Warren Buffett is one of the world’s best investors. He doesn’t mind investing in some great dividend shares, although Berkshire Hathaway doesn’t actually pay a dividend itself.
If you don’t know who Warren Buffett is then you should watch this HBO documentary.
Here are three dividend shares that Warren Buffett probably would like:
Insurance Australia Group Ltd (ASX: IAG)
IAG is actually the only ASX business that we are aware of that Berkshire Hathaway has invested in. It took a stake of IAG for a 10-year share of quota share to pay 20% of claims for 20% of the premium revenue.
At the time of the deal, Warren Buffett said: “We have worked with IAG for more than 15 years and over that time we’ve developed a good understanding and respect for their people, what they offer and the way they do business. For us, they are a natural partner with a strong management team and brand presence.”
IAG is suffering from the bushfires and hail at the moment, but the lower share price could be a longer-term buying opportunity. The share price is down 18% over the past six months, causing the trailing grossed-up dividend yield to rise to around 5.75%.
Air New Zealand Limited (ASX: AIZ)
Warren Buffett was famously against investing in airlines for a long time. But he recently changed his mind and invested in US airlines. So perhaps Air New Zealand is a good option too?
There aren’t too many airlines that fly into New Zealand. It’s rated as one of the safest and highest-quality airlines in the world, which is how it’s able to achieve its fairly consistent results.
Airline performances are quite dependent on fuel prices, but airline results are not as volatile with the more fuel efficient planes and the US now being one of the biggest, if not the biggest, oil producers in the world which provides a more consistent oil price.
Air New Zealand has increased its dividend each year since 2017 in Australian dollar terms and it currently has a trailing dividend yield of 7.7%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is the business that’s most similar to Berkshire Hathaway on the ASX. Soul Patts is an investment conglomerate which both invests in listed shares and it also owns some businesses outright.
Some of its biggest ASX-listed investments are TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and Clover Corporation Limited (ASX: CLV). Some of the private businesses it owns are involved in resources, swimming schools, agriculture and luxury retirement living properties.
It is increased its dividend each year since 2000 and it has a forward grossed-up dividend yield of 4%.
Each of these shares have attractive dividends. Air New Zealand is a very different dividend share idea compared to most others on the ASX, but for income I think it’s hard to beat Soul Patts as a dividend pick on the ASX for reliability & long-term growth.
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Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020