Imagine being able to invest like Warren Buffett, the legendary investor known for his success in the financial services industry. Through all types of market conditions, Buffett has consistently found opportunities to extract favorable deals with leading banking and insurance companies. His long-term approach has allowed him to build massive positions in struggling firms, while patiently collecting significant dividends. In this article, we will explore two picks from Buffett’s favorite industry that offer high yields and can empower your retirement.
Pick #1: BTO – Yield 10.2%
The recent sell-off in the banking sector, combined with increasing regulatory pressure, has created investment opportunities in regional banks. Insiders at several banking institutions, including First Citizens Bancshares and US Bancorp, have been buying up stock on the open market. This suggests a positive outlook from those with an intimate understanding of the industry.
The John Hancock Financial Opportunities Fund (BTO) is a closed-end fund with diversified assets across banking and capital market companies. This fund has a track record of solid performance and takes advantage of discounted opportunities in the financial services sector. Currently, BTO pays a quarterly distribution of $0.65/share, resulting in a healthy 10.5% annual yield. With $105 million in unrealized gains, BTO has enough coverage to sustain its distribution for approximately two years.
Pick #2: ATH Preferreds – Up to 8% Yields
Athene Holding Ltd., a leading retirement services company, managed $257 billion in gross invested assets as of June 2023. The firm has consistently achieved solid growth, doubling its assets since 2018. Athene’s balance sheet remains strong, with a debt-to-capital ratio below the peer average and $78 billion in available liquidity. The company’s senior debt and preferred stock are attractive income opportunities.
Athene preferreds pay qualified dividends and are currently discounted. We recommend considering the following preferreds:
- ATH.PR.B offers a fixed rate yield of 7.8% and presents 34% upside to par.
- ATH.PR.D provides a fixed-rate yield of 7.9% and offers 62% upside to par.
- ATH.PR.A lets you lock in a high 7.8% yield until June 2029, after which it floats to 3-month LIBOR + 4.253%.
These Athene preferreds present excellent investment opportunities, particularly amidst rate uncertainties and recession fears.
Warren Buffett’s investment strategy in the financial industry has proven successful time and time again. By taking advantage of market downturns and investing for the long term, Buffett has collected significant dividends for decades. Following his principles, we can find investment opportunities that cater to retirement needs. In the current buyer’s market, opportunities exist to secure high yields and empower our retirements. Consider adding BTO and Athene preferreds to your investment portfolio for a merry and energetic retirement.