Bill Gates’ Portfolio: Reviewing One Of The Wealthiest Man’s Dividend Stocks – February 2018 Update

Bill Gates Portfolio Dividend Stocks

Bill Gates is the second wealthiest man on the planet with a net worth in excess of $90 billion.

Just like you and me, Bill wants to earn a return on his pile of cash. Of the 17 publicly-traded companies held in the Bill & Melinda Gates Foundation Trust, 12 pay dividends.

In this article, I track and analyze changes in Bill Gates’ portfolio of dividend stocks.

The fourth quarter of 2017 was uneventful. No new companies were added to the portfolio, and all of the trust’s existing core holdings were largely unchanged.

Gates’ trust trimmed its position in Microsoft (MSFT) by 14%. Microsoft appeared as a new position in the second quarter of 2017 and was likely transferred from Bill Gates’ direction ownership to his trust instead, so you can’t read much into this activity.

The only other move in the trust was a 7% decrease in its shares of Berkshire Hathaway. Similar to Microsoft, the trust’s stake in Warren Buffett’s company has fluctuated up and down each quarter, so these trades are likely being driven by non-fundamental reasons.

Before analyzing the portfolio’s holdings, let’s review the trust’s investment strategy.

Bill Gates’ portfolio is managed by Michael Larson, who has overseen Bill Gates’ personal wealth since 1994.

Bill Gates’ Investment Strategy

Larson maintains a very low-key profile and runs a conservative strategy and invests across a wide range of assets including real estate, private equity, bonds, and publicly-traded stocks.

His operations are run out of an unmarked building in the Seattle suburb of Kirkland, and his employees who leave are typically required to sign confidentiality agreements.

According to the Wall Street Journal, Larson’s relatively conservative strategy delivered losses during the financial crisis in 2008 that were less than the 27% drop in the Dow Jones Industrial Average.

Since 1995, Larson’s returns have outperformed the S&P 500 by approximately 1% per year with presumably much lower volatility.

Larson is a value investor at heart and focuses on buy-and-hold investing. Most quarters, he does not make any trades. He looks for simple, high quality companies that he believes are reasonably priced. Most of these companies are considered blue-chip dividend stocks.

Few of these high quality businesses exist and trade at fair prices, which is why Bill Gates’ portfolio of stocks is concentrated in a small handful of companies.

Analyzing Bill Gates’ Portfolio of Dividend Stocks

I analyzed each of Bill Gates’ stock picks that pay a dividend, starting with his highest-yielding dividend stocks.

For each investment held by Bill & Melinda Gates Foundation Trust, I review how the company makes money and why Bill Gates might have been attracted to the company.

My analysis of Bill Gates’ portfolio is updated each quarter when new information about his holdings is released.

Investors might also be interested in reviewing Warren Buffett’s top high-yield dividend stocks and our updated analysis of high dividend stocks.

February 2018 Portfolio Update

True to his buy-and-hold philosophy, Michael Larson turned in another uneventful quarter.

The Bill & Melinda Gates Foundation Trust only made two transactions, trimming its position in Berkshire Hathaway by 5 million shares (a 7% decrease) and reducing its position in Microsoft (MSFT) by 14%.

Berkshire Hathaway remains Bill Gates’ largest position, accounting for 47.6% of the trust’s portfolio of equities. Microsoft remains the trust’s second-largest position at 15.5% of the portfolio after it was added during the second quarter of 2017.

However, investors should note that Cascade was not buying new shares of Microsoft. Bill Gates personally holds more than 100 million shares of his firm and appears to have simply transferred millions of shares to Cascade last year, perhaps for estate planning purposes.

Excluding the trim of Microsoft and the increased stake in Berkshire Hathaway, Larson’s last notable move happened during the second quarter of 2015 when he more than doubled his stake in Liberty Global’s LiLAC shares (ticker symbols LILA and LILAK), which are related to Liberty Global’s Latin American and Caribbean operations.

Many of Larson’s holdings have exposure to consumption growth in emerging markets as he is clearly playing the long game.

