Warren Buffett has been buying up big on dividend stocks. Should you?

Here's how the billionaire financial guru invests for dividends…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • This year has been a tough one for investors
  • Yet legendary investor Warren Buffett has been buying up big
  • So let's check out why Buffett might be focusing on dividend shares

As most investors would be acutely aware, 2022 has been a tough year for the markets. Year to date, the S&P/ASX 200 Index (ASX: XJO) has gone backwards by a nasty 12% or so.

That might put many investors off buying shares. These are uncertain times, after all.

But one investor has instead been buying up big. That would be the legendary Warren Buffett, of Berkshire Hathaway Inc (NYSE: BRK) fame.

As our Fool colleagues over in the US covered recently, Buffett has been spending big over the year so far. And one of his favourite shares to buy has been a dividend stock.

Buffett reportedly acquired 2.4 million shares of oil giant Chevron over the second quarter of 2022. Those 2.4 million shares would be worth approximately US$405.5 million on the latest pricing.

That brought Berkshire's total holdings to 163.5 million shares, representing an 8.4% ownership of the entire company. That's a stake worth more than US$27 billion.

Our Fool colleagues report that Buffett's company will now enjoy almost US$929 million in dividend income per annum from this investment.

A recreational fisherman holds a fishing rod with his hands apart indicating it was this big with a smile on his face.

Image source: Getty Images

Following Buffett's dividend example

Buffett's enthusiasm for this dividend share highlights the value of a solid dividend payer during uncertain times. While share prices may fluctuate, nothing is more concrete than receiving hard cash.

As we discussed this morning, market volatility, even crashes, can be the discerning investor's best friend. This is doubly true when it comes to dividend shares.

This is because the lower a dividend share's price gets, the higher starting yield an investor can potentially enjoy. Take the Commonwealth Bank of Australia (ASX: CBA) share price.

Over 2022 thus far, CBA shares have endured significant volatility, having fluctuated between $108.35 and $86.98 a share this year. But CBA has still been raising its dividend consistently since 2020. Its two most recent dividend payments add up to $3.85 in dividends per share.

For an investor buying in at $108.35, this would give them a dividend yield of 3.55% on their capital. But if that same investor was braver and bought up at $86.98, they would be rewarded with a far better yield of 4.43% on their capital.

So it's for this reason that all investors should strive to buy quality dividend shares at the lowest price possible. It's one of the reasons Warren Buffett is one of the richest investors in the world, after all.

Motley Fool contributor Sebastian Bowen has positions in Chevron. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

Man holding fifty Australian Dollar banknotes in his hands, symbolising dividends.
Dividend Investing

3 star ASX dividend income stocks for the rest of 2026

I rate these businesses as strong income buys.

Read more »

Children skipping and jumping up a hill.
Dividend Investing

Want passive income? These ASX dividend shares offer 5%+ yields

These companies grow their payouts over time.

Read more »

A golden egg with dividend cash flying out of it
Dividend Investing

These ASX dividend shares keep giving investors a pay rise

I think these businesses are excellent options for regular payout growth.

Read more »

A graphic of a pink rocket taking off above an increasing chart.
Dividend Investing

$1,000 buys 23 shares in an incredibly reliable ASX 200 dividend stock

This business offers incredible reliability with dividends.

Read more »

A happy elderly man wearing a red cape smiles as he jumps up like a hero from a massage table.
Dividend Investing

3 ASX dividend stocks I'd buy if I were a retiree

Reliable dividends often come from predictable demand. These three stocks highlight where that stability can be found.

Read more »

Beautiful young couple enjoying in shopping, symbolising passive income.
Dividend Investing

3 ASX dividend shares to build a passive income

Looking for passive income? These shares have been named as buys by analysts.

Read more »

One hand giving $100 notes to another hand, symbolising ex-dividend date.
Dividend Investing

An ASX dividend stalwart every Australian should consider buying

This is the right time to invest in this impressive stock.

Read more »

ATM with Australian hundred dollar notes hanging out.
Dividend Investing

How to dollar-cost average your way to passive income with ETFs

You don't need a lump sum to build a dividend income stream, just a plan and the discipline to stick…

Read more »