James Brumley says in Kiplinger Investing:
“Rich people often get perpetually richer for a reason, so it could be worthwhile to study what billionaires and high-asset hedge funds are plowing their long-term capital into.”
Any collection of stocks is more clearly understood when subjected to yield-based (dog catcher) analysis, this Buffett/Berkshire batch is perfect for the dogcatcher process. Here is the October 8 data for 28 dividend-paying stocks in the Kiplinger-documented collection of 44 now owned by Buffett’s Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) firm.
Another resource consulted for this article was dogsofthedow.com. It also keeps an ongoing spreadsheet of the Buffett/Berkshire stocks updated quarterly per BRK SEC filings.
The Ides of March plunge in the stock market took its toll on Buffett’s batch and made the possibility of owning productive dividend shares, reflecting his collection more viable for first-time investors. This October update shows the following seven stocks still live up to the ideal of having their annual dividends from a $1k investment exceed their single share price: KHC, STOR, SU, USB, SYF, BAC and SIRI.
Actionable Conclusions (1-10): Analysts Estimated 12.97% To 57.12% Net Gains For 10 Top Buffett-Held Dividend Stocks Come October 2021
Six of these ten Buffett-held top dividend stocks by yield were also among the top 10 gainers for the coming year based on analyst one-year target prices. (They are tinted gray in the chart below). Thus, this yield-based forecast for these Buffett dogs was graded by Wall St. Wizards as 60% accurate.
Projections were based on estimated dividends from $1,000 invested in each of the highest-yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts. Note: One-year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to October 8, 2021 were:
Suncor Energy was projected to net $571.21, based on a median of target price estimate from 26 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 48% more than the market as a whole.
M&T Bank Corp. (MTB) netted $218.11, based on a median of estimates from 21 analysts, plus dividends. The Beta number showed this estimate subject to risk/volatility 20% more than the market as a whole.
The Kraft Heinz Co. was projected to net $210.32, based on the median of target estimates from 20 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 3% more than the market as a whole.
Barrick Gold Corp. (GOLD) was projected to net $208.15, based on dividends, plus the median of target price estimates from 25 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 76% less than the market as a whole.
Bank of New York Mellon (BK) was projected to net $193.38, based on a median of target price estimates from 19 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 4% more than the market as a whole.
Wells Fargo & Co. (WFC) was projected to net $171.81, based on dividends, plus the median of target price estimates from 27 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 7% more than the market as a whole.
JPMorgan Chase & Co (JPM) was projected to net $161.18, based on a median of target price estimate from 26 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 15% over the market as a whole.
Sirius XM Holdings Inc. was projected to net $157.52, based on the median of target price estimates from 18 analysts, plus annual dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 17% over the market as a whole.
Bank of America Corp. was projected to net $151.62, based on the median of target price estimates from 26 analysts, plus annual dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 54% more than the market as a whole.
U.S. Bancorp was projected to net $129.72, based on dividends, plus a mean target price estimate from 26 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 8% over the market as a whole.
The average net gain in dividend and price was estimated at 21.73% on $10k invested as $1k in each of these 10 stocks. These gain estimates were subject to average risk/volatility 10% greater than the market as a whole.
Actionable Conclusion (11): (Bear Alert) Analysts Predicted One Buffett-Held Dividend Stock To Show A 8.38% Loss to October 2021
The probable losing trade revealed by Y-Charts to 2021 was:
United Parcel Service, Inc. (UPS) projected a loss of $83.67, based on dividend and a median of the target price estimates from 27 analysts, including broker fees. The Beta number showed this estimate subject to risk/volatility 2% under the market as a whole.
The Dividend Dogs Rule
Stocks earned the “dog” moniker by exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where, (3) yield (dividend/price) grew higher than their peers. Thus, the highest-yielding stocks in any collection became known as “dogs.” More precisely, these are in fact best called “underdogs”.
