In this article, we discuss 12 best value dividend stocks to buy according to Warren Buffett. You can skip our detailed analysis of Buffett's investment strategy and the performance of dividend stocks over the years, and go directly to read 5 Best Value Dividend Stocks to Buy According to Warren Buffett.
Warren Buffett, known as the Oracle of Omaha, is famous for his successful value investing approach. His hedge fund, Berkshire Hathaway, holds a remarkable portfolio that includes major companies like The Coca-Cola Company (NYSE:KO), Bank of America Corporation (NYSE:BAC), The Procter & Gamble Company (NYSE:PG), and more. Buffett’s strategy centers on investing in specific companies with a strong history, rather than just investing in the overall stock market. Many aspire to follow in his investment footsteps.
Value stocks are stocks of companies that are priced lower compared to their true, intrinsic value. In one of our articles, we examined the long-term returns of value stocks compared to growth stocks. We mentioned that value investing has shown its effectiveness in the long run, delivering a total return of 1,344,600% since 1926, while growth stocks have yielded a return of 626,000%.
During a period of high inflation in 2022, value stocks globally went down by 7%, while growth stocks experienced a more significant decline of 28.6%. Additionally, value stocks showed their most robust performance in the US relative to growth stocks since the dot-com crash in 2000. In 2023 so far, value stocks haven’t performed as well as growth stocks, falling behind in terms of returns and market performance. As of September 27, the Russell 3000 Growth index has beaten its value counterpart by nearly 22 percentage points, which is the second-largest difference in performance since 2001, as reported by Dow Jones Market Data. However, there's an anticipation or belief in the market that these value stocks will bounce back as their performance remains better than growth stocks in the third quarter of 2023. Value stocks fell by 1.7% over the quarter, outperforming growth, which declined by nearly 5%. However, the gap between the two styles is notable year-to-date, with growth stocks outperforming by more than 18%.
Besides investing in value stocks, Buffett also puts a lot of money into dividend-paying stocks. As of the end of the second quarter in 2023, most of the companies in his investment portfolio not only pay dividends to their shareholders but also have a strong track record of doing so. In this article, we will take a look at some of the best value stocks in Buffett’s portfolio that also pay dividends.
Best Value Dividend Stocks to Buy According to Warren Buffett
Our Methodology:
For this article, we analyzed Berkshire Hathaway's 13F portfolio as of the second quarter of 2023 and picked dividend stocks. From that list, we selected stocks that have price-to-earnings (P/E) ratios below 25 as of October 14. A low P/E ratio indicates that a stock or an investment is relatively undervalued in the market. We have also mentioned Berkshire Hathaway's stake value in each stock. The stocks are ranked in ascending order of their P/E ratios as of October 14.
The Procter & Gamble Company (NYSE:PG) is an American multinational consumer goods company. It currently pays a quarterly dividend of $0.9407 per share and has a dividend yield of 2.60%, as of October 14. The company has been raising its dividends for 67 consecutive years. With a P/E ratio of 24.29, PG is one of the best value stocks in Warren Buffett's portfolio.
During the second quarter of 2023, Berkshire Hathaway did not change its position in The Procter & Gamble Company (NYSE:PG) and owned stakes worth over $47.8 million in the company. It represented 0.01% of Buffett's portfolio.
At the end of Q2 2023, 74 hedge funds in Insider Monkey's database reported having stakes in The Procter & Gamble Company (NYSE:PG), compared with 75 in the previous quarter. The collective value of these stakes is over $5.3 billion. Among these hedge funds, Fundsmith LLP was the company's largest stakeholder in Q2.
Mondelez International, Inc. (NASDAQ:MDLZ) is an American multinational food and snack company that operates in the consumer goods industry. The stock has a P/E value of 20.2 as of October 14. On September 27, the company announced a 10% hike in its quarterly dividend to $0.425 per share. Through this increase, the company took its dividend growth streak to ten years, which makes it one of the best value stocks with dividends. The stock has a dividend yield of 2.76%, as of October 14.
At the end of Q2 2023, Berkshire Hathaway owned 578,000 shares in Mondelez International, Inc. (NASDAQ:MDLZ), worth over $42.1 million. The company represented 0.01% of the firm's 13F portfolio.
The number of hedge funds in Insider Monkey's database owning stakes in Mondelez International, Inc. (NASDAQ:MDLZ) grew to 55 in Q2 2023, from 51 in the previous quarter. The overall value of these stakes is over $1.74 billion.
