Most investors know who Warren Buffett is. He’s a great investor.
If you don’t know who he is then you should watch this HBO documentary.
Famously, his company Berkshire Hathaway doesn’t pay a dividend? Why? There are a few reasons, but mainly he thinks shareholders are better off by Berkshire Hathaway retaining money rather than paying it out. If the money can’t be properly used by the company then some of it, or all of it, should be paid to the owners.
However, he’s invested in plenty of shares that do pay dividends like Apple, banks and Coca Cola. So, my first pick of three Warren Buffett ASX dividend ideas is an obvious one:
Coca-Cola Amatil Ltd (ASX: CCL)
We can’t invest in the main Coca Cola company on the ASX, but we can invest in the Oceania-based company.
Not only does it sell Coca Cola, but it sells various other brands like Sprite, Fanta, Mount Franklin, Nutri Boost, Barista Bros, Canadian Club and so on.
It targets a dividend payout ratio of more than 80% and it has a trailing partially franked dividend yield of 4.4%.
The company is targeting low single digit EBIT growth in Australia and New Zealand, but it’s targeting a double digit growth of EBIT in the developing markets of Indonesia, Papua New Guinea and Fiji.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is often called the Berkshire Hathaway of the ASX. It operates in a similar type of way. It invests in listed shares like Brickworks Limited (ASX: BKW) & Clover Corporation Limited (ASX: CLV), and it also owns private businesses outright such as agriculture, luxury retirement living, swimming pools and a miner that specialises in copper and gold.
It’s a long-term investor, it tries to be contrarian and it aims to invest in uncorrelated assets. This strategy has allowed Soul Patts to outperform the ASX index over all of the long-term time periods such as fifteen years, ten years, five years etc.
It has paid a dividend every year in its century-long existence, it has grown its dividend every year since 2000 and it currently has a grossed-up dividend yield of 3.7%. I think it’s the gold standard for dividend shares on the ASX.
Qantas Airways Limited (ASX: QAN)
Qantas is not a typical dividend share. It isn’t my type of dividend share. But it has an impressive recent dividend history. In 2016 the dividend was $0.07 per share and in 2019 it had grown to $0.25 per share.
Despite the strong share price growth over the past few years it still has a grossed-up dividend yield of 5%.
Warren Buffett famously didn’t like airlines, they burned through a lot of money. But Berkshire Hathaway has invested in US airlines and our own national carrier is doing well now too. A price war with Virgin Australia Holdings Ltd (ASX: VAH) ending has helped too.
I don’t think Coca Cola Amatil or Qantas will ever enter my dividend portfolio. But, Soul Patts is definitely a Buffett dividend share. If he ever looked at the ASX he’d probably be quite interested in Soul Patts.
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Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.