Don't believe for one second that Warren Buffett doesn't think about dividends. In his latest letter to Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) shareholders, he mentioned that the company received $785 million in dividends from just one stock in 2021 (it was Apple).
Buffett's recent buys for Berkshire's portfolio also hints that dividends might have been on his mind. In the third quarter of 2022, he purchased eight stocks. Seven of them pay dividends. A few of them offer dividends that are quite attractive. Buffett just bought these three dividend stocks with yields of over 3%.
1. Paramount Global
Paramount Global(NASDAQ: PARA) stands out as Buffett's only high-yield purchase in the third quarter. The media company's dividend yield currently tops 5.1%.
Buffett's history with Paramount goes back to when the company was known as Viacom. He led Berkshire to open a position in Viacom in 2012. While the legendary investor later sold all of those shares, he apparently regained an interest in the stock in the first quarter of this year and has kept on buying.
Berkshire now owns 15% of Paramount Global's outstanding class B shares. The stock hasn't been a winner for Buffett so far, though, with a year-to-date decline of close to 40%.
What does the multibillionaire investor like about Paramount (other than its dividend)? Its valuation probably ranks high on the list. The stock trades below 12.8 times expected earnings.
2. Jefferies Financial Group
Buffett has long been a fan of bank stocks. But he's become less enamored of the financial services sector lately. That's what makes Berkshire's new position in Jefferies Financial Group(NYSE: JEF) somewhat surprising.
With a market cap of under $9 billion, Jefferies is much smaller than the other banks in Berkshire's portfolio. Unlike those other bigger corporations, Jefferies focuses only on investment banking and doesn't have a commercial banking unit. But it offers a dividend that rivals the big boys with a yield of more than 3.2%.
Jefferies' stock has also outgained Berkshire's other bank stocks so far this year. However, Buffett's investment in the company played a key role in that outperformance.
Berkshire owns only a tiny position in Jefferies, though. That could indicate that Buffett and his team began buying in the latter part of the third quarter and are continuing to scoop up shares in the fourth quarter.
3. Chevron
It wasn't surprising whatsoever that Buffett added to his position in Chevron(NYSE: CVX) in the third quarter. The oil and gas giant is Berkshire's third-largest holding, including shares owned by its New England Asset Management subsidiary.
Chevron's dividend yield of 3.1% is lower than it's been throughout much of the past 10 years. That's not because the company has cut its dividend, though. Actually, Chevron is a Dividend Aristocrat with 35 consecutive years of dividend increases.
Instead, the company's dividend yield is lower because its stock price has risen so much. Chevron stock has soared nearly 60% year to date. That follows a 39% gain in 2021.
Buffett seems to still think Chevron is attractively valued. Its shares trade at 11.2 times expected earnings. There's a good chance that this stock -- and its dividend -- go even higher.
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Keith Speights has positions in Apple and Berkshire Hathaway (B shares). The Motley Fool has positions in and recommends Apple, Berkshire Hathaway (B shares), and Jefferies Financial Group Inc. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
