3 Warren Buffett Stocks to Buy That Are Down This Year and Pay 5% Dividends

Warren Buffett remains one of the world’s most prominent investors, renowned for his long-term buy-and-hold strategies and extensive portfolio of public and private holdings. With interest rates poised to decline at some point this year, it makes sense to consider adding Buffett’s dividend-paying stocks, which are expected to rally as bond yields fall.

What makes the three stocks we are focused on interesting is that they are down in a year when Berkshire Hathaway Inc. (NYSE: BRK-B) has outperformed the competition. The fund is up a stunning 17%, versus the 5% loss in the S&P 500 and the 7% loss in the Nasdaq. So, having three losers in a banner year for the fund is an odd anomaly for a portfolio with far fewer holdings than most. The good news for investors looking to bottom fish Berkshire Hathaway holdings is that all three pay a dividend near 5% or higher.

Berkshire Hathaway has a long history of beating the market. Over the past 20 years, Berkshire Hathaway delivered an average annual return of 12.1%, compared to the S&P 500’s 11.5%. Plus, it is essential to note that Berkshire Hathaway holds significant stakes in numerous well-known private companies. These include Acme Brick, Benjamin Moore, Dairy Queen, Duracell, GEICO, and Lubrizol.

It may make sense to buy some of Berkshire Hathaway’s underperforming stocks, as Buffett has been known to press positions that trade lower after he initially takes a stake in the company. With his massive cash position, he could significantly add to the three stocks trading down, two of which he has owned for years, and are leaders in their respective sectors.

Why do we cover Warren Buffett stocks?

Few investors have the results and reputation that Buffett has garnered over the past 50 years. While investing has evolved over the past half-century, buying good companies with products and services recognized worldwide, while paying dividends, will always remain a timeless approach.

Chevron

This American multinational energy corporation specializes in oil and gas. Chevron Corp. (NYSE: CVX) is a safer option for investors looking to position themselves in the energy sector, and it pays a rich dividend. The company engages in integrated energy and chemicals operations worldwide via two segments

The Upstream segment is involved in the following:

• Exploration, development, production, and transportation of crude oil and natural gas
• Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
• Transportation of crude oil through pipelines
• Transportation, storage, and marketing of natural gas, as well as operating a gas-to-liquids plant

The Downstream segment engages in:

• Refining crude oil into petroleum products
• Marketing crude oil, refined products, and lubricants
• Manufacturing and marketing renewable fuels
• Transporting crude oil and advanced products by pipeline, marine vessel, motor equipment, and rail car
• Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives

Chevron announced in the fall of 2023 that it had entered into a definitive agreement with Hess Corp. (NYSE: HES) to acquire all its outstanding shares in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion, and the deal is expected to finally close this summer.

Berkshire Hathaway owns 6.7% of Chevron’s outstanding stock, or 123,000,000 shares, and the energy giant makes up 5.1% of the portfolio. Each year, the stock generates $776,734,888 in dividend income.

Kraft Heinz

Kraft Heinz Co. (NYSE: KHC) is the third-largest food and beverage company in North America and the fifth-largest in the world. It derives 76% of its revenues from its home market and 24% internationally. Even in bad times, everybody has to eat, and this company always stands to benefit while paying a tremendous dividend. The company was formed via the merger of H.J. Heinz and Kraft Foods.

The company is a leading global food company with estimated annual revenues of $25 billion from well-known brands such as Kraft, Heinz, Oscar Mayer, and Maxwell House.

Kraft Heinz’s additional brands include:

• ABC
• Capri Sun
• Classico
• Jell-O
• Kool-Aid
• Lunchables
• Ore-Ida
• Philadelphia
• Planters
• Plasmon
• Quero
• Weight Watchers
• Smart Ones
• Velveeta

Sirius XM

The satellite radio giant is a newer addition to the Berkshire Hathaway portfolio, and Buffett has continued to add shares over the past year. Sirius XM Holdings Inc. (NASDAQ: SIRI) is an audio entertainment company in North America.

The company has a portfolio of audio businesses, including its flagship subscription entertainment service Sirius XM, Pandora’s ad-supported and premium music streaming services, an expansive podcast network, and a suite of business and advertising solutions.

The Sirius XM segment features music, sports, entertainment, comedy, talk, news, traffic, news channels, and other content, as well as podcasts and infotainment services, on a subscription-fee basis in the United States.

Sirius XM’s packages include live, curated, and certain exclusive and on-demand programming.

The Pandora and Off-platform segment operates a music, comedy, and podcast streaming discovery platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through mobile devices, vehicle speakers, or connected devices.

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