If any investor has stood the test of time, it is Warren Buffett. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws literally thousands of loyal fans who are investors. Known for his long buy-and-hold strategies and his massive portfolio of public and private holdings, Buffett remains one of the preeminent investors in the entire world.
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Long-time investors and Buffett mavens are familiar with his quote that “His favorite holding for an S&P 500 stock is forever.” So, it is not really surprising to report that, for all the success and stature Berkshire Hathaway has in the investment world, many of its top holdings have been in the portfolio for years. While Berkshire Hathaway is much more concentrated than most portfolio managers would ever consider (five stocks make up 75% of the holdings), the strategy has worked for Berkshire Hathaway investors for years, and likely will in the future.
Three stocks Buffett has in the Berkshire Hathaway portfolio are members of the exclusive Dividend Aristocrats club. The 67 companies that made the cut for 2023 have increased dividends (not just remained the same) for 25 years straight. However, the requirements for membership go even further. Companies must:
- Be a member of the S&P 500.
- Be worth at least $3 billion at the time of each quarterly rebalancing.
- Have an average daily volume of at least $5 million in transactions for every trailing three-month period at every quarterly rebalancing date.
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So, Dividend Aristocrats make excellent candidates to buy and hold forever in an IRA.
Here are the three Dividend Aristocrats Buffett owns. All are rated Buy on Wall Street, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Chevron
This integrated giant is a safer way for investors looking to get positioned in the energy sector, and its shares have backed up nicely. Chevron Corp. (NYSE: CVX | CVX Price Prediction) engages in integrated energy and chemicals operations worldwide, and it is one of the highest paying companies in America.
The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.
The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It is also involved in cash management and debt financing activities, insurance operations, real estate activities and technology businesses.
The company posted strong fourth-quarter results, and the stock remains one of the best ways to play energy safely.
Chevron stock comes with a 3.74% dividend. Raymond James has a $212 target price, well above the $192.74 consensus target and Wednesday’s closing share price of $162.99.
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Coca-Cola
This remains a top five Buffet holding, as he owns a massive 400 million shares. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. It has an incredibly strong worldwide brand, with 40% overseas sales.
The company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
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Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.
Investors receive a 3.07% dividend. Morgan Stanley’s target price on Coca-Cola stock is $70. The consensus target is $68.64, and Wednesday’s close was at $60.04.
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Johnson & Johnson
With a diverse product base and a very popular and solid brand, this is among the most conservative big pharmaceutical plays. Johnson & Johnson (NYSE: JNJ) researches, develops, manufactures and sells various products in the health care field worldwide.
Its Consumer Health segment offers baby care products under the Johnson’s and Aveeno Baby brands; oral care products under the Listerine brand; skin health/beauty products under the Aveeno, Clean & Clear, Neutrogena and OGX brands; acetaminophen products under the Tylenol brand; cold, flu and allergy products under the Sudafed brand; allergy products under the Benadryl and Zyrtec brands; ibuprofen products under the Motrin IB brand; smoking cessation products under the Nicorette brand; and acid reflux products under the Pepcid brand.
This segment also provides women’s health products, such as sanitary pads and tampons under the Stayfree, Carefree, and o.b. brands; wound care products comprising adhesive bandages under the Band-Aid brand; and first aid products under the Neosporin brand.
The Pharmaceutical segment offers products in various therapeutic areas, including immunology, infectious diseases, neuroscience, oncology, pulmonary hypertension and cardiovascular and metabolic diseases.
Its Medical Devices segment provides electrophysiology products to treat cardiovascular diseases; neurovascular care products to treat hemorrhagic and ischemic stroke; orthopedics products in support of hips, knees, trauma, spine, sports and other; advanced and general surgery solutions that focus on breast aesthetics and ear, nose and throat procedures; and disposable contact lenses and ophthalmic products related to cataract and laser refractive surgery under the Acuvue brand.
Shareholders receive a 2.95% yield. Citigroup has set its price target at $205, while the consensus target is $181.75. Johnson & Johnson stock closed at $152.96 on Wednesday.
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These three Dividend Aristocrats have been longtime members of the Berkshire Hathaway portfolio and generate steady and dependable dividends. Last year alone Buffett collected $704 million in dividends from just Coke, so you can bet that it will remain in the portfolio for years to come, as will the others.
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