Berkshire Hathaway CEO Warren Buffett is one of history’s most successful investors. While his own company doesn’t pay a dividend, it’s clear that the Oracle of Omaha loves companies that regularly return cash to shareholders. In fact, each of Berkshire’s top-five largest stock holdings pays a dividend.
If you’re looking for great income-generating opportunities, read on for a look at two Buffett-backed stocks that boast big yields and impressive overall dividend profiles.
Coca-Cola (NYSE: KO) ranks as Berkshire’s fourth-largest portfolio holding, and it’s clear that Buffett is a big fan of the company. The Oracle of Omaha has even said that he would never sell a share of Coke stock. If you follow the famous investor, there’s also a good chance you’ve seen him sipping on some of the beverage giant’s products.
In February, the company announced a 4.6% increase of its quarterly dividend. That boost marked the company’s 61st consecutive annual dividend hike. Few companies have a longer streak of uninterrupted dividend growth, and it’s a safe bet that Coca-Cola will continue to increase its dividend at regular intervals in the coming years.
Based on its current stock price, Coca-Cola shares yield about 3.1% right now, and investors can bank on seeing any shares they purchase today generating a higher dividend down the line thanks to further payout raises. The company has raised its dividend 64% over the last decade, and its competitive advantages should ensure that continues.
Coca-Cola has virtually unrivaled infrastructure and distribution networks. It also has fantastic brand strength across its catalog of products, paving the way for pricing power and strong margins.
Over the long term, Coca-Cola should see efficiency improvements stemming from artificial intelligence and automation technologies. While the company’s logistics network is already incredibly effective, these new technologies will create opportunities to further reduce costs, improve production and delivery times, and streamline operations.
For investors seeking stocks that can serve up a solid yield and reliable payout growth, Buffett’s favorite beverage stock is a no-brainer.
Even after Berkshire trimmed its position in the first quarter, Chevron (NYSE: CVX) stands as the company’s fifth-largest stock holding. With a yield of roughly 3.8%, the energy giant also pays the largest dividend out of any of the top-five stocks held by the investment conglomerate.
Like Coca-Cola, Chevron has an impressive history of dividend growth. The integrated oil and gas company has increased its payout 51% over the last decade and delivered dividend growth on an annual basis for 36 years straight. Chevron has also been returning cash to shareholders through stock buybacks. The company’s board of directors recently authorized up to $75 billion in new buybacks.
By repurchasing and retiring shares, the company reduces its total amount of shares outstanding. Because the total number of shares decreases, this has a positive impact on the amount of earnings generated per share even if total net income stays the same. In addition to boosting per-share earnings, buybacks can also make it easier for a company to deliver big dividend growth over the long term because having a smaller pool of shares leaves room for each remaining share to have a larger dividend.
Chevron runs a highly efficient business and generates tons of free cash flow. While the company will see performance fluctuations in conjunction with shifting energy prices, it expects a significant improvement in its oil production over the next couple of years. The oil and gas giant is also growing through acquisitions, having recently announced that it had closed a deal to acquire Colorado-based shale producer PDC Energy.
Backed by strong industry positioning, Chevron is a high-yield dividend stock that can reliably generate cash for shareholders.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Chevron and recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.