Home Education Warren Buffett has been buying up big on dividend stocks. Should you?

Warren Buffett has been buying up big on dividend stocks. Should you?

by WOOWinvest
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Warren Buffett has been buying up big on dividend stocks.  Should you?


Image source: Getty Images

As most investors would be acutely aware, 2022 has been a tough year for the markets. Year to date, the S&P/ASX 200 Index (ASX: XJO) has gone backwards by a nasty 12% or so.

That might put many investors off buying shares. These are uncertain times, after all.

But one investor has instead been buying up big. That would be the legendary Warren Buffett, of Berkshire Hathaway Inc (NYSE: BRK) fame.

As our Fool colleagues over in the US covered recently, Buffett has been spending big over the year so far. And one of his favorite shares to buy has been a dividend stock.

Buffett reportedly acquired 2.4 million shares of oil giant Chevron over the second quarter of 2022. Those 2.4 million shares would be worth approximately US$405.5 million on the latest pricing.

That brought Berkshire’s total holdings to 163.5 million shares, representing an 8.4% ownership of the entire company. That’s a stake worth more than US$27 billion.

Our Fool colleagues report that Buffett’s company will now enjoy almost US$929 million in dividend income per annum from this investment.

Following Buffett’s dividend example

Buffett’s enthusiasm for this dividend share highlights the value of a solid dividend payer during uncertain times. While share prices may fluctuate, nothing is more concrete than receiving hard cash.

As we discussed this morning, market volatility, even crashes, can be the discerning investor’s best friend. This is doubly true when it comes to dividend shares.

This is because the lower a dividend share’s price gets, the higher starting yield an investor can potentially enjoy. Take the Commonwealth Bank of Australia (ASX: CBA) share price.

Over 2022 thus far, CBA shares have endured significant volatility, having fluctuated between $108.35 and $86.98 a share this year. But CBA has still been raising its dividend consistently since 2020. Its two most recent dividend payments add up to $3.85 in dividends per share.

For an investor buying in at $108.35, this would give them a dividend yield of 3.55% on their capital. But if that same investor was braver and bought up at $86.98, they would be rewarded with a far better yield of 4.43% on their capital.

So it’s for this reason that all investors should strive to buy quality dividend shares at the lowest possible price. It’s one of the reasons Warren Buffett is one of the richest investors in the world, after all.

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