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GlaxoSmithKline: The Best Buffett Dividend Stock

By Jeff Reeves

NEW YORK (InvestorPlace) -- Dividend stocks remain some of the most popular investments out there for buy-and-hold investors. And few income-oriented icons are more closely watched than Warren Buffett.

At least, Buffett and Berkshire Hathaway (BRK.B) used to seem like they were big on dividends . . . The most notable changes in Berkshire's August filing included the end of a big dividend payer -- Intel (INTC) dropped off Buffett's holdings altogether -- and some interesting new plays and increased positions, with many of those investments not paying a penny in distributions. Seems like portfolio managers Todd Combs and Ted Weschler are moving away from traditional Bershire stocks.

But Buffett & Co. haven't given up on dividends altogether. There are a number of big payers -- yielding more than 3% -- worth noting.

The biggest sector for dividends in the Buffett portfolio is health care, and the biggest single stock is U.K. drugmaker GlaxoSmithKline (GSK).

GSK made a splash recently with the buyout of Human Genome Sciences for $3.6 billion. That could yield benefits in the long term with an addition to the product pipeline and the potential for blockbusters to replace older medications.

Of course, share prices have lagged year-to-date because that much-anticipated blockbuster hasn't shown up yet. But there's the big yield to consider in GSK while you wait.

However, note that GSK isn't as consistent as domestic pharmaceuticals when it comes to distributions -- the past four quarterly payouts range between 52 cents and 82 cents a share. But add up the past four consecutive payments, and you get about $2.43 annually for a hefty 5.2% yield.

Health care is a hugely important sector in the Berkshire portfolio. There has been a lot of drug news lately that is inspiring for Big Pharma. Eli Lilly (LLY) recently received a favorable report on a possible Alzheimer's cure, and Merck (MRK) proved its drug pipeline is paying off with a surge after strong results for its osteoporosis medication. This proves the old guard can and will survive even amid patent expirations.

What other Berkshire Hathaway dividend stocks in health care (and elsewhere) are noteworthy? Visit the InvestorPlace website to check out the nine other holdings that make up the 10 best Buffett dividend stocks.

Jeff Reeves is the editor of InvestorPlace.com and the author of "The Frugal Investor's Guide to Finding Great Stocks." Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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