Berkshire Hathaway’s $1.3 Billion Dividend Earnings in 2023

Warren Buffett’s Berkshire Hathaway has never issued dividends, prioritizing capital deployment for shareholder returns. Despite this, Berkshire’s investments in dividend-paying stocks will generate over $1.3 billion in passive income this year.

Chevron: $811 Million in Annual Dividends

Berkshire has invested heavily in U.S. oil companies, acquiring over 118.6 million shares of Chevron (NYSE: CVX). This acquisition represents nearly 6% of Berkshire’s portfolio and makes Chevron its fifth largest equity holding. Chevron currently pays a quarterly dividend of $1.71 per share, yielding about 5%. If maintained, this will result in approximately $811.3 million in dividends for Berkshire this year.

Chevron has increased its quarterly dividend by 5%, marking 38 consecutive years of annual dividend growth. The company reported $1.3 billion in first-quarter free cash flow, yet excluding capital volatility, normalized cash flow stood at $3.7 billion. Management anticipates $10 billion in additional free cash flow by 2026, assuming oil prices stabilize around $70 per barrel. Growth in dividends remains a priority, suggesting that share buybacks would be scaled back before dividends in case of falling oil prices.

Kraft Heinz: $521 Million in Annual Dividends

Berkshire’s partnership with 3G Capital led to the $23 billion acquisition of Heinz in 2013, followed by the merger with Kraft in 2015. Despite a significant decline in share value, Berkshire holds over 325.6 million shares of Kraft Heinz (NASDAQ: KHC) and is set to receive around $521 million in dividends this year.

Kraft Heinz has a 10-year track record of dividend payments but notably reduced its dividend in 2019 due to debt management, with no increases since then. However, its dividend yield remains over 6%. Analysts project a trailing-12-month free cash flow yield near 9.5% and $2.63 in cash flow per share this year, comfortably covering the expected $1.60 in dividends. Although Kraft Heinz’s future is uncertain, possible strategic alternatives could unlock shareholder value while its dividends remain secure.

Investment Considerations for Chevron

Before investing in Chevron, it’s wise to explore other options. Current recommendations from analysts list alternative stocks that could offer substantial returns, reflecting on past success stories.

Bram Berkowitz has no positions in the stocks mentioned. The Motley Fool has interests in and recommends Berkshire Hathaway and Chevron, while Kraft Heinz is also recommended.

The views expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.