Healthy dividend stocks have the potential to:

  • Offer a plump income stream in both good times and bad times.
  • Provide much-needed diversification to growth-oriented portfolios.
  • Outperform the S&P 500 over the long haul.

Today, let’s take a look at three dividend plays that represent sizeable positions in the Bill & Melinda Gates Foundation Trust.

After all, investment legend and BIll’s good pal Warren Buffett is a trustee of the foundation, so it might make sense to follow along — maybe with some of your spare change.

1. Caterpillar (CAT)

Modern hydraulic excavator on a field work site where an excavation works is performed in Kuala Lumpur, Malaysia.
Sallehudin Ahmad/Shutterstock

With a healthy dividend yield of 2.3%, Caterpillar leads off our list.

According to its most recent 13F filing with the Securities and Exchange Commission, the Gates Foundation owns more than 18.6 million shares of the construction equipment giant representing 9.3% of the portfolio.

Caterpillar shares have slumped in recent months, down more than 25% from their 52-week highs, but now might be an opportune time for bargain hunters to jump in. Competitors like John Deere and Cummins have also been punished.

Despite the bearish sentiment surrounding heavy machinery stocks, Caterpillar’s dividend continues to be backed by unmatched brand credibility, scale advantages, and massive free cash flow generation.

In the most recent quarter, Caterpillar’s revenue jumped 29% to $12.9 billion. More importantly, management returned $800 million to shareholders through dividends and share repurchases.

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2. United Parcel Service (UPS)

Close up of UPS logo printed on a delivery truck
Sundry Photography/Shutterstock

Next up, we have UPS, which currently offers a dividend yield of 2.2%.

The Gates Foundation owns about 2.8 million shares of the small-parcel delivery leader, accounting for 2.4% of its total portfolio. Gates also owns 1.5 million shares of rival FedEx, so it’s clear that he’s fond of the space.

UPS’ dividend, in particular, is supported by a massive air and delivery fleet that allows the company to earn above-average margins. In fiscal 2020, UPS handled 21.1 million average parcels daily.

More recently, operating profit spiked 47% in Q2 to $3.3 billion as revenue increased 14.5%. And year-to-date, free cash flow clocked in at $6.8 billion representing a jump of 75% from the year-ago period.

With e-commerce tailwinds continuing to blow heavily in UPS’ favor, the stock’s forward P/E of 15 seems reasonable.

To be sure, UPS trades at $187 per share. But you can get a piece of UPS using a popular stock trading app that allows you to buy fractions of shares with as much money as you’re willing to spend.

3. Crown Castle International (CCI)

Telecommunication tower with blue sky and cloud

Rounding out our list is cell tower REIT Crown Castle International, which currently offers a solid dividend yield of 2.8%.

Crown Castle leases its more than 40,000 cell towers to major wireless carriers including Verizon, AT&T, and T-Mobile, so its dividend is backed by a highly reliable revenue stream and still-very attractive mobile data usage trends.

In the company’s latest quarter, management saw its “highest level of tower activity in history” fueled by a robust 5G leasing environment. Adjusted funds from operations — a key metric in the real estate industry — increased 18%.

Thanks to that momentum, Crown Castle paid common stock dividends of roughly $575 million, an increase of 11% over the year-ago period.

Crown Castle shares are down 6% in September.

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Bill's preferred personal investment

There you have it: three attractive dividend stocks sitting in the Gates Foundation portfolio.

While growth stocks make most of the financial headlines, generating steady returns with stable assets should be a top priority for risk-averse investors.

Of course, you don’t have to limit yourself to the stock market to do that.

In fact, Bill Gates is partial to investing in U.S. farmland with his own personal money.

Gates is America's largest private owner of farmland and for good reason: Over the years, agriculture has been shown to offer higher risk-adjusted returns than both stocks and real estate.

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