A chief perk of Berkshire Hathaway Inc.’s (NYSE: BRK.A) recent $10 billion investment in Occidental Petroleum Corp. (NYSE: OXY) is the fat 8% dividend. There’s a catch to receiving it, though: You have to be Warren Buffett.
For us regular investors, this energy stock yields 6%.
Buffett has earned the “Oracle of Omaha” moniker over a long history of good trades. He’s a world-class stock picker, and now, he leverages his firm’s cash for investments that will hold up in the long run.
That’s why he likes dividends, but it’s only part of why Occidental stock drew his attention.
OXY is thriving in a range of other metrics as well – earnings power, accelerating demand for the stock, and more. We know because our Money Morning Stock VQScore™ system, a proprietary algorithm that condenses these factors into a single number, tells us: The stock has a perfect score of 4.75.
So Occidental turned out to be a really smart move by Buffett, as it’s almost sure to break out on price.
But there’s a very similar, overlooked energy investment that can give any investor the same perks as Buffett’s Occidental strategy. In fact, it has the same VQScore as Occidental, and it pays a higher dividend yield than the special one Buffett got.
Here’s what makes the Occidental strategy so good for Berkshire Hathaway and how you can earn a similar cut from the energy market…
Why Buffett’s Oil Play Isn’t the Only One in the Book
According to a press release from Berkshire, the company will acquire 100,000 shares of “preferred Occidental stock.”
The move comes on the heels of reports that Buffett has managed to store up over $110 billion in Berkshire’s coffers by the end of 2018.
With that kind of cash in the bank, Buffett has been looking for an investment that’s going to give him not only a strong return, but one that’s on his terms.
And it looks like he got what he wanted from Occidental.
According to reports, Occidental has agreed to provide Berkshire with dividend-paying preferred stocks and warrants to buy common shares – two investing tools that will give Berkshire an edge over other investors when it comes to profiting from Occidental.
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That’s where the additional 2% dividend yield comes from. The 8% dividend yield ensures Buffett will now receive an annual $800 million payment on his $10 billion investment on top of the growth of the share price.
That’s great news for Berkshire. But it could mean even better news for you.
Our other energy stock pick is screaming “Buy” right now. The strategy is nearly identical to Buffett’s Occidental play.
The difference is it will pay you an 8.18% dividend, and you don’t need to be Warren Buffett…
Our Buffett Profit Play
Vermilion Energy Inc. (NYSE: VET) is an international oil company with operations in Europe, North America, and Australia.
Over the last few years Vermilion’s profits have grown like a weed, jumping 84% between 2015 and 2018.
This kind of cash flow has allowed the company to pursue some aggressive expansion efforts.
Vermilion last acquired Spartan Energy, a Saskatchewan-focused light oil producer, for a cool $1.4 billion.
These kinds of acquisitions are a clear sign the company is on track to generate strong returns down the line for shareholders.
And we’re not the only ones keeping an eye on Vermilion. Just this week, investment management company BlackRock Inc. (NYSE: BLK) boosted its holdings in Vermilion by 5%.
When a firm like BlackRock makes this kind of investment, it’s a clear sign you should pay close attention to what this stock does next.
Vermilion currently trades for around $23. However, analysts see the company’s stock heading to $42 down the line – a jump of 82%.
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