Buffett's $5.1 Billion "Missing" Paycheck

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To say Warren Buffett has done well for himself would be an understatement. That's why from time to time, I like to check in on what the "Oracle of Omaha" is doing with Berkshire Hathaway's (NYSE: BRK-A ) portfolio.

There is a neat resource if you like to keep tabs on Buffett, CNBC.com has a page that tracks the common stocks in Berkshire's portfolio in real-time. You can see it here.

Looking at that page, it's very evident that Warren and I invest a little differently than each other. He's the most famous value investor in the world. I'm more than happy to let the dividends roll in month after month -- even if the checks aren't in the billions or millions.

So while I understand he isn't on the prowl for high-income securities, the holdings still left me a little astonished. Poring over the names, I recognized every stock -- Berkshire owns some of the most well-known companies in the world.

But I also recognized that they don't own many stocks I would even look twice at for income. The best one is GlaxoSmithKline (NYSE: GSK ) , which yields 6.0%.

To its credit, Berkshire has bought some securities that threw out nice income. Back in 2008, it acquired some Goldman Sachs (NYSE: GS ) and General Electric (NYSE: GE ) preferreds that paid a nice yield of 10%. However, that was a special deal not available to retail investors and both companies have since redeemed thoseshares .

Digging a little deeper into Berkshire's holdings, I found the 34 common stock holdings yield an average of only 2.0%. Even so, thanks the massive size of its portfolio, Berkshire will rake in an astonishing $1.5 billion from dividends alone over the next year if you project forward the annual payments of the current holdings. Certainly $1.5 billion is a lot of money.

But Buffett's disinterest in income is costing Berkshire.

Just to see what happened, I calculated the average yield of the 44 holdings in my High-Yield Investing portfolios. It comes out to 7.0% -- more than five full points above Berkshire's 2.0% average yield.

In actual dividends paid, the difference between the yield on my portfolio and Berkshire's would be staggering. Berkshire's portfolio totals $73.1 billion (which is more than the GDP of Kenya, Puerto Rico, and Yemen, among others). If the entire portfolio earned 7% in dividends annually, payments would total $5.1 billion -- over $3.6 billion more than it does right now, and enough to purchase seven dozen Boeing 737's.

Action to Take --> Of course, we don't all have the portfolio of Berkshire Hathaway, and I think Warren Buffett has done ok for himself with his value focus. But the same principles that are leaving billions on the table for Berkshire could be leaving thousands on the table for your portfolio if you aren't making dividends a priority.


-- Carla Pasternak

Carla Pasternak does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC does not hold positions in any securities mentioned in this article.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

© Copyright 2001-2010 StreetAuthority, LLC. All Rights Reserved.


This article appears in: Investing , Investing Ideas

Referenced Stocks: GE , GS , GSK

Carla Pasternak

Carla Pasternak

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