3 Warren Buffett Stocks With Dividends And Long-Term Growth

Warren Buffet is Chairman of Berkshire Hathaway (BRK.B), the conglomerate with an equity portfolio worth more than $300 billion. Buffett is one of the most successful investors of all time.

The average investor, however, can invest right alongside the Oracle of Omaha. Looking across the list of Warren Buffett stocks, we can see that Buffett focuses on owning shares of high-quality companies that have significant competitive advantages. 

This article will examine three of our favorite Warren Buffet stocks right now.

Bank of America (BAC)

Berkshire Hathaway owns just over 1 billion shares of Bank of America stock, currently worth over $35 billion. Bank of America is one of the largest financial institutions in the world. The company produces revenue of $100 billion annually. It offers traditional banking services, such as deposits, checking accounts, credit cards, and consumer and commercial lending. The company provides wealth management services as well. 

Bank of America posted fourth quarter and full-year earnings on January 12th, 2024, and results were mixed. The bank beat adjusted earnings estimates at 70 cents per share, besting expectations by six cents. That figure excludes the special FDIC assessment charge of $2.1 billion. Revenue was off more than 10% year-over-year, however, to $21.96 billion. That was nearly $1.8 billion worse than expected. 

Net interest income was $14.1 billion, down from $14.5 billion in the prior quarter, and down from $14.8 billion a year ago. The bank saw higher deposits costs and lower deposit balances more than offset higher asset yields. Noninterest income was $8.01 billion, down sharply from $10.8 billion in Q3, and down from $9.85 billion in last year’s Q4. Noninterest expense of $15.6 billion, down from $15.8 billion in Q3.

Bank of America remains highly focused on reducing spending where possible, and it has finally begun building its loan book. The bank has also aggressively bought back shares in the past, which will help boost earnings-per-share. We expect 8% annual EPS growth over the next five years for BAC.

In the meantime, the stock has a solid dividend yield of 2.7%. Bank of America started to raise its dividend payout ratio several years ago, but the company still only pays out less than a third of its profits in the form of dividends. 

Chevron Corporation (CVX)

Berkshire Hathaway owns just over 126 million shares of CVX, worth just under $19 billion right now. Chevron is the fourth-largest oil major in the world based on its market cap. The company has increased its dividend for over 30 years in a row, placing it on the list of Dividend Aristocrats.

In early February, Chevron reported (2/2/24) financial results for the fourth quarter of fiscal 2023. Thanks to a slight improvement in the price of oil triggered by production cuts by OPEC and Russia and 7% production growth thanks to the acquisition of PDC Energy, earnings-per-share grew 13% sequentially, from $3.05 to $3.45, and exceeded the analysts’ consensus by $0.23. 

Acquisitions are a potential future growth catalyst for Chevron. On October 23rd, 2023, Chevron agreed to Acquire Hess (HES) for $53 billion in an all-stock deal. Thanks to this deal, Chevron will purchase the highly profitable Stabroek block in Guyana and Bakken assets and thus it will greatly enhance its production and its free cash flow. We expect lower oil prices this year but Chevron will post strong production growth thanks to its recent acquisition of PDC Energy and its pending acquisition of Hess.

Chevron grew 4% last year thanks to sustained growth in the Permian Basin and the acquisition of PDC Energy. The company has more than doubled the value of its assets in the Permian in the last five years thanks to new discoveries and technological advances. Chevron also learned its lesson from the previous downturn and now invests most of its funds in projects that begin delivering cash flows within two years. 

In addition, thanks to the high grading of its asset portfolio, Chevron can fund its dividend even at an oil price of $40. The pending acquisition of Hess is likely to be a major growth driver in terms of output and earnings in the years ahead. CVX has a high dividend yield of 4.4%.

Moody’s Corporation (MCO)

Moody’s is a top-10 position for Berkshire, which owns roughly 25 million shares of MCO for a current market value of approximately $10 billion.

Moody’s was created back in 1909, becoming the first company to analyze securities and rate their investment quality for investors on a large scale. Moody’s began with its Analyses of Railroad Investments in 1909 and has blossomed into the company we know today, with about $6.5 billion in annual revenue. Moody’s is still one of the largest players in the traditional ratings business but has transformed itself in recent years by investing heavily in data and analytics, which is less cyclical and has very strong margins. 

Moody’s posted fourth quarter and full-year earnings on February 13th, 2024. Adjusted earnings-per-share came to $2.19. Revenue was up 16% year-over-year to $1.5 billion, and fractionally beat estimates. Moody’s Analytics revenue grew 11%, or 10% on a constant currency basis, with all of its lines posting double-digit revenue growth. Moody’s Investor Services saw revenue grow 19%, or 17% on a constant currency basis. The company saw debt capital markets continue to recover, driving the strong top line result. Operating margin was 42.6% of revenue on an adjusted basis. This was up 560 basis points year-over-year, and drove earnings up strongly year-over-year

Guidance was for $10.25 to $11 in adjusted earnings-per-share for this year, weaker than consensus that was for $11.15. In addition, it boosted its dividend by 10.4% to a new annualized payout of $3.40, and added $1 billion to its share repurchase authority.

We forecast 13% earnings-per-share growth moving forward from 2024’s base. Moody’s can achieve this result by continuing its long tradition of buying growth, as we saw with the large Bureau van Dijk purchase and the smaller purchases made in the years since, as well as a smaller amount of organic revenue growth. MCO is a dividend stock with a 0.9% current yield.