With the S&P 500 making new all-time highs recently, it’s getting more and more difficult to find value stocks that pay a big dividend. Now may be the perfect time to turn to Warren Buffett’s top three dividend stocks: General Motors Company (GM), Verizon Communications Inc. (VZ) and Sanofi SA (ADR) (SNY).
Let’s face it — stocks are expensive, and interest rates are near all-time lows. That’s why smart long-term investors around the world are racking their brains to find value stocks that pay large, reliable dividends.
Luckily, investing in stocks is not like taking a test in school — it’s OK to look over the smart kid’s shoulder and copy.
Warren Buffett is one of the most successful value investors in history. Fortunately, each quarter we all get a chance to copy off of Buffett’s paper when Berkshire Hathaway Inc. (BRK.A, BRK.B) discloses its top holdings in its 13-F filing.
Verizon Communications Inc. (VZ) Answers the Dividend Call
VZ has been one of the top-performing dividend stocks in the market in 2016, gaining 16% on the year. Yet even after those gains, VZ still pays a generous 4.2% dividend.
Warren Buffett often looks to invest in companies that have a durable competitive advantage in their market. VZ has the largest share of the U.S. mobile carrier market, and it’s not likely to lose its top spot anytime soon. The wireless carrier business has an extremely high barrier to entry that limits outside competition, which is certainly reassuring for long-term investors.
And I’m fairly certain this whole cell phone trend isn’t going away anytime soon.
Despite its dominant position in a massive, stable market, VZ management isn’t content. In fact, the company recently made headlines for its $4.8 billion acquisition of Yahoo! Inc. (YHOO).
VZ is hoping that its YHOO acquisition will play a crucial role in its aggressive mobile video initiative, which could be a major growth driver in the future.
Finally, in addition to all these positives and that huge 4.2% yield, VZ stock is still a solid value at a forward price-to-earnings ratio of only 13.3.
Sanofi SA (ADR) (SNY) Has the Cure for Low Interest Rates
SNY is one of the largest global pharmaceutical companies. Its top drugs include Lantus (diabetes), Plavix (atherothrombosis) and Lovenox (thrombosis).
On top of its 4.1% dividend yield, SNY stock fits all the typical value qualifications for a Berkshire Hathaway holding. In an expensive market, the stock currently trades at a forward P/E of only 13.2.
Buffett’s current stake in SNY is a relatively modest $162 million, but he’s been an investor now for almost a decade.
It has been a tough environment for healthcare stocks in recent months. Fortunately, dividend stock investors now have the chance to scoop up SNY stock 24% cheaper than it was a year ago.
Ride the General Motors Company (GM) Dividend Highway
There is no question that when it comes to Warren Buffett dividend stocks, GM is the top pick in terms of both value and yield.
GM stock currently yields an incredible 4.8%. Yet it somehow trades at a minuscule forward P/E ratio of only 5.5 Fresh off huge Q2 earnings and revenue beats, GM stock is still somehow lagging the market and is down 6.4% in 2016.
The market seems to have plenty of fears when it comes to GM. Whether it be the rise of Tesla Motors Inc (TSLA), the possibility of an auto lending bubble, GM’s past financial struggles or all of the above, investors don’t seem to trust the stock.
However, Berkshire Hathaway’s massive $1.5 billion stake in GM tells you all you need to know about how much Warren Buffett trusts GM and its huge dividend as a long-term investment.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.