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They say imitation is the highest form of flattery. Even though I firmly believe in making my own investment choices, emulating a renowned investor like Warren Buffett is one thing. I’m not going to blindly follow his footsteps, but if I invested in some of his portfolios, I believe I could generate a decent passive income from dividends.
Commencing from the top
The current highest performing stock in his portfolio is city group. This global banking giant yields 5.2%.
Unlike UK banks, US banks were not compelled by regulators to halt dividend payments during the pandemic. As a result, Citigroup continued to distribute income to investors. Over the past decade, it has consistently increased dividends per share, demonstrating a strong track record.
Looking ahead, I am equally optimistic about US banks as I am about UK banks. The higher US interest rates exceeding 5% contribute to the growth of profits with wider net interest margins. Citigroup, with its significant retail presence in the US, is already reaping the benefits.
A valuable defensive inclusion
Another vital aspect I would like to replicate from Buffett is kraft heinz. This branded food company pays a quarterly dividend, which has remained at $0.40 per share for the past few years. Some may argue that the dividend is stagnant, raising concerns. While I acknowledge this point, I must stress that this is an extremely reliable dividend payout that is unlikely to be reduced in the near future.
At the current dividend rate, the yield stands at 4.92%.
Besides increasing earnings, Kraft Heinz is a defensive stock. From its popular ketchup brand to affordable chocolate bars, its products remain in demand even during a recession in the UK or US. This makes it a valuable addition to the portfolio.
In addition to these two options, I would exercise caution when deciding which Buffett stocks to include. For instance, I would not invest in Coca-Cola. While much is said about the enormous profits Buffett has made from his Coca-Cola shares, that is mainly due to his long-term ownership. The current yield is just above 3%, which is insufficiently enticing for me to invest.
This illustrates the fact that every investor is unique. Future decision making is influenced by factors such as when and why someone bought a stock. Just because Buffett owns a stock does not mean I should automatically follow suit.
It is important to acknowledge that no dividends are guaranteed. Future yields may fluctuate, potentially prolonging or shortening the time necessary to achieve my goal.
However, if I were to invest in the six highest-yielding stocks owned by Buffett, my average yield would be 4.45%. By depositing £500 per month into these companies and reinvesting the proceeds, by year 16 I could accumulate a sum of £140k. At that point, I would not need to make further investments and could enjoy a monthly income of £500.
The post How I Can Make £500 a Month by Copying Warren Buffett appeared first on The Motley Fool UK.
Citigroup is an advertising partner of Motley Fool company The Ascent. John Smith has no position in any stocks mentioned. The Motley Fool UK has no position in any stocks mentioned. The views expressed on the companies mentioned in this article are those of the author and may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, we believe that considering a wide variety of insights can make us better investors.
Motley Fool UK 2023