I think there are a few ASX dividend shares that Warren Buffett would like to own if he were investing in Australian shares.
Warren Buffett is one of the world's greatest investors in my opinion. Berkshire Hathaway is the business he leads. Berkshire Hathaway doesn't pay a dividend but plenty of its investments do. Plus, the US doesn't have franking credits – it makes more sense for ASX shares to pay dividends.
I think there are some ASX shares that Warren Buffett would have in his Australian portfolio:
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is an investment house that is often compared to Berkshire Hathaway with how it operates. They both invest in listed and unlisted businesses. Franking credits help Soul Patts lose less value through its ownership structure.
The ASX dividend share is invested across a variety of industries including telecommunications, building products, property, resources, agriculture and pharmacies.
I like the Soul Patts effort to expand its diversification into different industries. Soul Patts has been expanding in the financial services industry in recent years. It plans to invest into regional data centres as well. As an investment conglomerate, Soul Patts can alter its investments to be focused on long-term growth.
The ASX dividend share has a number of pleasing attribute dividend attributes. I think the most important one is the fact that it has increased its dividend every year since 2000. No other ASX share has a record as good as that.
Over time the business will make more investments that should improve and diversify its earnings stream further.
At the current Soul Patts share price it offers a grossed-up dividend yield of 4.1%.
Brickworks Limited (ASX: BKW)
One of Berkshire Hathaway's larger businesses is Clayton Homes – so it shows that Warren Buffett likes exposure to property-related earnings.
Brickworks is a manufacturer and seller of building products like bricks, masonry, roofing, paving, precast and so on. It's the largest brickmaker in Australia.
The ASX dividend share actually owns a significant chunk of Soul Patts shares. It owns 39.4% of the investment conglomerate. So that investment alone provides Brickworks with a source of reliable earnings and dividends.
Brickworks can normally rely on a good flow of earnings from its construction product businesses. COVID-19 is making that difficult at the moment, though the economy will hopefully bounce back with a return to normal construction at some point. It's a similar situation in the US – where Brickworks is the brickmaking market leader in the north east of the US – with COVID-19 having an impact.
Another segment of Brickworks is doing very well. It owns a 50% stake of an industrial property trust along with Goodman Group (ASX: GMG). Industrial properties are important for the operation of ecommerce and logistics. The property trust is currently building two large distribution warehouses for Amazon and Coles Group Limited (ASX: COL) which should increase the rental income and value of the trust significantly.
Brickworks is a really good ASX dividend share. It hasn't cut its dividend for over four decades. It currently offers a grossed-up dividend yield of 4.8%.
APA Group (ASX: APA)
APA Group is an infrastructure giant of Australia. It owns a vast gas pipeline across Australia and delivers half of the nation's natural gas. I think it's somewhat similar to Berkshire Hathaway's energy division and its railroad business.
APA also has investments in a number of energy generation and energy storage assets.
APA funds its annual distribution to shareholders from its cashflow. That cashflow is steadily growing as more projects are finished. The ASX dividend share is steadily investing into new projects which sometimes take a few years to complete. So it has a medium-term growth outlook even if it makes no more investments.
It has grown its dividend every single year for a decade and a half. That's one of the best records on the ASX.
APA increased its distribution to 50 cents per unit in FY20. It currently offers a distribution yield of 4.4%.
Foolish takeaway
I think each of these ASX dividend shares offer something that every income investor should want. Soul Patts has the best dividend record and the most diversification, though Brickworks is probably the best value and it offers the biggest starting dividend yield.