Perhaps more interesting is what Larson did not do during the quarter. While Warren Buffett is on the verge of completely exiting his stake in Wal-Mart, Larson continues to hold the company. Wal-Mart accounted for 4.3% of his portfolio of publicly-traded stocks at the end of the fourth quarter.

Looking at the rest of the holdings, Crown Castle (CCI) remains the highest-yielding stock in Bill Gates’ portfolio, followed by United Parcel Service (UPS) and Coca-Cola FEMSA (KOF).

Let’s take a closer look at Bill Gates’ dividend stocks:

1: Crown Castle (CCI)

Percent of Bill Gates’ Portfolio: 2.2%

Dividend Yield: 3.9%   Forward P/E Ratio: 19.7x (as of 2/16/18)

Sector: Real Estate Industry: Wireless Communications

Crown Castle is a real estate investment trust and the largest provider of shared wireless infrastructure in the U.S.

The company owns approximately 40,000 towers and more than 60,000 miles of fiber that supports small cell networks.

Crown Castle leases its towers to wireless carriers, which use the company’s infrastructure to provide wireless services to consumers and businesses.

Tenants deploy communications equipment, cables, and antennas on Crown Castle’s towers that transmit signals between the tower and customers’ mobile devices.

Approximately 90% of Crown Castle’s revenue is generated from the big four wireless carriers, and the company is completely focused on the U.S. wireless market.

Crown Castle’s business model has several appealing characteristics. First, its business model has excellent visibility.

Over 80% of the company’s revenue is recurring, and most of its site rental revenue results from long-term leases with initial 10-year terms and five-year renewal periods thereafter.

Crown Castle’s leases also have built-in price escalators, which have historically added around 3% to the company’s annual earnings growth.

Most importantly, there are not viable substitutes for the company’s wireless infrastructure today. Carriers need Crown Castle to operate their businesses, which has helped the company enjoy a non-renewal rate of just 2% over the last five years.

As data demand continues to increase, Crown Castle’s earnings have solid growth potential as the company fills out more of its towers.

Crown Castle began paying dividends in early 2014 and has since tripled its quarterly payout from 35 cents per share to $1.05.

The company targets 7-8% long-term annual growth in dividends per share going forward and should seemingly have little problem hitting this goal.

Crown Castle’s healthy dividend is supported by its reasonable dividend payout ratio and high incremental profit margins (adding more tenants to existing towers requires very little capital).

For investors seeking a high dividend growth REIT, Crown Castle is one to keep an eye on. American Tower (AMT) has many similarities but is much more international and targets 20% annual dividend growth. You can learn more about American Tower here.

Read More: Our Analysis of Crown Castle

2: United Parcel Service (UPS)

Percent of Bill Gates’ Portfolio: 2.0%

Dividend Yield: 3.4%   Forward P/E Ratio: 14.7x (as of 2/16/18)

Sector: Transportation   Industry: Air Freight Transport

UPS was founded in 1907 and has grown to become the world’s largest package delivery company. In 2016, UPS delivered approximately 4.9 billion packages and documents in more than 220 countries and territories.

Domestic package delivery services account for just over 60% of total revenue. International package delivery services generated another 21% of revenues, and supply chain and freight businesses make up the remaining 16% of sales.

UPS’s vast supply chain and logistics network creates a durable competitive advantage. The company has more than 100,000 package cars, vans, tractors, and motorcycles to accompany its 237 UPS jet aircraft.

The company also has nearly 5,000 UPS Stores, over 38,000 UPS Drop Boxes, and more than 24,000 UPS Access Point locations. Thousands of touch points and various delivery modes allow UPS to more efficiently deliver packages than smaller rivals.

Replicating the company’s assets would be extremely expensive and take years of time. Furthermore, new competitors would lack the shipping volumes needed to cover the costs of such a large delivery network.

It’s hard to imagine a new company beating the convenience and low-cost shipping benefits offered by UPS. UPS should also benefit from e-commerce growth as more packages need to be shipped around the world, even if Amazon successfully launches its own delivery service for businesses.

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Disclaimer: Simply Safe Dividends is not a registered investment advisor or broker/dealer. All information provided in this article and on the Simply Safe Dividends website is provided for ...

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