We recently published a list of Warren Buffett Dividend Stocks by Sector and IndustryIn this article, we’ll take a look at how Moody’s Corporation (NYSE:MCO) compares to the other dividend stocks approved by Warren Buffet.
Warren Buffett is a well-known figure in the investment community and his reputation needs no introduction. He is one of those rare investors whose strategies are closely imitated by countless newcomers to the field. This widespread admiration stems from the fact that Buffett is in a class of his own. He remains true to the investment principles he has relied on throughout his career, particularly value investing. The Oracle of Omaha’s lack of enthusiasm for the current AI trend underscores his unwavering commitment to the strategies that have guided his investment approach for decades.
At Berkshire’s annual shareholder meeting in May, Buffett was asked about the potential impact of AI on traditional industries. While he acknowledged that he is not familiar with the technology, he stressed that this lack of understanding does not mean that he in any way denies its existence, significance or importance. However, Buffett is also enthusiastic about several other strategies beyond value investing.
Read also: The 10 most convincing stock tips from Warren Buffett’s disciple Guy Spier
Dividend stocks have long been a staple of Berkshire’s portfolio, with nearly 93% of holdings concentrated in them. The media has often highlighted Buffett’s penchant for dividend stocks, particularly because Berkshire Hathaway, his own company, does not pay a dividend. His approach has proven successful, as the investment portfolio managed by Buffett and his team is expected to generate around $6 billion in annual dividend income. Notably, $4.36 billion of that income comes from dividends on common and preferred stocks of just five companies.
Buffett’s approach to dividend investing is not driven by the pursuit of the highest yield. Instead, he places emphasis on identifying outstanding companies that can maintain and grow their dividends over the long term. He prefers a moderate return from a stable, successful company to a higher return from a less reliable and weaker company. If Warren Buffett has a penchant for dividends, it’s clear he’s on the right track considering how much these stocks have contributed to overall market returns. His love of dividend stocks reflects the significant role these stocks have played in the market’s overall return over the years. Between 1993 and the end of 2022, the S&P 500 grew 777%. However, when dividends were taken into account, the S&P 500 saw an increase of over 1,400% over the same period. This shows that dividends accounted for more than 20% of the market’s overall return during those years.
Buffett carefully monitors the sectors and industries he invests in, which is a central aspect of his investment strategy. Through the end of the second quarter of 2024, the financial sector made up the majority of his portfolio, closely followed by the technology sector, with significant investments in basic materials and consumer goods as well. This article examines some of Warren Buffett’s best dividend stock picks across these various sectors and industries.
Our methodology:
For this article, we analyzed Berkshire Hathaway’s 13F portfolio for Q2 2024 and selected dividend stocks from the portfolio. We mentioned the sectors and industries these stocks belong to and ranked them in ascending order of the hedge fund’s holding in them in Q2 2024.
We also measured hedge fund sentiment on each stock, based on Insider Monkey’s database of 912 funds (as of Q2 2024). Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
A hand holds a rating table, emphasizing the importance of credit ratings in the financial services sector.
Moody’s Corporation (NYSE:MCO)
Value of Berkshire Hathaway shares: USD 10,384,249,654
Sector: Finance
Industry: Financial data & stock exchanges
Moody’s Corporation (NYSE:MCO) ranks eighth on our list of best Warren Buffett dividend stocks. It is an American financial services company that provides credit ratings and analytical solutions to investors and businesses. The company’s credit rating and risk analytics businesses continue to perform well. It also provides research and risk management services to clients in the financial services, corporate, and public sectors. The company reported strong earnings in the second quarter of 2024, driven by the success of its top-rated ratings franchise. It reported revenue of $1.8 billion, representing 21% growth over the same period last year. The double-digit revenue growth supported product development and innovation. In addition, the company entered into several promising strategic partnerships with leading industry players to expand the availability and reach of its data and insights.
Warren Buffett originally acquired Moody’s Corporation (NYSE:MCO) in 2000 after it was spun off from Dun & Bradstreet. The hedge fund held a consistent stake in the company, except for a single instance in 2010 when it reduced its holdings to raise funds for acquisitions. At the end of the second quarter of 2024, it owned nearly 25 million shares of the company, valued at over $10.3 billion. The company represented 3.7% of the firm’s 13F portfolio.
Moody’s Corporation (NYSE:MCO), one of Warren Buffett’s best dividend stocks, has increased its payouts for 14 consecutive years. The company currently pays a quarterly dividend of $0.85 per share and has a dividend yield of 0.71% as of August 21.
According to Insider Monkey’s database for Q2 2024, 59 hedge funds owned shares in Moody’s Corporation (NYSE:MCO), compared to 60 in the previous quarter. The consolidated value of these shares is almost $21 billion. In addition to Berkshire Hathaway, TCI Fund Management was also one of the company’s leading shareholders in Q2.
Total MCO takes 8th place on our list of the best dividend stocks to buy according to Warren Buffett. While we recognize MCO’s potential as an investment, we believe some highly undervalued dividend stocks promise higher returns and do so in a shorter time frame. If you’re looking for a highly undervalued dividend stock that’s more promising than MCO but trades at less than 7 times earnings and yields nearly 10%, read our report on the dirt cheap dividend stock.
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Disclosure: None. This article was originally published on Insider Monkey.
