Investors, brace yourself for a lesson in endurance and value, courtesy of the investing maestro Warren Buffett, known far and wide as the “Oracle of Omaha.” With a portfolio at Berkshire Hathaway (BRK.B) valued at a towering $400 billion, the Sage of Omaha has a penchant for selecting stocks that age like fine wine. His preference leans towards companies showering investors with unwavering returns.
Among the crown jewels in Buffett’s treasure trove lie three dividend giants: The Coca-Cola Company (KO), The Kroger Co. (KR), and American Express Company (AXP). These stalwarts not only mirror the heartbeat of key economic sectors but also epitomize Buffett’s allegiance to sturdy businesses, cushy dividend disbursements, and a customer-centric ethos.
While some of these stocks currently flirt with Wall Street’s price targets, intrepid investors would do well to keep a watchful eye out for potential pullbacks to established support levels. Why the vigilance, you ask? Because, in the dance of investments, timing often reigns supreme. Seizing these Buffett-endorsed gems during downturns could unveil a splendid chance to snag premium dividend stocks at more alluring price tags.
The Coca-Cola Company (KO): Savoring Success
The Coca-Cola Company (KO) looms large as a colossus in the global beverage realm, boasting iconic brands like Coke, Sprite, and Fanta. This multinational behemoth bats a stellar record, crafting, marketing, and disseminating over 500 beverage labels worldwide.
Over the past year, Coca-Cola’s stock journey has been rather uneventful, clocking a modest 5.4% ascent. So far in 2024, the stock has strutted a 6.8% increase and loiters a mere 2% shy of its peak.
With a market cap of $274.65 billion, Coca-Cola dons the cap of a blue-chip stock, trading at a forward P/E ratio of 22.59, a cut from its trailing P/E of 23.36.
The latest payout by this Dividend King tallied $0.485 as of June 14, 2024, summing up to an annualized dividend of $1.94, translating into a forward yield hovering around 3%.
In its first quarter 2024 earnings disclosure, Coca-Cola unboxed splendid figures, including a 1% uptick in unit case volume, a 3% surge in net revenues to $11.3 billion, and an impressive 11% spike in organic revenues. EPS ticked higher by 3% to $0.74, with comparable EPS witnessing a 7% upswing to $0.72.
James Quincey, the Chair and CEO, radiated optimism during the first quarter 2024 results announcement, noting the company’s delivery of “another quarter of volume, topline, and earnings growth amidst a dynamic backdrop.”
Coca-Cola recently announced a strategic entente spanning five years with Microsoft (MSFT) to fast-track cloud and innovative artificial intelligence (AI) facets. This symbiotic alliance underscores Coca-Cola’s continual tech metamorphosis, backed by a hefty $1.1 billion pledge to harness Microsoft’s Cloud and its innovative AI features.
Market wizards seem fond of KO stock, with 20 analysts offering their two cents. The collective voice echoes “strong buy,” with 14 favoring the tag, 1 advocating a “moderate buy,” and 5 nodding at a “hold.” The mean target price sings to the tune of $66.83, a chord that hints at a possible 6.1% uptick from current levels.
The Kroger Co. (KR): Grocery Royalty
Kroger (KR) reigns supreme in the American grocery domain, with its vast footprint etched across supermarkets, multi-departmental stores, and convenience marts countrywide. What’s their secret sauce? A blend of distinctive brands, an expansive store frontier, and a burgeoning digital presence, all in a bid to meet shopper whims without gouging wallets.
KR stock has flexed its muscles with a robust 13.6% lift in 2024, nudging its 52-week return to a commendable 10.1%.
Boasting a market cap of $37.41 billion, KR stock still holds its ground on the valuation front, priced at 11.70 times forward earnings and 0.25 times sales.
Courting their shareholders, Kroger recently hiked the quarterly dividend stakes by 10%. Based on the beefed-up payout of $0.32 per share, Kroger boasts an annual yield of 2.47%, fortified by over 15 years of consistent dividend increments.
Kroger’s Q1 2024 earnings battle cry, released on June 20, unraveled total sales raking in $45.3 billion, mirroring a slight growth from the previous year. At the earning’s bell, EPS stood at $1.29, with adjusted EPS ringing in at $1.43, serenading Wall Street’s estimates. Kroger upheld its 2024 full-year prophecy, envisioning identical sales sans fuel, perched between 0.25% to 1.75%, and adjusted EPS sailing in the $4.30 to $4.50 horizon.
Amidst the suspense veiling the judicial decree on Kroger’s union with Albertsons, the grocery juggernaut is broadening its healthcare tapestry. They unfurled senior-centric primary care services at eight clinics in Atlanta, in tandem with Better Health Group. Further, Kroger has also dabbled as a fresh contender in the buzzing GLP-1 market.
Making merry on Wall Street’s lips is a consensus “moderate buy” rating for KR. Of the 17 analyst nods, 10 chant “strong buy,” 6 pitch for “hold,” and 1 roots for “strong sell.” The mean target price for KR harmonizes at $57.47, precariously perched around 10.6% above present-day levels.
The Rise of American Express: A Beacon of Financial Fortitude
American Express Company (AXP): Thriving in Financial Excellence
American Express Company (AXP) stands tall as a global leader in payment services, renowned for its diverse portfolio of credit cards, charge cards, and travel-related offerings. The core of AXP’s operational ethos lies in its integrated payments platform, which serves as a crucial connector for millions of consumers and businesses globally.
Stock Performance Shoots for the Stars
The stock of AXP has been ablaze, witnessing a remarkable surge of 38.1% over the past year, accompanied by a soaring 25.2% uptick in 2024 alone.
Valuation and Dividends: AXP’s Gift to Investors
With a substantial market capitalization of $169.49 billion, AXP commands a forward P/E ratio of 18.23, placing it at a premium in the sector in contrast to its trailing P/E of 19.42. In addition, AXP recently declared a dividend of $0.70 per share, resulting in an attractive 1.20% annual yield for investors.
Financial Triumph and Projections
During Q1 of 2024, AXP reported a robust earnings performance, showcasing an 11% revenue hike to $15.8 billion, with earnings per share (EPS) surging by an impressive 39% to $3.33. The company reaffirmed its full-year 2024 outlook, anticipating revenue growth between 8% to 10% and EPS growth ranging from 15% to 17%, further cementing its momentum and positive trajectory.
Strategic Moves and Expansion
Recent strategic advances by AXP include the acquisition of Tock, a technology provider for reservation and event management, from Squarespace for $400 million. Furthermore, the launch of a new integration by American Express Global Business Travel aims to streamline spend management for small enterprises, consolidating the company’s foothold in the business services sector.
Analyst Outlook and Recommendations
Wall Street analysts maintain a consensus “moderate buy” rating for AXP, supported by 24 analyst recommendations, including 9 urging a “strong buy,” 2 advocating a “moderate buy,” 11 recommending “hold,” and 2 favoring a “strong sell.” The average price target hovers around $230.36, offering a minor discount compared to Monday’s closing price.
Embracing the Dividend Stock Opportunities
In the world of dividend investing, stalwarts like American Express, alongside other giants such as KO and KR, emerge as beacons of stability, growth, and income. As these dividend powerhouses witness periodic fluctuations, investors are encouraged to consider leveraging such opportunities to fortify their investment portfolios.