Buffett rakes in $123 million as firms boost dividends

Bloomberg News

Warren Buffett's bet on U.S. banks will generate $123 million more a year now that companies including Wells Fargo & Co. and American Express Co. have passed the Federal Reserve stress tests and been cleared to lift dividends.

Berkshire Hathaway Inc., where Mr. Buffett is chairman and chief executive officer, has a larger allocation to financial firms among its equity investments than to any other industry. It is the biggest shareholder in Wells Fargo and American Express, the No. 1 credit-card issuer by purchases.

While Mr. Buffett, 83, has rejected the idea of a dividend at Berkshire, he welcomes them from companies he invests in, using the funds to build up his own firm. The increased payouts highlight how returns from some of Mr. Buffett's largest investments now rely on Fed approval.

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Increasing dividends “are probably something he was hoping for in the long term,” Andrew Kilpatrick, a Buffett biographer, said before Wednesday's announcements. “Patience is the big lesson.”

The firms announced capital plans after the Fed evaluated how they would fare in a hypothetical financial crisis and found they could pay dividends while still maintaining a cushion against losses. The regulator is working to avoid future taxpayer bailouts like those of 2008 by evaluating banks' capital and management.

Wells Fargo, the largest U.S. home lender, increased its quarterly payout by $0.05 to $0.35 a share. That would give Berkshire $96.7 million more a year from its stake of 483.5 million shares disclosed in its 2013 annual report. Berkshire began accumulating the stock more than two decades ago.

AMERICAN EXPRESS

AmEx raised its quarterly dividend to 26 cents a share from 23. That gives Berkshire, which owns 151.6 million shares, $18.2 million more a year. Mr. Buffett's firm holds 96.1 million shares of U.S. Bancorp, and will get an extra $5.8 million a year after the lender raised its dividend to 24.5 cents from 23.

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Berkshire has smaller stakes in Goldman Sachs Group Inc., Bank of New York Mellon Corp. and M&T Bank Corp. BNY Mellon's 13% dividend increase will contribute about $2 million more a year to Berks