5 Best Dividend Stocks to Buy According to Warren Buffett

4. Coca-Cola Co (NYSE:KO)

Warren Buffett’s Stake: $23,572,000,000

Warren Buffett has been a believer in Coca-Cola Co (NYSE:KO) for several decades. With over six decades of consistent dividend increases and a resilient business Coca-Cola Co (NYSE:KO) is an example of the textbook businesses Warren Buffett likes.

As of the end of 2023 Berkshire Hathaway had a stake worth about $24 billion in the beverage company Coca-Cola Co (NYSE:KO).

Hayden Capital made the following comment about The Coca-Cola Company (NYSE:KO) in its third 2023 investor letter:

“It’s not just emerging markets either, where one could argue a “scarcity premium” given fewer quality public companies. Even in the US, The Coca-Cola Company (NYSE:KO) trades at ~30x P/E despite having the same earnings as 10 years ago.

Both of these companies actually have lower revenues than 10 – 15 years ago too, indicating that their profit growth is mostly from margin expansion. This can only last for so long before there’s no more excess expenses left to cut.

I find it ironic that all these companies trade as “bond-equivalents” in the minds of investors – even commanding lower yields than US treasuries, the safest security in the world. But it’s clear that their businesses are not nearly as safe. Coca-Cola is facing disruption risk from consumers shifting to new, heathier beverage brands.

But these companies are ~35% more expensive than US Treasuries, despite the heightened risk. On a risk-adjusted basis, one could argue the implied premium is even higher.”

Perhaps the explanation is simply the price volatility difference between these stocks and treasuries over the last two years. For example, 10-year Treasury bonds are down ~-20% since the beginning of 2022. By comparison, KO and PG are remarkably down only -4 – 6% over that time frame.”