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How Much Income Can You Make Investing $10,000 in Warren Buffett’s Top 5 Dividend Stocks?

Imagine receiving $4.84 billion in dividend income in a single year. If you’re Warren Buffett, you won’t have to use your imagination. That’s how much Berkshire Hathaway (BRK.A 0.01%) (BRK.B -0.57%) rakes in annually from just six stocks.

You’re probably not going to pull in that much money from dividends. But you can still do quite well following Buffett’s lead. Here’s how much income you could make investing $10,000 in each of Buffett’s top five dividend stocks.

Buffett’s top five

Let me first define how I identified Buffett’s top five dividend stocks. I didn’t only focus on the stocks in which Berkshire has the biggest positions. Instead, I ranked all of the stocks in the conglomerate’s portfolio by their dividend yield and selected the five with the highest yields.

Buffett’s highest-yielding dividend stock right now is Paramount Global (PARA 2.94%). The entertainment company pays a dividend yield of 4.61%. Paramount was one of several new stocks in Berkshire’s portfolio last year.

Although Buffett isn’t as big of a fan of bank stocks as he used to be, he still owns several. US Bancorp (USB 0.33%) is in the group. Its dividend yield of 4.11% ranks it in second place among Berkshire’s highest-yielding stocks.

Berkshire owns such a large stake in Kraft Heinz (KHC 0.08%) that the food company is listed among Berkshire’s subsidiaries on its website. Kraft Heinz is also one of the top dividend stocks in Berkshire’s portfolio with a dividend yield of a little over 4%.

Another bank comes in at the No. 4 spot on the list. Citigroup (C -0.63%) offers a dividend yield of 3.97%.

Ally Financial (ALLY 0.15%) stood out as one of the stocks Buffett bought hand over fist in 2022. The financial services company’s dividend yield of 3.67% narrowly edges out HP to make the list of the multibillionaire’s top five dividend stocks.

Counting the money

Now let’s look at how much money you could make this year by investing $10,000 in each of Buffett’s top five dividend stocks. The following table provides the details.

Stock Dividend Yield Annual Income
Paramount Global 4.61% $461
US Bancorp 4.11% $411
Kraft Heinz 4.01% $401
Citigroup 3.97% $397
Ally Financial 3.67% $367
  Total $2,037

Data source: Yahoo! Finance. Table by author.

In case you were wondering, the average yield for these five stocks is 4.07%. An investment of $50,000 split equally across the stocks would rake in a tidy amount of annual income.

Note, too, that it’s possible your income could be even greater than $2,037. One or more of the companies could increase their dividend payout during the year. Of course, it’s also possible (although unlikely) that any of these companies could reduce its dividend.

An important consideration

Any time you buy dividend stocks, it’s important to consider more than just the dividend. A steep decline in the share prices of Paramount Global, US Bancorp, Kraft Heinz, Citigroup, and/or Ally Financial could more than offset any dividend income you receive. On the other hand, share price appreciation could boost your total returns.

The Federal Reserve’s moves in 2023 related to interest rates could impact all of the stocks. That’s especially the case for the financial stocks on the list.

Should the U.S. economy enter into a recession, any or all of these stocks could also be affected. Anxious consumers aren’t as likely to spend money on going to the movies (which could hurt Paramount) or taking out loans (which could impact US Bancorp, Citigroup, and Ally). Kraft Heinz is probably in the best position among these stocks to weather a recession fairly well.

If you’re going to invest any amount of money in these top Buffett dividend stocks, be aware of the risks.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Ally is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and HP. The Motley Fool recommends Kraft Heinz and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.

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