04:27 pm
October 23, 2017

Warren Buffett Is Earning $6,731 in Dividend Income Per Minute This Quarter

Warren Buffett Is Earning $6,731 in Dividend Income Per Minute This Quarter

Did you know Berkshire Hathaway’s dividend stocks are generating nearly $1 billion per quarter?

Warren Buffett-led Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), in addition to its dozens of businesses, also owns a portfolio of 47 different common stocks, many of which were hand-selected by Buffett himself. And many of these stocks pay dividends. In fact, from all of the stocks in Berkshire’s portfolio, the company is generating more than $6,700 in dividend income every minute.

Berkshire Hathaway’s dividend income

During the second quarter, Berkshire’s holdings will pay out a combined total of $882,004,712 in expected dividend income. There are 91 days in the quarter, so this translates to $9,692,359 per day, or just under $6,731 per minute in dividend income.

To be fair, this makes two big assumptions. First, it assumes Berkshire’s portfolio holdings won’t change at all before or during the second quarter. And it assumes none of the dividend stocks will change their payouts, which some likely will. In reality, the dividend income received by Berkshire is likely to be even higher than these figures, since most of his stocks have great records of increasing dividends.

It’s also important to point out that Berkshire’s portfolio is rather top heavy — that is, there are a handful of big holdings and a bunch of smaller ones. The same is true for the dividends. Most come from these six stocks:

Company Expected Dividends — Second Quarter 2017
Kraft Heinz $195,380,981
Wells Fargo $182,287,623
Coca-Cola $148,000,000
IBM $113,723,224
Phillips 66 $50,834,632
American Express $48,515,424

SOURCE: THE MOTLEY FOOL’S OWN CALCULATIONS, USING DIVIDENDS AND BERKSHIRE HOLDINGS ACCORDING TO MOST CURRENT DATA AS OF 3/31/2017.

Why does Warren Buffett love dividend stocks so much?

To be clear, there are plenty of reasons to like dividend stocks, both as a group and Buffett’s choices individually. For example, you can read complete discussions of why Buffett likes Coca-Cola and Wells Fargo.

In a broad sense, Buffett loves dividend stocks for the same reason he loves most of the businesses that he and his team have acquired over the years. Dividend stocks generate a steady, and hopefully growing, stream of cash. And because Berkshire owns dozens of businesses, regularly acquires companies, and buys individual stocks, he can use this cash in whichever way suits Berkshire best at the time.

As an example, if one of Berkshire’s subsidiaries needs a new factory, this dividend income can help finance it. This is actually Buffett’s number one priority for cash generated by Berkshire — making sure its existing businesses have their capital requirements met.

As an alternative, if Berkshire’s capital needs are met and management perceives Berkshire’s stock as cheap, the dividends can be used to buy back shares — or they can be used to buy shares of any stock that looks attractive to Buffett and his stock-pickers. And if nothing looks attractive, this dividend income can be added to the company’s stockpile of cash to help fund the next big acquisitions.

The importance of dividend growth

You might notice by the stocks mentioned here, as well as some of the other dividend stocks in Buffett’s portfolio, Berkshire especially loves to invest in stocks that raise their dividends consistently. Coca-Cola is an excellent example, and has increased its payout for 54 consecutive years without fail — one of the best dividend track records in the market.

This is important to Buffett for the same reason it’s important to everyday investors like you and me. Consistent income streams are important, especially when you rely on the income from your investments to finance other expenses. And when your income stream grows every year, it not only helps you keep up with inflation, but increases your long-term compounding power.

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Matthew Frankel owns shares of American Express and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends American Express. The Motley Fool has a disclosure policy.

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