Unlock the Secrets of Warren Buffett’s Ultra-High-Yield Dividend Portfolio
When it comes to dividend investing, Warren Buffett’s portfolio is a treasure trove of opportunities. While his quarterly 13-F regulatory filings reveal only one ultra-high-yield dividend stock, Kraft Heinz, there’s more to the story. Berkshire Hathaway’s “secret portfolio,” managed by New England Asset Management (NEAM), holds several gems that meet our definition of ultra-high yield – a forward dividend yield of roughly 4.92%.
Ares Capital: A Hidden Gem in Buffett’s Portfolio
One standout stock in NEAM’s portfolio is Ares Capital (NASDAQ: ARCC), a leading business development company (BDC) with a forward dividend yield of 8.9%. As a BDC, Ares Capital must return at least 90% of its earnings to shareholders as dividends, making it an attractive option for income-seeking investors.
Diversification and Strong Fundamentals
Ares Capital’s $25.9 billion portfolio is diversified across industries, with no single investment making up more than 1.7% of its total portfolio. The company’s top 10 investments comprise only 11.3% of the total, and no industry accounts for more than 25% of its portfolio. Ares Capital’s access to capital is secure, with investment-grade credit ratings and relationships with 43 banks and over 250 investors.
A Proven Track Record
Ares Capital’s total return since its formation in 2004 exceeds 1,000%, outperforming the S&P 500 by a significant margin. The company has increased its dividend by 26.3% over the last 10 years, more than any other externally managed BDC with a market cap of over $700 million.
Key Risks to Consider
While Ares Capital is an attractive option, it’s not without risks. The company’s use of leverage and potential client defaults are concerns, although its diversification and stringent investment criteria help mitigate these risks. Additionally, disruptions in capital markets could impact Ares Capital’s business.
Expert Insights and Recommendations
Before investing in Ares Capital, consider the expert insights and recommendations from The Motley Fool’s Stock Advisor analyst team. Their top 10 stock picks for investors to buy now could produce significant returns in the coming years. With a proven track record of outperforming the S&P 500, Stock Advisor provides investors with a blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month.
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