3 Top Warren Buffett Stocks to Buy for Reliable Dividend Income
May 22, 2025
Key Points
Warren Buffett's company,
Berkshire Hathaway
(NYSE: BRK.A)
(NYSE: BRK.B)
, has famously eschewed paying dividends. Buffett and his team would rather retain Berkshire's earnings and reinvest that cash than pay it
out
to shareholders in dividends.
While Buffett doesn't want to pay dividends to his shareholders, he loves receiving them from other companies.
Berkshire Hathaway owns
many dividend-paying stocks. Three top options for those who like Buffett's style but also want to receive some
dividend income
are
Chevron
(NYSE: CVX)
,
Coca-Cola
(NYSE: KO)
, and
Kraft Heinz
(NASDAQ: KHC)
. The trio ranks among Berkshire's top holdings and pay dividends with above-average yields.
1. A well-oiled, dividend-paying machine
Berkshire Hathaway holds more than 118.6 million shares of
Chevron
(6.8% of the oil company's
outstanding shares
) worth over $16.3 billion. That's the company's fifth-largest holding.
Chevron currently has a dividend yield of almost 5%. That's well above the
S&P 500
index's sub-1.5% dividend yield.
The oil giant has been a terrific dividend stock over the years. The company has increased its payout for 38 straight years, which includes many up-and-down oil markets. Chevron hasn't just increased its payout; it has delivered peer-leading growth over the past 10 years.
Chevron's high-yielding dividend is on a very sustainable foundation. The company has one of the most resilient portfolios in the oil patch, with the lowest break-even level in the sector at around $30 per barrel. With crude oil currently in the $60s, Chevron
is producing
lots of free cash flow. It's on track to generate an incremental $9 billion in free cash flow next year at $60 oil, driven by its investments to grow its low-cost oil resources. Add in Chevron's fortress-like balance sheet (its
leverage ratio
of 14% is below its target range of 20% to 25% and at the low end of its peer group), and its dividend is on rock-solid ground.
2. Satisfying income investors for decades
Coca-Cola currently clocks in as Berkshire's third-largest
holding
at 10.1% of its investment portfolio. Buffett's company owns 400 million shares (9.3% of its outstanding stock) worth over $28.6 billion. Berkshire collects over $800 million in dividend income from Coca-Cola each year, a staggering amount considering the company only paid about $1.3 billion for its position years ago.
Berkshire collects a lot of dividend income from Coca-Cola these days because the beverage giant has steadily increased its payment
.
The company raised its payment by 5.2% earlier this year, its 63rd
straight
year of increasing its dividend.
Coca-Cola's payout currently yields about 2.9%. That high-yielding dividend is on a very sustainable foundation.
The company expects to produce about $9.5 billion in free cash flow this year
after funding the capital expenditures needed to sustain and grow its business
.
That's
more than
enough to cover its annual dividend outlay of around $8.8 billion. Add in its strong balance sheet (its leverage ratio was below the low end of its target range at the end of last year), and Coca-Cola's payout is on a very stable foundation.
3. A very appetizing yield
Kraft Heinz ranks as Berkshire's eighth-largest holding. It owns over 325 million shares (27.5% of its outstanding stock) worth more than $9 billion (3.2% of its investment portfolio).
The food company pays a tasty dividend that currently yields 5.7%. It produces plenty of cash to cover its dividend. Last year, Kraft Heinz generated $3.2 billion in free cash flow after funding capital expenses, up 6.6% from the prior year. That easily covered the $2.7 billion of cash it returned to investors via dividends ($1.9 billion) and share repurchases ($988 million). It used the remaining excess free cash flow to strengthen its already solid financial profile.
Kraft Heinz expects to produce even more free cash flow in the future. The company is working on capturing efficiencies in its business that will increase its free cash flow conversion rate from 85% last year to 95% this year and 100% by 2027. It's also working to return its business to growth by next year, which positions it to produce more free cash flow
in the future
.
Be like Berkshire and collect dividend
income
While Warren Buffett's company doesn't pay dividends, it sure likes to collect dividend income. Because of that, its investment portfolio is
a great
place for investors to find high-quality dividend stocks. Chevron, Coca-Cola, and Kraft Heinz stand out as great options for those seeking to collect lucrative
streams of dividend income
.
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Matt DiLallo
has positions in Berkshire Hathaway, Chevron, and Coca-Cola. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool recommends Kraft Heinz. The Motley Fool has a
disclosure policy
.