44 Buffett Holdings By Target Gains
28 Buffett Picks By Yield
Actionable Conclusions (12-21): 10 Top Buffett-Held Stocks By Yield
Top 10 Buffett-held stocks selected 10/8/20 by yield represented four of eleven Morningstar sectors.
First place went to the first of two dogs from the consumer defensive sector, The Kraft Heinz Co. . The second consumer defensive representative placed ninth, Coca-Cola Co (KO) .
A lone real estate sector representative, placed second, STORE Capital Corp. .
Third, place was claimed by one representative from the energy sector, Suncor Energy Inc. . And fourth through eighth and tenth places went to six financial services representatives. In fourth place was, M&T Bank Corp. , followed by U.S. Bancorp , PNC Financial Services Group Inc. (PNC) , JPMorgan Chase & Co. , Bank of New York Melon Corp. , and Synchrony Financial , to complete the October Buffett/Berkshire top 10 batch of dividend dogs by yield.
Actionable Conclusions: (22-31) Top 10 October Buffett/Berkshire Dogs Showed 11.5%-53.25% Upsides And (32) Three Down-Siders Surfaced at -0.25%-9.71%
To quantify top dog rankings, analyst median price target estimates provide a “market sentiment” gauge of upside potential. Added to the simple high-yield metrics, analyst mean price target estimates became another tool to dig out bargains.
Analysts Forecast A 24.18% Advantage For Five Highest-Yield, Lowest Priced Of 10 Top Buffett-Collected Dividend Stocks To October 2021
Ten top Buffett/Berkshire dividend dogs were culled by yield for this update. Yield (dividend/price) results provided by YCharts did the ranking.
As noted above, top 10 Buffett-chosen dividend dogs screened 10/8/20 showing the highest dividend yields represented four of eleven Morningstar sectors.
Actionable Conclusions: Analysts Predicted Five Lowest Priced Of The Top Ten Highest-Yield Buffett-Held Dogs (33) Delivering 22.06% Vs. (34 ) 17.76% Average Net Gains by All 10 Come October 8, 2021
$5,000 invested as $1k in each of the five lowest-priced stocks in the top 10 dividend Buffett-selected kennel by yield were predicted by analyst one-year targets to deliver 24.18% more gain than $5,000 invested as $.5k in all 10. The very lowest priced selection, Suncor Energy, was projected to deliver the best analyst-estimated net gain of 57.12%.
The five lowest-priced top-yield Buffett-Picked dividend dogs as of October 8 were Suncor Energy, STORE Capital, Synchrony Financial, Kraft Heinz, and Bank of New York Mellon Corp, with prices ranging from $12.92 to $37.18.
Five higher-priced Buffett-picked dividend dogs as of October 8 were U.S. Bancorp, Coca-Cola, M&T Bank, JPMorgan Chase, and PNC Financial Services, whose prices ranged from $39.50 to $116.54.
The distinction between five low-priced dividend dogs and the general field of ten reflected Michael B. O’Higgins’ “basic method” for beating the Dow. The scale of projected gains based on analyst targets added a unique element of “market sentiment” gauging upside potential. It provided a here-and-now equivalent of waiting a year to find out what might happen in the market. Caution is advised since analysts are historically only 20% to 80% accurate on the direction of change and just 0% to 20% accurate on the degree of change.
If somehow you missed the suggestion of the seven stocks ready for pick-up at the start of the article, here is a reprise of the list at the end:
The following seven from the Buffett October batch (as of 10/8/20) realized the ideal of offering annual dividends from a $1k investment exceeding their single share prices: KHC, STOR, SU, USB, SYF, BAC, and SIRI.
The net gain/loss estimates above did not factor in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of “dividends” from any investment.
Stocks listed above were suggested only as possible reference points for your Buffett/Berkshire batch stock purchase or sale research process. These were not recommendations.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.
Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb; YCharts; finance.yahoo; analyst mean target price by YCharts. Dog photo source: pinterest.com