Goal: $3,000 in passive income Method: Invest $16,000 in these 3 Warren Buffett dividend stocks and wait 5 years

The Motley Fool UK » All Articles » Goal: $3,000 Passive Income – Method: Invest $16,000 in These 3 Warren Buffett Dividend Stocks and Wait 5 Years

In 3 sentences

  • Verizon has a huge dividend yield that has increased for 15 consecutive years.
  • Chevron is in excellent financial shape, having paid a dividend for 36 consecutive years.
  • US Bancorp is consistently among the best performers in the banking industry.

In times of volatility, investors may seek stocks with high dividend yields that can generate stable passive income over time. Few people know more about dividend stocks than Warren Buffett. About his company Berkshire Hathaway Buffett has invested in more than a few dividend-paying stocks that have helped Berkshire outperform over the years.

Three stocks that are earning Buffett handsome dividend yields are the telecommunications giant Verizon Communications (WKN: 868402), the main energy producer herringbone (WKN: 852552) and the big bank United States Bancorp (WKN: 917523). A $6,000 investment in Verizon with a dividend yield of around 4.8%, $5,000 in Chevron with a dividend yield of around 3.25%, and $5,000 in US Bancorp with a dividend yield of about 3.4% would pay about five years Generate $3,100 in passive income. Not so bad. Let’s take a look at each of these three stocks.

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1. Verizon

Buffett bought Verizon in late 2020 amid the pandemic, at a time when it was selling more than it was buying. Not only does Verizon offer a high dividend yield, but it’s also a classic Buffett stock, trading at less than 10 times earnings. Verizon also appears to have some momentum as the company had a strong quarter, with earnings and revenue beating expectations. Forecasts for this year were also higher than analysts’ expectations.

Verizon is making good progress with its 5G wireless initiative, and within that initiative there are some exciting new areas of business where the company seems to be taking the lead. Take Network as a Service (NaaS), a digital subscription that allows users to sync all their electronic devices, from an iPhone to a self-driving vehicle. Verizon has now increased its dividend for 15 consecutive years, making it a very strong dividend stock.

2. Herringbone

Chevron is one of the best performing stocks in Berkshire’s portfolio, having gained more than 40% so far in 2022. The catalyst for this year was Russia’s invasion of Ukraine, which significantly raise oil prices. Since the United States and many other countries have banned oil and gas imports from Russia due to the war, and Russia is one of the largest exporters of gas, this has made the very valuable American energy companies. Chevron is currently trading at an all-time high.

The company is also in good financial shape and has a history of growing free cash flow even as oil prices fall. Chevron also plans to significantly increase its share buybacks and recently raised its free cash flow forecast through 2026. The company has increased its dividend every year for 36 consecutive years. Given this year’s strong performance, it’s certainly fair for investors to wonder if a setback might be on the horizon at some point. But Chevron is in a very strong financial position and is a great dividend-paying stock.

3. Bancorp of the United States

The group is completed by US Bancorp, one of the largest banks in the United States with over $564 billion in total assets. US Bancorp survived the massive bank sell-off by Buffett and Berkshire during the pandemic and appears to be Buffett’s favorite regional US bank. US Bancorp is a leading commercial bank serving small businesses and large corporations with its unique payment business that sets it apart from its competitors. In the coming years, US Bancorp plans to further unify and integrate its payments and commercial banking products.

Since 2010, US Bancorp has consistently delivered strong annual returns on equity of over 14%. This is a good indication of how much money the company has taken in from equity. US Bancorp is a consistent dividend payer and has consistently increased its dividend since 2010. The bank is consistently among the top performers in the industry.

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Bram Berkowitz does not own any of the stocks listed. The Motley Fool owns shares of and endorses Berkshire Hathaway and endorses Verizon Communications. This article was published on April 9, 2022 on Fool.com and has been translated for our German readers.

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