ third biggest stock pick in his portfolio, and the largest of the three we’re looking at here. Gates’ Foundation owns $2.21 billion worth of Caterpillar, which account for a total of 9.26% of all his holdings.

CAT is another easy pick for income investors; the company consistently raised its dividend for 27 consecutive years, and, with a yield of 2.31% and a 3-year dividend growth of 33%, the firm is returning value to shareholders at a rapid rate.

Like many companies this year, Caterpillar’s stock price hit record highs earlier in 2021, but has since retraced slightly.

The company’s business is in great shape, having report a revenue and EPS beat in July of $12.9 billion and $2.60 respectively.

Dividend investors also received additional good news, with the firm announcing improved operating profit margins up from 7.8% to 13.9%, and an enterprise cash position at the end of the Second Quarter of $10.8 billion.

To throw some cold water on CAT’s dividend paying credentials, the company does currently sport a fairly high payout ratio of nearly 68%. But as mentioned before, its cash reserves are improving and there’s nothing to imply that its status as a dividend aristocrat is in peril.

Furthermore, the stock is actually pretty cheap right now; its Price-to-Sales multiple of 2.28 makes the firm a buy simply on this basis. In fact, Caterpillar’s share price is up 27% over the previous 12 months, but down 17% the last 6 – perhaps making today the best day to buy this quality business.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.