3 Warren Buffett Dividend Stocks That Generate Monster Passive Income – The Motley Fool

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Warren Buffett probably doesn’t think much about passive income when he invests. When you’re one of the richest people in the world, you don’t have to.
However, those of us who aren’t quite so wealthy can still get some pretty good ideas for passive income sources from the Oracle of Omaha. Berkshire Hathaway‘s (BRK.A 0.05%) (BRK.B 0.13%) portfolio includes a handful of dividend stocks that deliver monster yields at today’s share prices. Here are three of them.
Berkshire Hathaway initiated a position in Paramount Global (PARA 5.08%) earlier this year. Buffett obviously likes the stock: He added more shares in the third quarter.
Paramount hasn’t been a winner for him so far. The stock has plunged by around 40% year to date. However, it’s practically a passive income machine. With a yield of 5.3% today, an investment of $100,000 in the media and entertainment company would produce annual passive income of $5,300. 
You should be able to count on Paramount’s dividend, too. The company’s payout ratio stands below 22%, so management appears to have a lot of financial flexibility to increase those payouts. 
Paramount Global’s underlying business is in pretty good shape. The company’s CBS network claims seven of the top 10 entertainment shows. Nickelodeon has nine of the top 10 kids’ series on cable TV. Streaming service Paramount+ ranks as the No. 1 streaming service in the U.S. for sign-ups so far this year. And its Pluto TV continues to reign as the top free ad-supported streaming TV service in the U.S.
Buffett doesn’t appear to be as gung-ho about bank stocks at the moment as he has been in the past. However, he hasn’t thrown in the towel on them by any means. Berkshire Hathaway still owns significant stakes in several banks. The giant conglomerate even added to its position in Citigroup (C 0.38%) this year. 
Valuation is probably one of the things Buffett likes about Citigroup. Its shares are down by roughly 25% year to date. As a result, the stock trades at only around 6 times expected earnings.
Investors looking for passive income should like Citigroup’s dividend. It currently yields 4.56%. The main knock against Citigroup for income investors is that it hasn’t increased its payout in several years.
Aside from this criticism, though, Citigroup appears to be in a good position to grow over the long term. Despite some macroeconomic headwinds, the company said in its latest quarterly update that it continues to have “solid momentum in the underlying drivers of the majority of our businesses.”
Berkshire Hathaway owns a 3.4% stake in another big bank: U.S. Bancorp (USB -1.03%). And it has held a position in that bank for nearly 16 years. However, Buffett isn’t as much of a fan of U.S. Bancorp as he once was. His conglomerate recently slashed its position in the stock by more than half.
Buffett’s interest in U.S. Bancorp decreased in another way as well. Berkshire Hathaway subsidiary New England Asset Management also significantly cut its stake in the bank after owning shares for a long time.
Shares of U.S. Bancorp are down this year, but the stock hasn’t performed worse than others that Buffett likes. Perhaps one reason why Berkshire Hathaway reduced its position is that U.S. Bancorp’s valuation is higher than that of several of its peers.
There’s still a lot to like about the stock, though — starting with its ability to generate passive income. Its dividend yield stands at nearly 4.5%. And unlike Citigroup, U.S. Bancorp is increasing its dividend payout.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.
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