The Kroger Co. (NYSE:KR) is one of the largest and most prominent retail grocery chains in the US. On September 14, the company declared a quarterly dividend of $0.29 per share, which was consistent with its previous dividend. In 2023, the company stretched its dividend growth streak to 17 years, which makes it one of the best value stocks with dividends. The stock's dividend yield on October 14 came in at 2.63%.
At the end of the second quarter of 2023, 43 hedge funds tracked by Insider Monkey owned investments in The Kroger Co. (NYSE:KR), which remained unchanged from the previous quarter. The overall value of these stakes is over $3.13 billion.
Oakmark Funds funds mentioned The Kroger Co. (NYSE:KR) in its Q3 2023 investor letter. Here is what the firm has to say:
“The Kroger Co. (NYSE:KR) is the second-largest grocery retailer in America behind only Walmart. Although the grocery industry is highly competitive, Kroger’s scale advantages allow it to offer a more compelling value proposition than smaller peers and earn higher returns on capital. In recent years, the market has assigned Kroger a lower multiple due to concerns that e-commerce would disrupt traditional brick-and-mortar grocery. However, we believe the company’s performance through the pandemic highlighted that its store footprint, distribution infrastructure, technology investments and strong brand all position the company well for a world with higher online grocery adoption. The stock trades for just 10x our estimate of next year’s EPS, which we believe is attractive given Kroger’s competitive positioning and earnings growth outlook. The pending merger with Albertsons has the potential to drive accelerated earnings growth and further scale advantages. If the merger is not approved, the company will have the capacity to return approximately 25% of its market cap to shareholders.”
American Express Company (NYSE:AXP) is an American multinational financial services company that offers a range of credit card products, including consumer, small business, and corporate cards. The company was the third largest holding of Berkshire Hathaway at the end of Q2 2023 as the firm owned an AXP stake worth over $26.4 billion. The company represented 7.58% of the firm's 13F portfolio.
American Express Company (NYSE:AXP) has been making regular dividend payments to shareholders since 1989. The company offers a quarterly dividend of $0.60 per share and has a dividend yield of 1.55%, as of October 14. With a P/E ratio of 15.3, AXP is one of the best value stocks with dividends.
As of the close of Q2 2023, 73 hedge funds in Insider Monkey's database owned stakes in American Express Company (NYSE:AXP), compared with 77 in the previous quarter. The consolidated value of these stakes is over $28 billion.
The Kraft Heinz Company (NASDAQ:KHC) is a multinational food and beverage company that specializes in producing and marketing a wide range of consumer food products. The company currently pays a quarterly dividend of $0.40 per share and has a dividend yield of 5.08%, as of October 14. It has been paying regular dividends to shareholders since its merger in 2015.
The Kraft Heinz Company (NASDAQ:KHC) represented 3.31% of Warren Buffett's portfolios in Q2 2023. His hedge fund owned over 325.6 million shares in the company worth over $11.5 billion.
The number of hedge funds tracked by Insider Monkey owning stakes in The Kraft Heinz Company (NASDAQ:KHC) grew to 39 in Q2 2023, from 34 in the previous quarter. The collective value of these stakes is over $12.2 billion.
Occidental Petroleum Corporation (NYSE:OXY) is a major international oil and gas exploration and production company. In the second quarter of 2023, Berkshire Hathaway increased its stake in the company by 6% to over $13.1 billion. The company made up 3.78% of the firm's 13F portfolio.
On July 27, Occidental Petroleum Corporation (NYSE:OXY) declared a quarterly dividend of $0.18 per share, which was in line with its previous dividend. The stock's dividend yield on October 14 came in at 1.10%.
Insider Monkey's database of Q2 2023 showed that 73 hedge funds owned stakes in Occidental Petroleum Corporation (NYSE:OXY), compared with 81 in the previous quarter. The consolidated value of these stakes is over $15.4 billion. In addition to Berkshire Hathaway, Fairfax Financial Holdings was one of the company's leading stakeholders in Q2.
An American multinational oil and gas company, Chevron Corporation (NYSE:CVX) is next on our list of the best value stocks with dividends. The company offers a quarterly dividend of $1.51 per share and has a dividend yield of 3.60%, as of October 14. It has been growing its dividends consistently for the past 36 years.
At the end of Q2 2023, Berkshire Hathaway owned over $123 million shares in Chevron Corporation (NYSE:CVX), worth over $19.3 billion. The company represented 5.56% of the firm's 13F portfolio.
As of the end of the second quarter of 2023, 73 hedge funds owned stakes in Chevron Corporation (NYSE:CVX), up from 64 in the previous quarter. The collective value of these stakes is over $21.4 billion.
