Keith Speights, The Motley Fool
·4 min read
Do billionaires like dividend stocks? Absolutely. Just take a look at the holdings of famous billionaire investors such as Warren Buffett and Ken Griffin. They're loaded with dividend stocks.
Bill Gates stands out as another great example. Although he doesn't manage a public company or hedge fund like Buffett and Griffin do, he's donated a boatload of money to the Bill & Melinda Gates Foundation Trust. And over half of this charitable foundation's $42 billion portfolio is invested in these three dividend stocks.
1. Microsoft
It should come as no surprise that Microsoft (NASDAQ: MSFT) remains Gates' favorite stock. After all, he co-founded the technology company along with Paul Allen and led it for years. Microsoft ranks as the top holding for the Gates Foundation Trust by far, making up 33.98% of its total portfolio at the end of 2023.
Many tech companies don't pay dividends, but Microsoft is an exception. The company initiated a dividend program in 2003. Over the last 10 years, Microsoft has increased its dividend payout by nearly 168%. Its dividend yield, though, is still only 0.74%.
One key reason why the yield is so low is that Microsoft's share price has soared. The stock has been a 10-bagger over the last 10 years and is up almost 60% over the last 12 months.
2. Canadian National Railway
The Gates Foundation isn't just betting on tech stocks such as Microsoft. Canadian National Railway (NYSE: CNI) ranks as its third-largest holding, making up nearly 16.3% of the total portfolio.
Canadian National Railway isn't limited to just Canada. It has 20,000 or so miles of rail that transport products in the middle part of the U.S. as well. The company also offers transportation and logistics services in addition to rail operations.
The transportation company has increased its dividend for 28 consecutive years, most recently boosting its dividend payout by 7% in the first quarter of 2024. Its dividend yield currently stands at 1.94%.
3. Caterpillar
Caterpillar (NYSE: CAT) is the fifth-largest position for the Gates Foundation. It makes up 5.14% of the total portfolio. That brings the combined weight of these three dividend stocks to 55.41%.
The Gates Foundation has owned Caterpillar since the fourth quarter of 2005. However, the last time it added shares of the equipment manufacturer was back in the fourth quarter of 2013. The most recent transaction involving Caterpillar came in 2022 Q1, with the sale of roughly 24% of the foundation's stake in the company.
Caterpillar has generated nice dividend income for the Gates Foundation through the years. The company has paid a dividend every quarter since 1933 and has increased its payout for 29 consecutive years. Its dividend now yields 1.55%.
Are Bill Gates' top dividend stocks smart picks for other investors?
It isn't a good idea to buy any stock just because a billionaire investor owns it. For one thing, the factors at play when the billionaire first bought the stock could have changed over time.
My view is that income investors can find plenty of other stocks that offer more attractive dividends than Microsoft, Canadian National Railways, and Caterpillar. Value investors can find better choices as well.
Are any of these stocks good picks for growth-oriented investors? We can cross Canadian National Railways and Caterpillar off the list. Microsoft, however, should have tremendous growth prospects thanks largely to the rising adoption of generative AI. Its shares have a lot of growth baked in, though, with a forward earnings multiple of over 31x. Still, I think Microsoft is still worthy of consideration for long-term growth investors.
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Keith Speights has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Canadian National Railway and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Billionaire Bill Gates Has Over Half of His $42 Billion Portfolio Invested in These 3 Dividend Stocks was originally published by The Motley Fool
