Warren Buffett has made headlines over the past years for selling down his positions in stocks such as Apple (AAPL) and Bank of America (BAC). But there’s one stock the legendary investor has kept buying.
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Sirius XM Holdings (SIRI) is a small-cap stock that has had a dreadful track record. Formed in 2008 through the merger of Sirius Satellite Radio and XM Satellite Radio, the combined company today has a virtual monopoly on satellite radio.
However, SIRI stock has been a long-term laggard and is down nearly 60% over the past five years. Yet despite the disappointing performance, Buffett has continued adding to his position in the stock. The Oracle of Omaha currently owns $2.83 billion of Sirius XM stock, or about 35% of the company. In the past year, Buffett has increased his investment in Sirius XM by 20 million shares or $459 million.
Big Dividend
So, why has Buffett continued buying a stock that is down more than 50% in the last five years? The hefty dividend yield is likely the answer. Sirius XM is a small-cap stock that pays a big dividend. SIRI stock pays a quarterly dividend of $0.27 per share, giving it a hefty yield of 4.57%. The average dividend yield among companies listed on the benchmark S&P 500 index is a paltry 1.21%.
A notorious dividend hound, Buffett now earns $129.36 million per year in dividend payments from his Sirius XM position. The chair of holding company Berkshire Hathaway (BRK.B) also no doubt likes Sirius XM’s monopoly over satellite radio. Whatever the reasons, Buffett’s continued buying provides SIRI stock with a much needed vote of confidence.
Is SIRI Stock a Buy?
The stock of Sirius XM Holdings has a consensus Moderate Sell rating among nine Wall Street analysts. That rating is based on two Buy, two Hold, and five Sell recommendations issued in the last three months. The average SIRI price target of $22.33 implies 8.07% downside from current levels.
