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 April 27 data for 34 dividend paying stocks in the Kiplinger-documented collection of 52 owned by Buffett’s Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) firm.
The Ides of March plunge in the stock market took its toll on Buffett’s batch and made it possible to own productive dividend shares, reflecting his collection is more viable for first-time investors. Heading into May, the following eleven stocks now live up to the ideal of having their annual dividends from a $1K investment exceed their single share price: STOR, SU, WFC, KHC, SYF, USB, BK, AAL, BAC, OXY, SIRI.
To learn which of these eleven are ‘safer’ dividend dogs, click here.
Actionable Conclusions (1-10): Analysts Estimated 21.28% To 94.7% Net Gains For Ten Top Buffett-Held Dividend Stocks Come May 2021
Seven of these ten Buffett-held top dividend stocks by yield were also among the top ten gainers for the coming year based on analyst 1-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 70% 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 April 27, 2021 were:
STORE Capital Corp. (STOR) was projected to net $946.97, based on dividends, plus a mean target price estimate from fifteen analysts, less broker fees. The Beta number showed this estimate subject to risk 3% under the market as a whole.
Southwest Airlines Co. (LUV) netted $460.12 based on a median of estimates from nineteen analysts, plus dividends. The Beta number showed this estimate subject to volatility 63% more than the market as a whole.
American Airlines Group (AAL) was projected to net $454.60 based on a median of target price estimates from nineteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 104% more than the market as a whole.
Synchrony Financial (SYF) was projected to net $432.59, based on dividends, plus the median of target price estimates from twenty-one analysts, less broker fees. The Beta number showed this estimate subject to risk 62% more than the market as a whole.
Phillips 66 (PSX) was projected to net $374.46, based on a median of target price estimate from twenty-one analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 37% over the market as a whole.
Suncor Energy Inc. (SU) was projected to net $316.19, based on a median of target price estimate from twenty-seven analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 52% more than the market as a whole.
Wells Fargo & Co. (WFC) was projected to net $265.65, based on dividends, plus the median of target price estimates from twenty-seven analysts, less broker fees. The Beta number showed this estimate subject to volatility 35% more than the market as a whole.
Restaurant Brands International (QSR) was projected to net $252.71, based on the median of target price estimates from twenty-nine analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risks 29% more than the market as a whole.
U.S. Bancorp (USB) was projected to net $242.34, based on the median of target estimates from twenty-six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 29% more than the market as a whole.
Bank of America Corp. (BAC) was projected to net $212.76, based on the median of target price estimates from twenty-six analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk 70% over the market as a whole.
The average net gain in dividend and price was estimated at 39.58% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risks 48% greater than 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”.
52 Buffett Holdings By Target Gains
52 Buffett Picks By Yield
Actionable Conclusions (11-20): 10 Top Buffett-Held Stocks By Yield
Top ten Buffett-held stocks selected 4/27/20 by yield represented five of eleven Morningstar sectors. The lone real estate sector representative in the top ten placed first, STORE Capital Corp. . Then two dogs from the energy sector placed second and fourth. Suncor Energy Inc. , and another in sixth, Phillips 66 .
Third, sixth, seventh, eighth, and tenth places were claimed by five financial services representatives, Wells Fargo & Co. , Synchrony Financial , U.S. Bancorp , PNC Financial Services Group Inc. (NYSE:PNC) , and M&T Bank Corp. (NYSE:MTB) .
The fifth slot was claimed by the lone consumer defensive sector representative, The Kraft Heinz Co. (KHC) . Finally, one representative from the consumer cyclical sector placed ninth, Restaurant Brands International Inc.  to complete the May Buffett/Berkshire top ten batch of dividend dogs, by yield.
Actionable Conclusions: (21-30) Top Ten May Buffett/Berkshire Dogs Showed 19.89%-86.83% Upsides And (31) No Downsiders Emerged
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 25.89% Advantage For 5 Highest Yield, Lowest Priced Of 10 Top Buffett-Collected Dividend Stocks To 2021
Ten top Buffett/Berkshire Batch dogs were culled by yield for this update. Yield (dividend/price) results provided by YCharts did the ranking.
As noted above, top ten Buffett-chosen dividend dogs screened 4/27/20 showing the highest dividend yields represented five of eleven Morningstar sectors.
Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Buffett-Held Dogs (32) Delivering 40.65% Vs. (33) 32.29% Average Net Gains by All Ten Come May 2021
$5,000 invested as $1k in each of the five lowest-priced stocks in the top ten dividend Buffett-selected kennel by yield were predicted by analyst 1-year targets to deliver 25.89% more gain than $5,000 invested as $.5k in all ten. The second lowest priced selection, STORE Capital Corp., was projected to deliver the best estimated net gain of 94.7%.
The five lowest-priced top-yield Buffett-Picked dividend dogs as of April 27 were: Suncor Energy Inc., STORE Capital Corp., Synchrony Financial, Wells Fargo & Co., The Kraft Heinz Co., with prices ranging from $15.60 to $29.23.
Five higher-priced Buffett-picked dividend dogs as of April 27 were: U.S. Bancorp, Restaurant Brands International, Phillips 66, PNC Financial Services Group Inc., M&T Bank Corp., whose prices ranged from $34.00 to $105.06.
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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.
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.
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
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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.