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Buffett's $4.53 Billion "Missing" Paycheck |
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By Carla Pasternak |
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Buffett's focus on value investing has placed him among
the richest men in the world. But with my focus on income, I see things a little differently
than the world's most famous investor.
By not focusing on dividends, I calculate Warren Buffett and
Berkshire Hathaway are missing out on billions over the next year --
up to $4.53 billion to be exact.
(Full Story Below) |
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Buffett's
$4.53 Billion "Missing" Paycheck
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To say Warren Buffett has done well for himself would be an
understatement. That's why from time to time, I like to
check in on what the "Oracle of Omaha" is doing with
Berkshire Hathaway's (NYSE: BRK-A) portfolio.
I came across a neat resource the other day. If you also
like to keep tabs on Buffett, CNBC.com has a page that tracks
the common stocks in Berkshire's portfolio in real-time.
You can see it here.
Looking at that page, it's very evident that Warren
and I invest a little differently than each other. He's the
most famous value investor in the world. I'm more than happy
to let the dividends roll in month after month -- even if
the checks aren't in the billions or millions.
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Berkshire
Hathaway's
Highest-Yielding Stocks |
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Stock |
Yield |
| Glaxo (NYSE: GSK) |
4.8% |
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M&T Bank (NYSE: MTB) |
4.7% |
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Sanofi (NYSE: SNY) |
4.4% |
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Conoco (NYSE: COP) |
4.3% |
| Kraft (NYSE: KFT) |
4.1% |
So while I understand he isn't on the prowl for high-income
securities, the holdings still left me a little astonished.
Poring over the names, I recognized every stock -- Berkshire owns
some of the most well-known companies in the world.
But I also recognized that they don't own many stocks I
would even look twice at for income. The closest one is
GlaxoSmithKline (NYSE: GSK), which yields 4.8%.
To its credit, Berkshire does own some securities throwing
off nice income. They acquired some Goldman Sachs (NYSE: GS) and
General Electric (NYSE: GE) preferreds in late 2008 that pay a
nice yield of 10%. However, that was a special deal not available to
retail investors.
Digging a little deeper into Berkshire's holdings, I found the roughly 40 common stock holdings yield an average of
only 2.0%. Even so, thanks the massive size of its
portfolio, Berkshire will rake in an
astonishing $1.2 billion from dividends alone over the next
year if you project forward the annual payments of the
current holdings. Certainly
$1.2 billion is nothing to sneeze at.
But Buffett's disinterest in income is costing Berkshire.
On a whim, I calculated the average yield of the 21 holdings
in my
High-Yield Investing portfolios (I like to be able
to watch my holdings like a hawk, that's why my portfolio
isn't larger than it is). It comes out to 8.4% -- more than
six full points above Berkshire's 2.0% average yield.
In actual dividends paid, the difference between the yield
on my portfolio and Berkshire's would be staggering.
Berkshire's portfolio totals $53.9 billion (which is more
than the GDP of Panama, Iceland, and Bulgaria, among
others). If the entire portfolio earned 8.4% in dividends
annually, payments would total $4.53 billion -- over $3.3 billion more than it does right now, and enough to
purchase nearly two dozen Boeing 747's.
Of course, we don't all have the portfolio of Berkshire
Hathaway, and I think Warren Buffett has done ok for himself
with his value focus. But the same principles that are
leaving billions on the table for Berkshire could be leaving
thousands on the table for your portfolio if you aren't
making dividends a priority.
Good Investing,
Carla Pasternak's Dividend Opportunities
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Income
Notes
Buffett is increasing fixed-income investments after results
slumped at operating units
and companies in Berkshire's equity portfolio slashed dividends.
"Some of the normal places he's gotten the cash to invest are
just getting killed in the recession," said Gerald Martin, a
finance professor at American University. "So he's locking in
these guaranteed returns, moving from the volatility of stocks
to a steady stream of income that, in some cases, is almost at
the return you normally get from the stock market."
--
Bloomberg
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