Want to make money while you sleep? Here are Warren Buffett’s top dividend picks
Influential investor Warren Buffett has been giving out investment advice since the beginning of his career. He is a strong advocate of value investing in well-managed large-cap stocks, Buffett once said: “If you don’t find a way to make money while you sleep, you will work until you die.” Here are his top dividend picks
Investing in high-quality dividend stocks can help you generate substantial passive income, creating a stable cushion for retirement as well as side income. Companies categorized as dividend aristocrats have a decades-long history of regularly distributing dividends, making them a good source of income during turbulent market conditions and fears of recession.
Buffett, who currently ranks number 5 on Forbes’ list of real-time billionaires with a net worth of $114 billion, is a staunch supporter of industry-leading blue chip stocks.
“Watch for the investment activity that produces applause; the big moves are usually met with yawns,” Buffett once said.
Take a look at some of Buffett’s top dividend picks
Coca-Cola Co.
Buffett has said that dividend stocks are the “secret sauce” behind the success of Berkshire Hathaway Inc. He addressed Coca-Cola Co. (NYSE: KO) in Berkshire Hathaway’s 2022 shareholder letter, saying: “[Utdelning] growth occurred every year, as sure as birthdays.”
Buffett and his right-hand man Charlie Munger, vice chairman of Berkshire Hathaway, invested $1.3 billion in Coca-Cola and received 400 million shares in 1994 when it generated a $75 million dividend. As of 2022, annual dividends from Coca-Cola shares have ballooned to $704 million – an increase of more than 800% in less than three decades.
Berkshire Hathaway’s stake in Coca-Cola was valued at $25 billion as of 2022, an increase of more than 1,800% from the initial investment of $1.3 billion. As of last year, Coca-Cola shares accounted for about 5 percent of Berkshire Hathaway’s total holdings.
American Express Co.
Buffett made similar gains on his investment in American Express Co (NYSE: AXP). He invested nearly $1.3 billion in American Express in 1995, which is now valued at $22 billion. This marks a nearly 1,600% increase in valuation.
Capital gains are not the only benefit that American Express shares have generated for Buffett. The world’s largest portfolio manager also received dividend income of $302 million from its American Express holdings in 2022, up from $41 million during the initial investment in 1995.
“Also these [American Express utdelning] checks seem very likely to increase,” Buffett said in Berkshire Hathaway’s 2022 shareholder letter. American Express shares also account for nearly five percent of Hathaway’s net worth.
Apple Inc.
While Apple Inc (NASDAQ:AAPL) is not considered a dividend stock by most investors, the tech giant’s dividends have made the stock one of Buffett’s family jewels. Berkshire Hathaway has a nearly 5.8% stake in Apple.
Buffett describes Apple as a “better company than anything else we own.” He attributes his significant stake in Apple to several share repurchases the company has made over the years, making it “costless” for Berkshire Hathaway to increase its Apple shareholding.
Buffett’s dividend income from Apple averaged about $775 million annually in 2020, according to Berkshire Hathaway’s 2020 shareholder letter. Apple currently has 11 consecutive years of dividend growth.
Make money while you sleep
Warren Buffett famously said: “If you don’t find a way to make money while you sleep, you will work until you die.” It’s time to put your investments to work.
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