Bill Gates allocates more than 50% of his $42 billion portfolio to these 3 dividend stocks

Certainly, billionaires, including renowned investors like Warren Buffett and Ken Griffin, exhibit a strong affinity for dividend stocks, as evident in their investment portfolios. Bill Gates, while not directly managing a public company or hedge fund like Buffett and Griffin, stands out as a noteworthy example. Despite his focus on philanthropy through the Bill & Melinda Gates Foundation Trust, a significant portion of the trust's $42 billion portfolio is allocated to three dividend stocks.

Caterpillar

Caterpillar (NYSE: CAT) holds the position of the fifth-largest holding in the Gates Foundation's portfolio, constituting 5.14% of the total assets. The cumulative weight of these three dividend stocks, including Microsoft and Canadian National Railway, stands at 55.41%.

The Gates Foundation has maintained ownership of Caterpillar since the fourth quarter of 2005, with the last addition of shares occurring in the fourth quarter of 2013. In the most recent transaction involving Caterpillar in 2022 Q1, approximately 24% of the foundation's stake in the company was sold.

Caterpillar has been a reliable source of dividend income for the Gates Foundation over the years. The equipment manufacturer has a longstanding history of paying dividends every quarter since 1933 and has consecutively increased its payout for 29 years. Currently, Caterpillar's dividend yields 1.55%.

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Disclosure: Keith Speights holds positions in Microsoft, and The Motley Fool holds positions in and recommends Microsoft. Additionally, The Motley Fool recommends Canadian National Railway and provides disclosure on options positions related to Microsoft. The Motley Fool adheres to a disclosure policy.

Microsoft

It's unsurprising that Microsoft (NASDAQ: MSFT) holds a special place as Gates' preferred stock, given his role as co-founder and leader of the technology giant alongside Paul Allen. Microsoft stands as the dominant holding in the Gates Foundation Trust, comprising a substantial 33.98% of the total portfolio as of the close of 2023.

While many tech companies typically don't distribute dividends, Microsoft stands out as an exception. The company introduced a dividend program in 2003 and has consistently increased its dividend payout by nearly 168% over the past decade. Despite this growth, Microsoft's dividend yield remains relatively low at 0.74%. This is attributed to the significant surge in Microsoft's share price, which has experienced a tenfold increase over the last 10 years and nearly a 60% rise in the past 12 months.

Canadian National Railway

The Gates Foundation Trust doesn't solely rely on technology stocks like Microsoft. Canadian National Railway (NYSE: CNI) holds the position as its third-largest investment, constituting almost 16.3% of the entire portfolio.

Canadian National Railway's reach extends beyond Canada, with a network of approximately 20,000 miles of rail facilitating product transport in the central part of the U.S. The company provides not only rail operations but also transportation and logistics services.

Demonstrating financial stability, the transportation company has increased its dividend for 28 consecutive years. In the first quarter of 2024, it raised its dividend payout by 7%. Currently, Canadian National Railway boasts a dividend yield of 1.94%.

Should Other Investors Consider Bill Gates' Leading Dividend Stock Choices?

Relying on a billionaire's stock holdings may not be prudent, as market conditions and factors influencing the initial investment can evolve over time. While Microsoft, Canadian National Railways, and Caterpillar might not be the most compelling choices for income or value investors, Microsoft stands out for growth-oriented investors.

The potential for substantial growth in Microsoft is attributed to the increasing adoption of generative AI. However, it's essential to note that Microsoft's shares are already priced for significant growth, reflected in a forward earnings multiple exceeding 31x. Despite this, I believe Microsoft remains a viable consideration for long-term growth investors.