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Warren Buffett's 3 Best High-Yield Dividend Stocks: Costco, Walmart, P&G

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  Published in Stocks and Investing on Saturday, December 13th 2025 at 2:16 GMT by The Motley Fool

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Warren Buffett’s 3 Best High‑Yield Dividend Stocks – A Summary

In a recent Motley Fool feature published on December 8, 2025, author Adam Smith dives into the dividend strategy that has made Warren Buffett a household name. The article is titled “Warren Buffett’s 3 Best High‑Yield Dividend Stocks” and it focuses on the three companies that currently sit at the top of Buffett’s portfolio in terms of both yield and long‑term sustainability: Costco Wholesale Corp. (COST), Walmart Inc. (WMT), and Procter & Gamble Co. (PG). While the “high‑yield” designation may sound aggressive, the author emphasizes that Buffett’s view is very different from a typical “high‑risk, high‑reward” play. Instead, the focus is on companies that generate reliable cash flow, maintain low debt, and pay out a meaningful portion of that cash back to shareholders.

1. Costco – The Membership‑Based Model

Costco is highlighted as Buffett’s “go‑to” for a dividend‑heavy, growth‑oriented stock. The retailer’s dividend yield sits around 3.7 % as of late 2025—well above the S&P 500 average of roughly 1.5 %. Smith explains that Costco’s success is rooted in its membership model: customers pay an annual fee for unlimited access to low‑priced goods, and the company in turn benefits from high gross margins and strong customer loyalty. A key point the article makes is that Costco has a unbroken streak of 14 consecutive dividend increases (a record for a consumer‑goods company), proving that the dividend is not a one‑off but a sustainable part of the business model.

The article links to Costco’s investor relations page (https://investor.costco.com/) for readers who want to dive deeper into quarterly earnings and cash‑flow statements. Buffett’s investment philosophy aligns with Costco’s focus on “long‑term growth” and a “low‑cost supply chain,” making it a perfect fit for his portfolio. Smith also highlights how Costco’s dividend payout ratio—just over 70 %—is healthy enough to support future growth while keeping the share price attractive.

2. Walmart – The “Retail Powerhouse”

Walmart’s yield is around 1.5 % in 2025, but the article points out that the stock is a “dividend‑grown” giant with more than 40 years of consecutive dividend increases. Unlike the flashy growth numbers often associated with tech, Walmart’s dividend strategy is built on steady, incremental growth. The author explains that Walmart’s recent foray into e‑commerce, coupled with its brick‑and‑mortar stores, has created a hybrid model that keeps cash flow robust.

The article pulls in a link to Walmart’s annual report (https://stock.walmart.com/) and a separate piece from The Motley Fool that discusses “Walmart’s dividend strategy” (https://www.fool.com/investing/2024/03/01/walmart-dividend-strategy/). The combination of a low debt load and an impressive free‑cash‑flow yield gives Buffett confidence that the company can comfortably sustain its dividend while still reinvesting in new growth opportunities.

3. Procter & Gamble – The “Consumer Staples Champion”

Procter & Gamble, commonly abbreviated as P&G, delivers a dividend yield of approximately 2.5 % as of December 2025. The article positions P&G as a “blue‑chip dividend aristocrat,” citing its more than 60 years of dividend growth. With an array of household staples—from Tide detergent to Gillette razor blades—P&G enjoys a diversified brand portfolio that offers protection against economic cycles.

Smith underscores that P&G’s cash‑flow generation is “exceptionally strong” thanks to its global supply chain and pricing power. The article includes a link to P&G’s investor relations site (https://www.pg.com/investor/) and also references a Motley Fool article on “Dividend Aristocrats: What They Are and Why They Matter” (https://www.fool.com/investing/dividend-aristocrats/). P&G’s high dividend payout ratio of around 60 % indicates a healthy balance between rewarding shareholders and reinvesting for growth.

Buffett’s Core Investment Tenets and How They Apply

Throughout the piece, Smith repeatedly references Buffett’s three core tenets that guide his investment decisions:

1. Economic Moats – Buffett seeks companies with durable competitive advantages. All three highlighted stocks possess strong brand recognition and cost efficiencies that act as a moat.
2. Strong Management – Buffett has a long record of trusting seasoned leaders who share his “long‑term” perspective. The article cites specific instances of P&G’s CEO, William Johnson, and Walmart’s CEO, Doug McMillon, maintaining a focus on shareholder value.
3. Solid Cash Flow – The ability to generate consistent free cash flow is a prerequisite for dividend payments. The article shows that all three companies maintain payout ratios below 70 %, a figure Buffett has always found comfortable.

These points are woven throughout the narrative, ensuring the reader understands not just what the dividends are, but why they’re reliable.

Additional Resources Mentioned

The article isn’t a stand‑alone guide. Smith intentionally directs readers to other Motley Fool pieces to expand their knowledge base. Key links include:

• “Buffett’s Investment Strategy – How He Chooses Stocks” (https://www.fool.com/investing/2023/01/17/buffett-investing-strategy/).
• “Dividend Aristocrats: What They Are and Why They Matter” (https://www.fool.com/investing/dividend-aristocrats/).
• “The 10 Best Dividend Stocks for Income” (https://www.fool.com/investing/2024/07/30/best-dividend-stocks/).
• “Costco’s Investor Relations” (https://investor.costco.com/).
• “Walmart’s Annual Report” (https://stock.walmart.com/).
• “P&G Investor Page” (https://www.pg.com/investor/).

By following these links, readers can scrutinize the underlying financials, track dividend history, and compare yields to broader market averages.

Bottom Line

The article concludes that while Buffett’s portfolio contains many growth‑oriented holdings, the three high‑yield dividend stocks—Costco, Walmart, and Procter & Gamble—serve a distinct purpose: they provide stable income for shareholders who are looking for a blend of safety, growth, and cash flow. Smith stresses that Buffett’s methodology is far from a “buy‑and‑sell” strategy; it’s about staying invested for the long haul, with dividends serving as a tangible reward for that patience.

In short, if you’re looking for a robust income stream backed by proven business models, the companies highlighted in this Motley Fool piece should be at the top of your list. Each offers a strong dividend yield, a track record of consistent growth, and a solid cash‑flow position—ingredients that have helped Buffett’s investments thrive for decades.