Warren Buffett Swaps VOO for This Reliable Dividend Stock

Key Points

• Berkshire Hathaway’s exit from the S&P 500 ETF suggests concerns over market valuation, as the index’s forward P/E ratio is above historical averages.
• Despite this, the company still maintains large holdings in individual shares of top companies in the index. 
• Buffett’s latest buy is Domino’s Pizza, a strong dividend stock with a 12-year streak of dividend increases and a sustainable 41.70% payout ratio.

Warren Buffet, long famous for advising retail investors to buy and hold low-cost index funds, revealed in a recent filing that his holding company had exited the Vanguard S&P 500 ETF NYSEARCA: VOO. Berkshire Hathaway sold its entire position in both VOO and its only other S&P 500 index fund in the fourth quarter of 2024 in a move that has investors questioning the value of top tech players in the index.  

Let’s take a closer look at what’s going on at Berkshire Hathaway and what Buffet is buying instead of VOO. 

Why Is Warren Buffet Now Selling the S&P 500?

When understanding the decision to sell VOO, it’s important to consider these shares within the context of Buffet’s overall portfolio. Since VOO tracks the S&P 500 and is considered to be a measure that allows investors to put money into the overall American economy, it could be interpreted that Buffet believes that the index is currently overvalued. 

There is an argument to be made that the S&P 500’s valuation has been getting lofty, especially as international competition in the tech sphere heats up. In late February of 2025, the forward 12-month P/E ratio for the S&P 500 was 21.2. 

This is higher than both the five-year average P/E ratio of 19.8 as well as the 10-year average of 18.3. A measure of price in relation to earnings, a rising P/E ratio could indicate that the share prices that make up the index are rising without the earnings to back them up. Buffet’s increase in cash holdings is another signal to investors that the investing expert believes a correction is due. 

Despite this recent data, it’s inaccurate to say that Warren Buffet is now going against his previous advice to investors to bet on the American economy with an index fund. S&P 500 index funds accounted for less than 0.02% of Berkshire's portfolio in the third quarter of 2024, meaning that fund sales can hardly be considered a statement about the overall economy. 

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This is especially true when you consider that Berkshire’s portfolio contains many of the same stocks that make up major S&P 500 indexes. Shares of Amazon.com NASDAQ: AMZN, Kraft Heinz NASDAQ: KHC, Coca-Cola NYSE: KO and Apple NASDAQ: AAPL all remain top holdings in Berkshire Hathaway's portfolio while also making up major portions of the index. Even if Buffet believes a correction is coming, his portfolio is still holding onto major investments in top American companies. 

Buffet Buys DPZ, A Solid Dividend Stock

Recent filings from Berkshire Hathaway didn't only reveal selling activity; data also revealed increasing holdings in Domino’s Pizza NASDAQ: DPZ.

Berkshire purchased 1.28 million shares as of the end of the 3rd quarter—an investment that has since returned more than 20% to investors. 

A leader in the competitive quick-service industry, Domino’s can be a solid long-term play for dividend investors.

The company offers a $1.74 quarterly dividend payment, which equals out to a sustainable 1.44% yield.

It has also raised its dividend for 12 consecutive years, with an average annual increase of 5.41%. 

Its 41.70% payout ratio is considered within the safe and sustainable zone, contributing to its potential. 

What Do Analysts Say About DPZ?

As an investor, it’s important to take a long-term approach when choosing which stocks to hold in your portfolio. While investors' confidence indicates that share price and dividend increases may be on the horizon for Domino’s, it’s not advisable for retail investors to sell shares of major market funds like VOO to purchase shares of an individual company. 

There are also some indications that investor interest in DPZ could be overhyped. Short interest increased by 5.5% to more than $1 billion in early March, indicating that the number of days to cover the float is steadily increasing. Only 0.76% of company shares are also held by insiders, which is another negative indicator that may show general investor confidence isn’t as high as Buffet’s individual belief in the company. 

DPZ can still be a solid pick for income investors, holding a Moderate Buy consensus rating from analysts. Investment experts are predicting a 4.49% potential upside in the next year following last year’s approximate 8% increase in share prices. 

While Domino’s did miss its most recent earnings consensus estimate by $0.04 per share, analyst predictions on future earnings paint a similarly optimistic picture for the worldwide pizza retailer. Quarterly revenue rose 2.9% year-over-year to $1.44 billion, with experts predicting an additional 4.6% growth next year.