If any investor has stood the test of time, it is Warren Buffett, and with good reason. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world, and his annual Berkshire Hathaway Inc. (NYSE: BRK-B) shareholders meeting draws thousands of loyal fans who are investors. They were stunned at this year’s meeting when Buffett announced that he would be stepping down as CEO of the investment giant at the end of the year. While he will remain board chair and continue to have a voice in the day-to-day operations, his pre-announced successor, Greg Abel, will assume the chief executive position at the end of the year.
One primary concern for many Buffett followers and others across Wall Street is that his favorite stock market indicator, the market capitalization-to-GDP ratio, currently stands at a gigantic 218%. While this does not necessarily mean a market crash is imminent, it does suggest that current valuations are incredibly extended. Given his apparent concern about the stock market now and his substantial cash and T-bill holdings, it makes sense for investors to consider buying some of the more conservative, highest-yielding dividend stocks in the Berkshire Hathaway portfolio. Four companies appear to be very safe investments for now, and all are rated Buy at the top Wall Street firms we cover.
Why do we cover Warren Buffett’s stocks?
Few investors have the results and reputation that Buffett has garnered over the past 50 years. While investing has evolved over the past half-century, buying good companies with products and services recognized worldwide, while paying dividends, will always remain a timeless approach.
Chevron
This American multinational energy company predominantly specializes in oil and gas. The integrated giant is a safer option for investors looking to position themselves in the energy sector, and it pays a substantial 4.16% dividend, which was recently raised by 5%. Chevron Corp. (NYSE: CVX) operates integrated energy and chemicals businesses worldwide through two segments.
The Upstream segment is involved in the following:
- Exploration, development, production, and transportation of crude oil and natural gas
- Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
- Transportation of crude oil through pipelines, and transportation, storage
- 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 renewable fuels
- Transporting crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car
- Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives
It also involves cash management, debt financing, insurance operations, real estate, and technology businesses.
Chevron announced in late 2023 that it had entered into a definitive agreement with Hess Corp. (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion. The Federal Trade Commission approved the deal last October, and it is expected to close this summer.
UBS has assigned a Buy rating and a massive target price of $197.
Diageo
Diageo PLC (NYSE: DEO) is a British multinational alcoholic beverage company headquartered in London, England. This company is one of the world’s largest producers of alcoholic beverages and pays a solid dividend of 4.40%. Diageo produces, markets, and sells alcoholic beverages worldwide.
It offers:
- Scotch whiskey, gin, vodka, rum, beer, and spirits
- Irish cream liqueurs,
- Wine, Raki, tequila, Canadian, and American whiskey
- Cachaça, and brandy, as well as adult beverages and ready-to-drink products
The company’s premium brands comprise Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray, and Guinness.
Its reserve brands include:
- Johnnie Walker Blue Label
- Johnnie Walker Green Label
- Johnnie Walker Gold Label 18-year-old
- Johnnie Walker Gold Label Reserve
- Johnnie Walker Platinum Label 18-year-old
- John Walker & Sons Collection
- Johnnie Walker The Gold Route
- Johnnie Walker The Royal Route
Johnnie Walker super premium brands: The Singleton, Cardhu, Talisker, Lagavulin, and other malt brands.
Bank of America has a Buy rating on the shares with a $109 target price.
Kraft Heinz
Kraft Heinz Co. (NYSE: KHC) is North America’s third-largest food and beverage company and fifth-largest globally. Even in difficult times, everybody needs to eat, and this company consistently benefits while paying a substantial 6.20% dividend. The company was formed via the merger of H.J. Heinz and Kraft Foods Group, and it manufactures and markets food and beverage products worldwide through its eight consumer-driven product platforms:
- Taste Elevation
- Easy Ready Meals
- Hydration
- Meats
- Cheeses
- Substantial Snacking
- Desserts
- Coffee and other grocery products
The company has two reportable segments defined by geographic region: North America and International Developed Markets.
Its other segments, consisting of West and East Emerging Markets (WEEM) and Asia Emerging Markets (AEM), are combined and disclosed as Emerging Markets. It manufactures its products from a wide variety of raw materials.
Kraft Heinz brands include:
- Kraft
- Oscar Mayer
- Heinz
- Philadelphia
- Lunchables
- Velveeta
- Ore-Ida
- Capri Sun
- Maxwell House
- Kool-Aid
- Jell-O
- Golden Circle
- Wattie’s
- Plasmon
- ABC
- Master
- Quero
- Pudliszki
The company’s products are sold through its sales organizations and independent brokers, agents, and distributors.
Kraft Heinz is evaluating the potential spin-off of a significant portion of its grocery business, which includes slower-growing brands such as Velveeta, Oscar Mayer, and Jell-O, into a separate entity that could be worth approximately $20 billion. The move aims to “unlock shareholder value” by allowing a more focused, high-growth “RemainCo” centered on premium brands such as Heinz ketchup and Philadelphia cream cheese to pursue innovation and international expansion. In contrast, the divested business could pursue its own strategic direction. Many on Wall Street believe that this could be a significant positive for shareholders, citing spin-offs at General Electric and AT&T as examples from the past.
DZ Bank upgraded the shares from Hold to Strong Buy with a $30 target price.
Sirius XM
The satellite radio giant is a newer addition to the Berkshire Hathaway portfolio, and Buffett has continued to increase his stake over the past year. Sirius XM Holdings Inc. (NASDAQ: SIRI) is an audio entertainment company in North America that pays shareholders a dividend yield of 4.81%.
The company has a portfolio of audio businesses, including its flagship subscription entertainment service SiriusXM; the ad-supported and premium music streaming services of Pandora; an expansive podcast network; and a suite of business and advertising solutions.
Its segments include:
- Sirius XM
- Pandora and Off-platform
The Sirius XM segment offers a variety of content, including music, sports, entertainment, comedy, talk, news, traffic, and other channels, as well as podcasts and infotainment services, in the United States for a subscription-based fee.
Sirius XM’s packages include live, curated, and specific exclusive and on-demand programming.
The Pandora and Off-platform segment operates a music, comedy, and podcast streaming discovery platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through mobile devices, vehicle speakers, or connected devices.
Barrington Research has an Outperform rating with a $28 price objective.
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