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3 dividend aristocrats from Warren Buffett's portfolio that you can now buy at a discount

Jamie Cameron
12. 10. 2022
4 min read

Equity markets, under pressure from the hawkish Fed, fell significantly in September, offering a number of opportunities. And where else to get tips on quality stocks that can make a bundle in a few years than from Berkshire Hathaway CEO and legendary investor Warren Buffett. Here are 3 dividend titles from his portfolio that are now selling cheaper.

Warren Buffett

Chevron: One of Buffett's favorites in recent months

Buffett clearly likes Chevron $CVX-0.9%. Berkshire has significantly increased its stake in the oil and gas giant this year. Warren Buffett's position in Chevron is currently worth $24.5 billion. That's 8.17% of their entire stock portfolio (the 3rd largest stake).

Five-year price chart of CVX stock

These aggressive purchases of significant stakes in major oil and gas companies are indicative of Buffett's view on the sector and make sense given the lagging sentiment and positioning in this bull market in oil.

Buffett is not known for cyclical investments. He has repeatedly stated over time that he prefers investments that have stable, predictable and growing cash flows - the opposite of the peaks and troughs of cyclical investments. Still, Buffett has owned oil and gas company stocks on and off, and has done well - especially in periods of inflation like the current one.

Chevron is a dividend aristocrat that has a 35+ year history of annual dividend increases. That's an incredible track record given the ups and downs the energy sector has experienced in that time. Clearly, it's important for the company to return value to investors through a growing dividend. The current dividend yield is approximately 3.95%.

Bank of America: In a rising rate environment

Warren Buffett and his Berkshire Hathaway $BRK-B-0.9% company have had a complicated relationship with bank stocks since the pandemic. They sold many of their bank holdings early in the pandemic because they were concerned about their overall exposure to the sector. In the first quarter of 2022, Buffett and Berkshire started buying bank stocks again. One bank stock, however, has been a stalwart in Berkshire's portfolio all along: Bank of America $BAC-1.2%.

A five-year price chart of BAC stock

Warren Buffett's position in Bank of America is currently worth $31.4 billion. That's 10.47% of their entire stock portfolio (2nd largest stake). The investor owns 12.75% of Bank Of America stock. Bank Of America's first trade was made in Q2 2007.

It is true that the economic outlook is becoming more challenging and that a serious recession in the near future seems increasingly inevitable. Like all banks, Bank of America has seen its investment banking business hurt by a lack of initial public offerings of stock and other issues. The mortgage banking industry has also been affected due to rising rates, and a severe recession could reduce loan growth and consumer spending. Although the business environment is increasingly difficult, banks have not experienced the same environment of rising rates as before the Great Recession. Therefore, it is wrong to expect Bank of America to finish the year strongly.

Bank of America's dividend yield at the current share price of $32.38 is approximately 2.83%.

Air Products & Chemicals: bucking an unstoppable trend

Buffett has probably never publicly expressed interest in buying Air Products & Chemicals $APD+1.3% stock. However, he already owns a position in this industrial gases supplier, thanks to a tiny stake of just 482 shares.

Five-year price chart of APD stock

Since its founding in 1940, Air Products has become one of the world's leading suppliers of industrial gases, with operations in 50 countries and 19,000 employees. The company is the world's largest supplier of hydrogen and helium. It has a unique portfolio that serves customers in a range of industries, including chemical, power, medical, metals and electronics.

Air Products currently has a dividend yield of 2.78%. Since 2014, its dividend payout has increased an average of 10% per year, with a strong business behind this impressive dividend history.

DISCLAIMER: All information contained herein is for informational purposes only and is in no way an investment recommendation. Always do your own analysis.

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