Three Stocks Dividend-Yielding from Warren Buffet's Portfolio Outperformed the Market in 2021. Will They Lead the Way in 2025?
Three Stocks Dividend-Yielding from Warren Buffet's Portfolio Outperformed the Market in 2021. Will They Lead the Way in 2025?
Warren Buffet seems set to outperform the S&P 500 somewhat in 2024 with Berkshire Hathaway's shares slighty increasing by around 3% more than the index.
However, there are a few stocks in Berkshire's portfolio that are soaring significantly higher. These three dividend stocks that Buffet owns have surpassed the market in 2024. Can they repeat this feat in 2025?
1. American Express
Buffett has held shares of American Express (AXP -1.24%) for a long time. This credit card giant constitutes the second-largest holding in Berkshire's portfolio. It's also one of Buffett's best-performing stocks of 2024, with a remarkable gain of 56%.
American Express' dividend may not be as enticing. Its forward dividend yield currently stands at only 0.96%. Despite the relatively low dividend, few would complain about the returns the stock has delivered this year.
In the past few quarters of 2024, American Express has reported strong financial results. The company has posted 10 consecutive quarters of record revenue. It's gaining new card members while retaining existing members at high rates.
While Wall Street doesn't expect American Express to maintain its impressive run in 2025, its valuation remains attractive with shares trading below 19 times forward earnings despite the high returns this year. The potential of deregulation and corporate tax cuts in a second Trump term could also benefit the company. New products like the U.S. Consumer Gold Card could drive further growth.
2. Citigroup
Citigroup (C -0.86%) is also outperforming the S&P 500 in 2024. Shares of the financial services giant have surged 33% even after a recent pullback following the Federal Reserve's hint at fewer rate cuts in 2025 than initially anticipated.
Citigroup offers a dividend that many income investors will find appealing. Its forward dividend yield is 3.27%. Despite the COVID-19 pandemic, Citigroup has increased its dividend by a substantial compound annual growth rate of around 49% since 2014.
Its low valuation has attracted investors in 2024. Although the stock has gained significantly, it still trades at around 9.2 times forward earnings and 67% of its book value.
Wall Street continues to view Citigroup as a solid investment. The consensus 12-month price target indicates an upside potential of 17%. I believe that analysts are correct: Citigroup should continue its excellent performances in 2025.
3. Capitol One Financial
Yet another financial stock has been one of Buffett's top performers in 2024. Capitol One Financial's shares have jumped close to 33%, matching Citigroup's performance.
Capitol One's forward dividend yield of 1.37% is slightly higher than the S&P 500's yield. However, the company's dividend history is less reliable, with a dividend cut in 2020 and no increase since 2021.
Analysts don't have high expectations for Capitol One in 2025. The average price target is less than 7% higher than the current share price. Only a few analysts recommend buying the stock.
However, I believe that if Capitol One's acquisition of Discover Financial Services goes through, the company could beat the S&P 500 in 2025. The company cleared one key regulatory hurdle for the deal with the Delaware State Bank Commissioner approving the acquisition. Capitol One expects the transaction to close in early 2025, assuming no further regulatory issues arise.
- With Buffet's successful investment strategy in mind, many individuals are considering diversifying their own portfolios by investing in stocks such as American Express. By analyzing the company's financial performance and potential for future growth, individuals can potentially see substantial returns similar to those achieved by Warren Buffet.
- In the world of finance and investing, the performance of stocks like Citigroup can significantly impact an individual's financial well-being. With its impressive returns and attractive dividend yield, Citigroup has become an appealing investment option for many income-focused investors looking to grow their wealth while also receiving a steady stream of passive income.