3 Dividend Stocks That Pass Buffett’s Test: Buy, Sell or Hold?
Costco, Fastenal, and Visa all pass Warren Buffett's classic quality screen, but passing the quality test and clearing the valuation bar are two very different things. One of these compounders is a trap at current prices, one deserves patience, and…
Warren Buffett prizes durable brands, high returns on capital, and rising dividends. Costco Wholesale (NASDAQ:COST | COST Price Prediction), Fastenal (NASDAQ:FAST), and Visa (NYSE:V) all clear that bar, yet each trades on very different terms today. Here is how each stacks up on valuation, growth, and dividend quality right now.
Costco at $940.87: A Premium-Priced Compounder
Costco is the definition of a Buffett-style compounder, with a 89.7% worldwide renewal rate baked into Q3 FY2026 membership fees of $1.37 billion, up 10.7%. Comparable sales rose 9.8% and digital comps jumped 21.5%, and management is on track for roughly 940 warehouses by fiscal year end. The dividend has climbed from $1.02 in early 2024 to $1.47 today, with periodic specials layered on top.
The problem is price. Costco trades at 47 times trailing earnings and 41 times forward, with a 0.57% yield and a PEG of about 5. Shares are up 9.42% year to date but off 0.81% over the past year, roughly in line with the broader market. The $1,076.91 analyst target across 37 covering analysts implies mid-teens upside, but targets are guides, not guarantees.
At $940.87, Costco is a Hold. Own it if you already have a position, but wait for a broader pullback before adding exposure.
Fastenal at $45.49: A Great Business Priced for Perfection
Fastenal just delivered a clean beat, with Q2 revenue of $2.39 billion, up 14.74%, and EPS of $0.33. Contract customer daily sales grew 17.6%, now 75.8% of revenue, and June sales surged 20.5%. Returns are elite, with return on equity of 34.3% and a 1.97% dividend yield.
The bear case is the setup. Shares are up 14.6% year to date, well ahead of the S&P 500’s roughly high-single-digit gain, and trade at 39 times earnings. Gross margin compressed 75 basis points on customer mix and tariff pressure, and 2026 capex jumps to $310 million to $330 million from $230.6 million. The $47.84 analyst target across 17 analysts sits barely above the current quote, with 5 sell or strong sell ratings versus 5 buys.
At $45.49, Fastenal is a sell for new money. The analyst target sits barely above the current quote and the ratings distribution leans cautious. Wait and revisit closer to the low $40s.
Visa at $358.56: The Buffett Trifecta Still Works
Visa is the cleanest buy of the three. Q1 FY2026 net revenue rose 14.6% to $10.90 billion, payments volume grew 8% in constant dollars, and processed transactions hit 69.4 billion. Operating margin is 67.3% and return on equity is 60.4%. The quarterly payout was raised 13.6% to $0.67, now $2.68 annualized, alongside $21.1 billion left on the buyback authorization.
Valuation is reasonable for the quality on offer, at 31 times trailing and 24 times forward earnings. Shares are up just 2.66% year to date, lagging the S&P 500, which sets up a catch-up trade. The $401.47 analyst target across 40 analysts, with 37 rating it Buy or Strong Buy, implies roughly 12% upside before dividends. The interchange MDL litigation overhang is real, but reserves are already flowing through GAAP results.
At $358.56, Visa is a Buy. The combination of double-digit revenue growth, a growing dividend, aggressive buybacks, and a discounted forward multiple is the setup long-term compounders like Buffett tend to reward.
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Vandita Jadeja is a financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis. She has contributed to several publications, including the Joy Wallet, Benzinga, The Motley Fool and InvestorPlace.
