Certainly, billionaires express a notable interest in dividend stocks, evident in the investment portfolios of renowned billionaire investors like Warren Buffett and Ken Griffin. Their holdings prominently feature dividend-paying stocks.
Bill Gates serves as another prominent illustration. While not overseeing a public company or hedge fund like Buffett and Griffin, Gates has directed substantial funds to the Bill & Melinda Gates Foundation Trust. Impressively, over half of the charitable foundation’s $42 billion portfolio is allocated to three dividend stocks.
1. Microsoft
It’s hardly surprising that Microsoft (NASDAQ: MSFT) maintains its status as Bill Gates’ preferred stock. Considering Gates’ co-founding of the technology giant alongside Paul Allen and his substantial leadership role over the years, Microsoft overwhelmingly stands as the primary holding for the Gates Foundation Trust. As of the close of 2023, it constitutes a significant 33.98% of the trust’s total portfolio.
Unlike many tech companies that eschew dividend payouts, Microsoft is a notable exception. The company established a dividend program in 2003, and over the past decade, it has consistently increased its dividend payout by an impressive nearly 168%. Despite this, the dividend yield remains relatively low at 0.74%.
The primary factor contributing to this modest yield is Microsoft’s remarkable share price surge. Over the last 10 years, the stock has multiplied by a factor of 10, and in the last 12 months alone, it has witnessed an impressive uptick of nearly 60%.
2. Canadian National Railway
The Gates Foundation Trust isn’t exclusively focused on technology stocks like Microsoft. Canadian National Railway (NYSE: CNI) holds a significant position as its third-largest holding, representing almost 16.3% of the overall portfolio.
Canadian National Railway extends beyond Canadian borders, boasting around 20,000 miles of rail infrastructure that facilitates product transportation across the central U.S. The company’s operations also encompass transportation and logistics services, expanding its reach beyond rail operations.
Notably, the transportation firm has a commendable track record of dividend increases, having raised its dividend for 28 consecutive years. In the first quarter of 2024, Canadian National Railway furthered this trend by increasing its dividend payout by 7%. The current dividend yield for the company 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?
Relying solely on a billionaire investor’s ownership is not a foolproof strategy for stock selection, as the circumstances surrounding the initial investment may have evolved. It’s crucial to consider changing factors over time.
While Microsoft, Canadian National Railways, and Caterpillar may not be optimal choices for income or value investors, growth-oriented investors might find Microsoft to be a compelling option. The company is poised for significant growth, particularly due to the increasing adoption of generative AI. However, it’s important to note that Microsoft’s shares already reflect substantial growth, evident in its forward earnings multiple exceeding 31x. Despite this, Microsoft remains a worthy contender for long-term growth investors.
