Investors who are looking to put cash to work during periods of volatility may look for stocks trading at a discount, or they can seek out high-yielding dividend stocks that, over time, may produce stable passive income. Warren Buffett is the all-time expert on dividend stocks. Buffett’s Berkshire Hathaway has invested in several dividend companies that have aided in Berkshire’s outperformance over time.
The telecommunications behemoth Verizon Communications ( VZ -0.57%), the big energy producer Chevron ( CVX -0.05%), and U.S. Bancorp ( USB 4.15%) are three stocks that generate solid dividend yields for Buffett. Investing $6,000 in Verizon with a dividend yield of about 4.8%, $5,000 in Chevron with a dividend yield of about 3.25%, and $5,000 in US Bancorp with a dividend yield of about 3% would result in roughly $3,100 in passive income after five years if invested into these three equities simultaneously via an exchange-traded fund [ETF]. Not bad for mailbox dollars! Let’s take a look
1. Verizon
At the end of 2020, Warren Buffett purchased Verizon during the epidemic when he was doing more selling than buying. Not only does Verizon have a solid dividend yield, but it’s also a classic Buffett value play trading at less than 10 times earnings. Verizon appears to be gaining momentum, especially after reporting a strong quarter in which revenue and earnings exceeded expectations while guidance for this year was higher than analyst expectations.
Verizon is making significant progress on its 5G wireless internet plan, and among the new and innovative business lines it appears to be leading on are network as a service (NaaS) plan, which is a digital subscription that allows you to sync all of your gadgets from your iPhone to an autonomous car. Verizon has now paid out a dividend for 15 years in a row, strengthening its payout ratio.
2. Chevron
Chevron is one of Berkshire’s top-performing investments and has jumped more than 40% this year. Russia’s takeover of Ukraine has been the driving force behind the rise in oil prices. Due to America’s and many other countries’ bans on Russian oil and gas imports owing to the war, and Russia being one of the world’s largest exporters of gas, American energy firms are becoming increasingly valuable. Chevron is presently trading at all-time highs.
Chevron is also in excellent financial condition, having been able to expand free cash flow even when the value of oil drops. Chevron is also anticipating a significant increase in share repurchases and recently increased its free cash flow expectations through 2026. For 36 consecutive years, the firm has increased its dividend annually. It’s certainly understandable for investors to question if there will be a pullback at some point, given this year’s strong results, but it’s in excellent financial health and provides a fantastic dividend yield.
3. U.S. Bancorp
The group also includes U.S. Bancorp, one of the country’s largest banks with nearly $564 billion in assets. U.S. Bancorp proved that it could survive Buffett’s and Berkshire Hathaway’s massive bank sell-off during the pandemic by remaining Buffett’s favorite regional bank in the United States. Through its unique payments business, which distinguishes it from its competitors, U S Bancorp has a top-notch commercial banking system that caters to large organizations as well as small businesses. In future years, US Bank has plans to link and integrate its commercial and payment banking services further.
Since 2010, U.S. Bancorp has delivered above-average yearly returns on equity each year, with at least 14% in excess of the industry average. Since 2010, U.S. Bancorp has been a consistent dividend payer and has also grown its payout proportionally. It’s a bank that has performed well in the competition over time.
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