Warren Buffett is one of the best investors in the world. $1 invested in Berkshire in 1965 is worth more than $1.2 million (!) today. Buffett is known as a value investor, but his top holdings have one thing in common: Dividends.
A couple interesting notes to consider about these dividend paying companies.
First, look at the payout ratios. They are very reasonable. Coca-Cola's may seem high but the company has a strong moat around its brand and the revenues are reliable. It can support the dividend. Occidental Petroleum has a very, very low payout ratio. Earnings could be cut a in half a couple times before the payout ratio become dangerously high.
Second, your dividend chart goes back 10 years but the dividend growth goes back even further. Seeking Alpha shows Coca-Cola dividend growing from as far back as 1989. During that time the company has survived all sorts of economic storms, booms, crashes, etc.
Third, I think crafting your own dividend portfolio like Warren Buffett did is not difficult to do. I think it would be possible to apply many of the sames qualitative and quantitative metrics from Compounding Quality to Compounding Dividends. An investor would still want a company with an economic moat with strong financials and is foundational to modern society. A lousy company can't sustain, let alone grow, a dividend. Rather than buy into a dividend focused ETF, cherry pick 5 - 8 companies, maybe 1 or 2 CEFs, 1 or 2 investment grade bonds, and park some cash in a money market account. Done right, you will have a wonderful dividend portfolio!
Good observations Boris! The payout ratio is important when you're evaluating the safety of the dividend, as well as the ability for the company to continue growing it.
Coca-Cola and Chevron are both dividend aristocrats. Coca-Cola has increased the dividend for 62 years in a row, and Chevron has a 37-year history of dividend increases!
Well done! 👍
A couple interesting notes to consider about these dividend paying companies.
First, look at the payout ratios. They are very reasonable. Coca-Cola's may seem high but the company has a strong moat around its brand and the revenues are reliable. It can support the dividend. Occidental Petroleum has a very, very low payout ratio. Earnings could be cut a in half a couple times before the payout ratio become dangerously high.
Second, your dividend chart goes back 10 years but the dividend growth goes back even further. Seeking Alpha shows Coca-Cola dividend growing from as far back as 1989. During that time the company has survived all sorts of economic storms, booms, crashes, etc.
Third, I think crafting your own dividend portfolio like Warren Buffett did is not difficult to do. I think it would be possible to apply many of the sames qualitative and quantitative metrics from Compounding Quality to Compounding Dividends. An investor would still want a company with an economic moat with strong financials and is foundational to modern society. A lousy company can't sustain, let alone grow, a dividend. Rather than buy into a dividend focused ETF, cherry pick 5 - 8 companies, maybe 1 or 2 CEFs, 1 or 2 investment grade bonds, and park some cash in a money market account. Done right, you will have a wonderful dividend portfolio!
Good observations Boris! The payout ratio is important when you're evaluating the safety of the dividend, as well as the ability for the company to continue growing it.
Coca-Cola and Chevron are both dividend aristocrats. Coca-Cola has increased the dividend for 62 years in a row, and Chevron has a 37-year history of dividend increases!