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Stocks B / Berkshire Hathaway

URL:  https://boards.fool.com/so-you-want-a-dividend-27763831.aspx

Subject:  So you want a dividend Date:  6/22/2009  5:05 PM
Author:  mungofitch Number:  155445 of 264387

For those who like Berkshire but want a dividend, many unkind words
have been said over the years. (I think they are both reasonable
goals, just not from the same security). So, herewith an alternative.

Why not just buy a bunch of the stocks that Berkshire owns which happen
to be paying good dividends right now? The stock picks of Mr Buffett
and Mr Simpson et al are not perfect, but I think simply stealing their
picks works considerably better than a dart board at finding good solid firms.

I thought a 4%/year current dividend yield would be a nice target.
I took all the big Berkshire holdings which are currently yielding over 3%,
and reweighted them so you have more of the higher yielders, and then
fiddled it a bit to cap the largest holdings, and to force GE and WFC into the list.

Ticker   Yield   Weighting   Price
MTB 6.30% 7.50% 44.44
COP 4.64% 6.25% 40.52
ETN 4.61% 6.19% 43.37
KFT 4.59% 6.15% 25.25
GSK 4.59% 6.14% 35.70
GCI 4.52% 6.00% 3.54
SNY 4.39% 5.75% 32.78
HD 3.86% 4.72% 23.30
UPS 3.83% 4.65% 47.02
NSC 3.73% 4.47% 36.45
CEG 3.66% 4.34% 26.26
JNJ 3.52% 4.10% 55.64
IR 3.50% 4.05% 20.59
PG 3.48% 4.02% 50.62
GE 3.46% 7.50% 11.57
KO 3.41% 3.89% 48.16
PKX 3.20% 3.54% 78.65
TSCO.L 3.16% 3.48% 356.14 (UK pence)
AXP 3.08% 3.34% 23.34
WFC 0.88% 3.92% 22.80
_______
100.00%

This portfolio has a total yield of 4.00% right now. It's a nice
round 20 stocks, no single stock accounts for more than 7.5% of the
portfolio, and the biggest holding is less than twice the size of the smallest.

As for that 4%....I think there is a good chance that Wells and GE may reinstate
their dividends, at or close to the old rates. If they merely raise them
half way to the old levels, the yield on this portfolio would rise to 4.37%.
That's why WFC is in the list even though the yield is low right now---
if they reinstate the dividend, as I expect them to do within a couple
of years, the old dividend on the current price is a yield of 5.96%.
As for GE, I think there is a small chance it will blow up and a huge
chance it will prosper immensely. The joys of leverage!
If they prosper, the price and the dividend will both rise a lot.

Counteracting this yield up-side is the fact I expect broad US dividends
may fall for a few years and may stay lower for quite a while, though
probably not much worse than 1/3 lower than they are now.
Since this is a broad portfolio, I would be prepared for cuts in
the yield along the same lines, perhaps as low as 2.5% for a while.
This is a high quality crowd, so I expect the dividend cuts to be
more mild than for the average company, meaning that's a worst case.
Here are some of my recent thoughts on broad-market US dividends---
http://boards.fool.com/Message.asp?mid=27684817

Bottom line, this is a bunch of good firms giving a good yield, and I
think they make a fairly safe and sensible long run equity portfolio.
It's probably good for a very long hold. I would not rebalance it,
since the long run prospects of some of the firms (like Wells) are
hugely better than for some of the others (like Gannett). So, it's
best to let the winners run and run in this case, letting the really
great firms eventually come to dominate the portfolio even if some
things are temporarily overvalued and over-represented occasionally.

Jim
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