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Buffett's $3.8 Billion "Missing" Paycheck

By: Carla Pasternak
Posted: 10/26/2010 11:09:00 AM
Referenced Stocks: COP;GE;GS;GSK;MTB;SNY

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-B) portfolio.

I came across a neat resource if you also like to keep tabs on Buffett. has a page that tracks the common stocks in Berkshire's portfolio in real-time. You can visit it here .

Looking at that page, it's very evident Warren and I invest a little differently. 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 it doesn't own many stocks I would even look at twice for income. The closest one is GlaxoSmithKline ( GSK ) , which yields 4.9%.

To its credit, Berkshire does own some securities throwing off nice income. The company acquired some Goldman Sachs ( GS ) and General Electric ( GE ) preferreds in late 2008 that pay a niceyield of 10%. However, that was a special deal not available to retail investors.

Digging a little deeper into Berkshire's holdings, I found the roughly 40 common stock holdingsyield an average of only about 2.0%. Even so, thanks to the massive size of its portfolio, Berkshire will rake in an astonishing $1.2 billion from dividends alone in the next year if you project the annual payments of the current holdings forward. Certainly $1.2 billion is nothing to sneeze at.

But Buffett's disinterest in income is costing Berkshire.

On a whim, I calculated the averageyield of the 27 holdings in my High-Yield Investin g portfolios (I like to be able to watch my holdings like a hawk -- that's why my portfolio isn't larger than it is). It comes out to 7.4% -- more than five full points above Berkshire's 2.0% averageyield .

In actual dividends paid, the difference between theyield on my portfolio and Berkshire's would be staggering. Berkshire's portfolio totals $50.9 billion (which is more than the GDP of Panama, Iceland and Bulgaria, among others). If the entire portfolio earned 7.4% in dividends annually, payments would total $3.8 billion -- over $2.6 billion more than it does right now, and enough to purchase nearly twenty Boeing 747s.

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 has nearly 30 years of income investing experience, including serving as the Director of Research for High-Yield Investing and High-Yield International. Read More...

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Disclosure: Neither Carla Pasternak nor StreetAuthority, LLC hold positions in any securities mentioned in this article.