Healthy dividend stocks have the potential to:

  • Offer a plump income stream in both good and bad times.
  • Provide needed diversification to growth-oriented portfolios.
  • Outperform the S&P 500 over the long haul.

Let’s take a look at three dividend plays that represent sizeable positions in the Bill & Melinda Gates Foundation Trust. It might make sense to follow along — maybe with some of your spare change.

1. Caterpillar (CAT)

Modern hydraulic excavator on a field work site where an excavation works is performed in Kuala Lumpur, Malaysia.
Sallehudin Ahmad/Shutterstock

With a healthy dividend yield of 2.3%, Caterpillar leads off our list.

According to its most recent 13F filing with the Securities and Exchange Commission, the Gates Foundation owns more than 18.6 million shares of the construction equipment giant, representing 9.3% of the portfolio.

Caterpillar shares have slumped in recent months, down more than 25% from their 52-week highs, but now might be an opportune time for bargain hunters to jump in. Competitors like John Deere and Cummins have also been punished.

Despite the bearish sentiment surrounding heavy machinery stocks, Caterpillar’s dividend continues to be backed by unmatched brand credibility, scale advantages and massive free cash flow generation.

In the most recent quarter, Caterpillar’s revenue jumped 29% to US$12.9 billion. More importantly, management returned US$800 million to shareholders through dividends and share repurchases.

2. United Parcel Service (UPS)

Close up of UPS logo printed on a delivery truck
Sundry Photography/Shutterstock

Next up, we have UPS, which currently offers a 2.2% dividend yield.

The Gates Foundation owns about 2.8 million shares of the small-parcel delivery leader (2.4% of its total portfolio). Gates also owns 1.5 million shares of rival FedEx, so it’s clear he’s fond of the space.

UPS’ dividend is supported by a massive air and delivery fleet that allows the company to earn above-average margins. In fiscal 2020, UPS handled an average 21.1 million parcels daily.

Operating profit spiked 47% in Q2 to US$3.3 billion as revenue increased 14.5%. Year-to-date free cash flow clocked in at US$6.8 billion — a jump of 75% from the year-ago period. With e-commerce tailwinds blowing heavily in UPS’ favor, the stock’s forward P/E of 15 seems reasonable.

While UPS trades around US$187 per share, you can get a piece of UPS using a popular stock trading app that allows you to buy fractions of shares with as much money as you’re willing to spend.

3. Crown Castle International (CCI)

Telecommunication tower with blue sky and cloud
Sattaya/Shutterstock

Rounding out our list is cell tower REIT Crown Castle International, which currently offers a solid 2.8% dividend yield.

Crown Castle leases its 40,000-plus cell towers to major wireless carriers including Verizon, AT&T and T-Mobile, so its dividend is backed by a reliable revenue stream and attractive mobile data usage trends.

In the company’s latest quarter, management saw its “highest level of tower activity in history,” fueled by a robust 5G leasing environment. Adjusted funds from operations — a key metric in the real estate industry — increased 18%.

Thanks to that momentum, Crown Castle paid common stock dividends of roughly US$575 million, an increase of 11% over the year-ago period. Crown Castle shares are down around 6% in September.

Build your own growth portfolio

There you have it: three attractive dividend stocks sitting in the Gates Foundation portfolio that generate steady returns and are well suited to risk-averse investors.

Even if you only have a modest investing budget, you may want to use an investing app that allows you to buy “slices” of shares of big-name stocks — especially one that comes with no fees or commissions.

Going with a robo-advisor can also be a stress-free way to start investing.

And, those looking to take control of their investments should certainly explore online trading platforms. The best sites offer resources and tools to help investors make informed decisions as they build and manage their investment portfolios.

About the Author

Brian Pacampara, CFA

Brian Pacampara, CFA

Freelance Contributor

Brian is an investment contributor for MoneyWise. A long-time stock junkie, his work has appeared in The Motley Fool, Seeking Alpha, and Yahoo Finance. He believes in owning "Forever Stocks" — a rare group of businesses that have paid out dividends for decades. Brian holds the Chartered Financial Analyst (CFA) designation.

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