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Warren Buffett’s Stocks with Dividend Yields Above 3.5%
Posted by: Holly LaFon (IP Logged)
Date: March 22, 2012 05:28PM
GuruFocus’ newly released All-in-One Screener enables users to find exactly the type of stocks they are looking for easily. As a demonstration, you can search for Warren Buffett’s stocks that have a minimum dividend yield of 3.5%. First, go to the Gurus tab, enable gurus under Gurus Currently Holding and click on Warren Buffett. Then, go to the Fundamental tab and next to Min Yield click on 3.4%. Six stocks appear at the bottom that fit this description: Gannett Inc. (GCI), Glaxosmithkline (GSK), Sanofi-Aventis (SNY) and Johnson & Johnson (JNJ).
Gannett Inc. (GCI)
Gannett is a major media and marketing company involved in digital, mobile, broadcast and print media. It owns 82 daily newspapers, 23 televisions stations and 600 magazines.
Gannett has a sizable dividend yield of 5.3%, particularly compared to other companies in the publishing industry. The Washington Post (WPO) pays 2.52%, and News Corp (NWS) pays 0.84%, for instance.
The company’s dividend has not been stable in recent years. It reduced the dividend from $.40 to $.04 in 2009. Then, on February 22, it announced that its board had approved a 150% dividend increase to $0.80 per share on an annual basis. It also announced a share repurchase program of $300 million as part of “an ongoing part of cash return to shareholders.”
After a period of financial strain that caused the dividend to be cut in 2009, the company has been taking aggressive action toward generating growth. As a result, it paid back $2 billion in 2011 and generated $2.4 billion in free cash flow. The boosted dividend is a reflection of management’s belief in the company’s future financial strength.
Prior to the dividend cut, Buffett held 3,448,000 Gannett shares as a long-term holding. In the fourth quarter of 2009, he sold 1,245,400 shares for an approximate $12 per share, then sold an additional 461,969 shares in the first quarter of 2010 for an approximate $16 per share. He now holds 1,740,231 shares and the stock trades for $15.34 per share.
GlaxoSmithKline is a science-led global healthcare company that develops prescription medicines, vaccines, consumer healthcare and dermatology products.
The company is one of three pharmaceutical companies in Buffett’s portfolio yielding higher than 3.4% and has the third-largest yield in the pharmaceutical industry at 5%. In 2011 the company increased its dividend 8% and also distributed a 5p supplemental dividend from the net proceeds from the sale of its non-core North American OTC brands. When it finds a buyer for its remaining non-core assets it will return the net proceeds from the sale in the form of another dividend.
The total dividend and share buy backs GlaxoSmithKline paid in 2011 amounted to all of its free cash flow and asset disposal proceeds.
Buffett owns 1,510,500 shares of GlaxoSmithKline, which he purchased in the fourth quarter of 2007 for an average price of $51.45 per share.
Sanofi-Aventis is a diversified global healthcare company operating in more than 100 companies that aims to treat and prevent disease. It has a dividend yield of 3.5%.
The CEO of Sanofi, Christopher A. Viehbacher, discussed what part dividends and share buy backs played in its equity story in a February interview: “Clearly, shareholder returns are extremely important and our preferred method of achieving that is through an enhanced dividend policy. When I look at the dividend that we paid last year in respect of 2010, we achieved a pay-out ratio of 35%, but we believe we can do better – and should do better – than that. So we have committed to increasing the pay-out ratio to 50% by the time we pay the 2013 dividend in 2014. So when we look at the dividend now, in respect of 2011, we’re proposing a dividend of €2.65. This is an increase of 6% and improves our pay-out ratio to 40%. In addition to that, we’ve also said that we believe in opportunistic buy-backs and in 2011 we actually achieved €1 billion of buy-backs. That programme of opportunistic buy-backs will continue into 2012. So between an opportunistic share buy-back and an enhanced dividend policy, we believe that we offer an attractive investment opportunity for shareholders.”
Sanofi realized higher revenues and earnings in 2011 due largely to its acquisition and integration of Genzyme, which resulted in a higher dividend payment of $1.37 per share, compared to $1.10 per share in 2010. It is facing significant headwinds in 2012 though as its patents for major drugs Plavix, Avapro and Eloxatin will expire, resulting in an estimated $1.86 billion loss in 2012. Its biggest forthcoming drug, Lemtrada, for the treatment of multiple sclerosis, could bring in 700 million to 1 billion euros, Viehbacher estimates.
Sanofi is one of Buffett’s foreign holdings. He owned 291,577,428 shares at year-end 2011, increased from 242,163,773 shares at year-end 2010.
Johnson & Johnson (JNJ)
Johnson & Johnson is a corporation focusing on consumer health care, medical devices & diagnostics and pharmaceuticals. It was founded 125 years ago and owns more than 150 companies in 57 countries. Its dividend yield is 3.5%. The company has increased its dividend every year for the past 49 years. Most recently, in 2011, the dividend increased to $2.25 per share from $2.11 in 2010. In 2011, it grew adjusted earnings for the 28th consecutive year.
Johnson & Johnson had two challenging years and also faced trying times from the expiration the patents for two major drugs which together had peak-year sales of $6 billion. But the company returned to operational sales growth in 2011 and launched the most new pharmaceutical products in the U.S. from 2009 to 2011. It spent $37 billion over the past five years on R&D, which resulted in nine major approvals for new pharmaceutical products in the U.S., and has replenished its pipeline.
Warren Buffett’s Johnson & Johnson investment predates the second quarter of 2007. In the past two quarters, he has reduced the size of his position from 42,624,563 shares to 29,018,127. In the last year, the stock price increased almost 10%.
To find the stocks that match your unique criteria, try GuruFocus’ All-in-One Screener.
Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
Stocks Discussed: GCI, GSK, SNY, JNJ, WPO, NWS,