As earning season winds up, attention starts to shift towards dividends. With the average dividend yield of the S&P 500 pencilled in at 2%, the following three stocks in Berkshire Hathaway’s portfolio have high dividend yields that are more than double the market’s average, giving me the potential to earn some passive income during quieter periods of the year. In addition to that, these stocks are also excellent value as they hold defensive positions, making them extremely useful for my portfolio during a time of market volatility.
Buying the dip
To start with, this stock is one of Warren Buffett’s biggest holdings in his portfolio, at 3.5%. Kraft Heinz, the ketchup giant, has declared a dividend of $0.40 per share, bringing its dividend yield to 4%. With its ex-dividend date coming up on 10 March, I will be looking to buy any dips in its share price in order to maximise its high dividend yield. Additionally, the stock itself has done relatively well as compared to the S&P 500, as it is up 10% year-to-date (YTD). The company also reported superb earnings with positive guidance recently, giving me even more confidence to hold the stock past its ex-dividend date.
4.7% dividend yield on the Verizon
Along with utilities and energy, telecommunication stocks tend to gain a lot of attention in times of a bear market due to their defensive nature, which is why my eyes are firmly set on Verizon. Along with its potential ability to protect my investments more securely as a defensive stock, its 4.7% dividend yield makes it the highest dividend stock within Warren Buffett’s portfolio. Although its ex-dividend date is slightly over a month away in April, I see this an opportunity to conceivably buy shares for a bargain before dividend investors start flocking towards the stock.
Fuel for my portfolio
For all the geopolitical conflict and soaring inflation that has occurred over the past couple of months, Chevron (NYSE: CVX) has been one of the largest beneficiaries. The stock itself has done the complete opposite of the S&P 500, jumping 17% in value (YTD). As analysts forecast the price of oil to shoot up to $120 per barrel, the energy giant stands to continue reaping rewards. For that reason, it should be expected that profit margins will increase, and its dividends along with it. Potential upside to its share price at $143 and a dividend of $1.42 per share gives me the opportunity to hedge my portfolio against any further downside in the overall market, all while also earning me passive income with its 4% dividend yield.
Something to keep in mind
There are a couple of things that are worth pointing out, however. First of all, with all three stocks being US holdings, UK investors will have to account for a potential withholding tax of 15% on any dividends. Secondly, there is also a possibility that the market rebounds from its current position. This could possibly make these companies less attractive as investors may opt for tech and growth positions. Nevertheless, I will be watching how the economic and geopolitical situation plays out over the coming days and weeks as I plan to adjust my portfolio accordingly.
John Choong has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
