Warren Buffett likes to brag about the big dividends some of his S&P 500 stocks pay. But this year, like most investors he is scoring the biggest gains with Warren Buffett stocks that don't pay any dividend at all.
Seven of the top eight best-performing U.S.-listed stocks in Berkshire Hathaway's public portfolio — including financials Nu Holdings and StoneCo as well as Amazon.com — pay no dividend whatsoever. And yet, these seven Warren Buffett stocks are up an average of 36.7% — blowing away the S&P 500's 9.6% year-to-date gain and the 6.2% gain of the average stock in the Berkshire Hathaway portfolio.
Buffett's experience is in line with one of the most surprising trends in the S&P 500: Dividend stocks are flopping this year.
It seems if you can get 4% or higher interest rates from an FDIC-insured savings account, the S&P 500's 1.6% dividend yield isn't worth the trouble.
"Dividend stocks are in a long winter," said Bespoke Investment Group.
Even Warren Buffett Stocks That Pay Dividends Are Whiffing
Dividend stocks are out — even most of the ones Buffett picked.
The iShares Select Dividend ETF is down 7.3% despite yielding twice the S&P 500's 3.4%. Meanwhile, the SPDR Portfolio S&P 500 Growth ETF, which yields just 1.5%, is up 13%.
Several of Buffett's very worst stocks this year are big dividend payers. Shares of Bank of America are down more than 14% even after paying a fat 3.1% yield. And Chevron and Jefferies Financial are off 14.2% and 11.2%, respectively, despite their nearly 4% yields.
And don't assume some of these stocks are falling just because they're in the financial sector. Berkshire Hathaway's top stock this year, Nu Holdings, is also a financial. Shares of the U.S.-listed digital banking company based in Brazil are up nearly 58% this year. And that's despite paying zip in terms of a dividend.
Other Winning $0 Dividend Stocks
Another financial stock Buffett owns, StoneCo, is also a big winner despite paying no dividend.
Shares of the financial technology firm are up more than 44% this year. It's not a huge position for Buffett. Berkshire Hathaway owns less than 4% of the company's shares outstanding. Nonetheless, StoneCo makes up in growth for what it lacks in dividends. Analysts think the company's adjusted profit will boom by more than 95% this year to $3.34 a share.
Similarly, Amazon.com is a tiny holding for Berkshire Hathaway, worth just $1.2 billion. Berkshire Hathaway owns less than 0.2% of the company — perhaps because it's a megacap tech that still doesn't pay a dividend. Nonetheless, Amazon is up 41% this year, making it the No. 3 performer among U.S.-listed Buffett stocks.
That's not to say none of Buffett's dividend payers is paying off. Apple is Berkshire Hathaway's largest position by far, occupying about half of the U.S.-listed public portfolio. And Apple is the exception — sort of. Shares are up a strong 35% this year, and the company does pay a dividend. It's a tiny dividend, though, of just 0.6%.
But, by and large, you won't be hearing many complaints this year about some of Berkshire Hathaway's stocks not paying a yield. That's what a savings account is for, it seems.
These Warren Buffett Stocks Pay Zilch
Seven of Berkshire Hathaway's top eight stocks this year pay no dividend
| Company | Symbol | Dividend | YTD change | Sector |
|---|---|---|---|---|
| Nu Holdings | 0% | 57.0% | Financials | |
| StoneCo | 0 | 44.3 | Financials | |
| Amazon.com | 0 | 40.7 | Consumer Discretionary | |
| DaVita | 0 | 35.2 | Health Care | |
| Apple | 0.6 | 34.7 | Information Technology | |
| Floor & Decor | 0 | 30.8 | Consumer Discretionary | |
| Snowflake | 0 | 28.4 | Information Technology | |
| Formula One | 0 | 22.6 | Communication Services |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
