NEW YORK ( TheStreet) -- Warren Buffett is arguably the most famous investor of all time, and Thursday morning he showed us again why. The chairman of Berkshire Hathaway ( BRK.A) has orchestrated a deal that allows the conglomerate to cash in its P&G holdings without paying capital gains by swapping its stake for Duracell.
While Duracell is a great addition to Buffett's roster of consumer products that allows him to indirectly benefit from tech growth, why did he decide it was time to part ways with Procter & Gamble ( PG) ? An analysis comparing P&G with the other three dividend aristocrats in his top seven holdings shows that P&G was the one with the lowest growth over the last decade.
Must Read: 7 Stocks Warren Buffett Is Selling in 2014
Before the sale, the Oracle of Omaha held four dividend aristocrats stocks, stocks with 25-plus years of rising dividends, in his top seven holdings:
- Coca-Cola (KO) : 16% of portfolio
- Wal-Mart (WMT) : 4% of portfolio
- Procter & Gamble (PG) : 4% of portfolio (pre-sale)
- ExxonMobil (XOM) : 4% of portfolio
These four comprised more than 25% of Warren Buffett's holdings. Buffett is known to hold stocks for decades at a time. Just because Coca-Cola is his largest holding, however, doesn't necessarily mean it's the best dividend stock buy in his portfolio. There are 8 Rules of Dividend Investing that we will use to compare how these four businesses compare with each other.
Rule 1: Dividend History
- Procter & Gamble has increased its dividend payments for 58 consecutive years
- Coca-Cola has increased its dividend payments for 52 consecutive years
- Wal-Mart has increased its dividend payments for 41 consecutive years
- ExxonMobil has increased its dividend payments for 32 consecutive years
All of the businesses above have extremely long histories of dividend growth year after year. Procter & Gamble has the longest history of dividend increases, followed by Coca-Cola. Interestingly, 3 of the 4 were founded in the 1800's. Procter & Gamble was founded in 1837. ExxonMobil's parent company Standard Oil (of Rockefeller fame) was founded in 1870, and Coca-Cola was founded in 1892. Wal-Mart is the 'baby' of the bunch; it was founded in 1962.
The extremely long operating histories of these businesses show how successful they have been over a long period of time. So much in the world has changed since the 1800's, yet these businesses continue to grow year after year. Investing in businesses with such long histories helps to reduce uncertainty about future dividend growth.
Must Read: What's the Best Way to Protect Your Financial Data?