Are the three "high dividend" US stocks heavily invested by Microsoft worth copying?

Wealthy Americans Prefer Dividend Stocks

Many billionaire investors in the United States, such as "Stock God" Warren Buffett and "New Hedge Fund King" Ken Griffin, prefer dividend stocks. Bill Gates is no exception. Although he doesn't manage public companies or hedge funds like Buffett and Griffin, he has donated a large sum to the Bill and Melinda Gates Foundation Trust Fund. Over half of the foundation's $42 billion investment portfolio is in these three dividend stocks.

1. Microsoft (MSFT.US)

Microsoft remains Gates' favorite stock, which is not surprising considering he co-founded the tech company with Paul Allen and led it for many years. Microsoft is the largest holding in the Gates Foundation Trust Fund, accounting for 33.98% of its total investment portfolio by the end of 2023.

While many tech companies do not pay dividends, Microsoft is an exception. The company initiated a dividend plan in 2003. Over the past 10 years, Microsoft's dividend payments have increased by nearly 168%. However, its dividend yield is still only 0.74%. One key reason for such a low yield is Microsoft's soaring stock price. The stock has increased tenfold in the past 10 years and nearly 60% in the past 12 months.

2. Canadian National Railway (CNI.US)

The Gates Foundation not only bets on tech stocks like Microsoft but also holds Canadian National Railway as its third-largest position, accounting for nearly 16.3% of the total investment portfolio. Canadian National Railway's business extends beyond Canada, with approximately 20,000 miles of railway transporting products in the central United States. In addition to railway operations, the company provides transportation and logistics services. This transportation company has increased its dividend for 28 consecutive years, most recently raising its dividend by 7% in the first quarter of 2024. Its current dividend yield is 1.94%.

3. Caterpillar Inc. (CAT.US)

Caterpillar is the fifth-largest holding in the Gates Foundation's portfolio, accounting for 5.14% of the total investment. Together with the above two stocks, their total weight reaches 55.41%. The Gates Foundation has held Caterpillar since the fourth quarter of 2005. However, the last time the foundation increased its stake in this equipment manufacturer was in the fourth quarter of 2013. The most recent transaction involving Caterpillar occurred in the first quarter of 2022 when the foundation sold approximately 24% of the company's shares.

Over the years, Caterpillar has brought significant dividend income to the Gates Foundation. The company has paid dividends every quarter since 1933 and has increased dividends for 29 consecutive years. Its current dividend yield is 1.55%.

Can Gates' top dividend stock investments be "copied"?

Just because a billionaire investor owns a certain stock, it's not necessarily a good idea to buy it. Firstly, the factors that were at play when the billionaire initially purchased these stocks may change over time. Secondly, income investors can find many other stocks that offer more attractive dividends than Microsoft, Canadian National Railway, and Caterpillar. Value investors can also find better options.

Are there any stocks suitable for growth investors among these? We can rule out Canadian National Railway and Caterpillar from the list. However, Microsoft should have tremendous growth prospects, largely due to the increasing popularity of generative artificial intelligence. Nevertheless, its stock price has already seen significant growth, with an expected P/E ratio exceeding 31 times. However, The Motley Fool analyst Keith Speights believes that Microsoft is still worth considering for long-term growth investors.