Billionaire Warren Buffett’s Top 3 Dividend Stocks

The Coca-Cola Company (NYSE:KO), Suncor Energy Inc. (TSX:SU)(NYSE:SU), and International Business Machines Corp. (NYSE:IBM) deserve a spot in your portfolio.

The Motley Fool

When searching for new income ideas, it never hurts to peek over the shoulders of the world’s greatest investors. And it doesn’t get any better than Warren Buffett.

Although Berkshire Hathaway Inc. shareholders don’t receive a cash payout, Buffett’s portfolio is chalked full of companies that spin off steady, growing dividends.

And given his track record, there’s no better place to look for new investment ideas. Here are Buffett’s top three dividend stocks.

1. The Coca-Cola Company 

Not every hockey player is as good as Sidney Crosby, and not every stock is as good as The Coca-Cola Company (NYSE: KO).

Coca Cola belongs to a special group of dividend stocks that Standard & Poor’s calls ‘Dividend Aristocrats’. And you don’t get into this elite club by just paying a dividend. No, these industry champions have increased their payouts for at least 25 consecutive years. In fact, Coca Cola has managed to pass on 51 straight dividend hikes to shareholders.

Impressed? You should be. Because when a company has a 50-plus year streak of paying and raising its dividend, you better believe investors are counting some impressive compounded returns.    

2. Suncor Energy Inc.

Suncor Energy Inc.’s (TSX: SU)(NYSE: SU) new Chief Executive Steve Williams has one focus: to return as much cash to shareholders as possible.

After taking over at the oil giant back in 2011, Mr. Williams has doubled the size of the company’s dividend and bought back over 10% of its outstanding shares. And just last quarter, he hiked Suncor’s dividend another 15% and announced plans to buy back an additional $1 billion in stock.

How has Mr. Williams been able to pull this off? He isn’t interested in growth just for the stake of growth. Rather, every dollar reinvested back into the business must meet a high return threshold or be returned to shareholders. This is the sort of discipline that has attracted Buffett’s attention.

3. International Business Machines Corp.

What could Buffett possibly see in a technology company like International Business Machines (NYSE: IBM)? It is among the best capital allocators in the business.

Throughout its history, IBM has chosen to return enormous amounts of capital back to shareholders rather than squander it on overpriced acquisitions. Over the past two decades, the company has repurchased over half of its outstanding shares and has increased its dividend 17-fold.

And IBM is likely to maintain that impressive financial performance for decades to come. Intangible assets like reputation, track record, and client relationships give the firm a huge competitive advantage in the consulting business. Switching costs and scale should also allow IBM to maintain superior profit margins over the long haul.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned. The Motley Fool owns shares of Berkshire Hathaway and International Business Machines and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola.

More on Dividend Stocks

money cash dividends
Dividend Stocks

The 2 Stocks Every Dividend Investor Should Own for Reliable Cash

Dividend stocks offering consistent and reliable returns can be a crucial asset in any portfolio, especially for income-producing dividend portfolios.

Read more »

grow dividends
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX dividend-growth stocks now offer yields above 7%.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Building a large, tax-free nest egg in your TFSA with growth stocks can give you more control over your tax…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Dividend Stocks

May Boycotts: Is Loblaw Stock in Trouble?

Even extreme fluctuations in consumer purchasing patterns may not impact a stock as aggressively as demoralizing actions like boycotts.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Want $2,000 in Annual Dividends? Invest $27,000 in These 3 Stocks

These three top dividend stocks could help earn a stable passive income.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Absurdly Cheap Stocks to Buy and Hold for Years

Looking for some great stocks to buy for long-term growth? Here are three absurdly cheap stocks that are impossible to…

Read more »

Canadian Dollars
Dividend Stocks

Earn $100 Monthly With a Simple $17,025.75 Investment

A less than $20,000 investment in a high-yield energy stock can produce $100 every month.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

Innergex Cut its Dividend: Is the Stock Still a Buy?

While a dividend cut is bad news for existing investors, it may present a good buying opportunity for new investors.

Read more »