The key to building wealth is to find a proven investing strategy and stick with it over the long run.
Few investors exemplify this better than Berkshire Hathaway's (BRK.A -0.28%) (BRK.B -0.68%) chief executive officer and chairman, Warren Buffett. The Oracle of Omaha has stuck with the dividend and value investing strategies for well over half a century. This approach transformed Berkshire Hathaway into the largest holding company in the world over that stretch of time.
Here are two consumer staple dividend payers trading at reasonable valuations that income investors may want to buy this year and hold for many more years.
1. Coca-Cola: The most dominant beverage company on the planet
It's a fact of life that everybody must consume liquids in order to survive. And with approximately 200 beverage brands, such as Sprite soda, Dasani water, and Minute Maid juice, Coca-Cola (KO 1.50%) has a beverage that can fit almost anyone's taste preferences.
For context, Coca-Cola's $259 billion market capitalization is meaningfully higher than PepsiCo's (PEP 3.62%) $233 billion market cap. This is made even more impressive by the fact that the former is a pure-play beverage company, whereas the latter also is majorly invested in snacking brands. That's what makes Coca-Cola the undisputed leader of the global beverage industry. Unsurprisingly, Berkshire Hathaway owns a 9.2% stake in the company valued at $24.2 billion, making it the holding company's fourth-biggest position.
With the global population projected to grow by nearly 2 billion people between now and 2050, the company's volume and revenue should both grow organically. Paired with the potential for acquisitions that could boost Coca-Cola's market share, this explains how analysts are expecting 5.4% annual earnings growth over the next five years.
Yield-oriented investors will also like that Coca-Cola's 2.9% dividend yield is well above the S&P 500 index's 1.7% yield. And given that the company's dividend payout ratio will come in just below 71% in 2022, it should continue delivering dividend growth well beyond the current mark of 60 years.
The valuation further sweetens the deal to make the stock a buy for income investors. Coca-Cola's forward price-to-earnings (P/E) ratio of 23.7 is only slightly more than the non-alcoholic beverages industry average forward P/E ratio of 23.3, which is a well-deserved premium for the company's quality.
2. Mondelez International: A snack company with well-known brands
Just as everybody needs to consume liquids to survive, everyone must also eat. With top-notch brands like Chips Ahoy! cookies, Honey Maid graham crackers, and Philadelphia cream cheese, Mondelez International (MDLZ 0.79%) is an established player in the snacks industry. Berkshire Hathaway's $37 million stake in the company is minute compared to the consumer staple's $88 billion market cap.
Nevertheless, Mondelez is a quality business. Due to its brand power, the company holds the No. 1 global position in the cookies and crackers industry and is second in the chocolate industry. As the global demand for snacks rises with the population and Mondelez executes bolt-on acquisitions to strengthen its business, earnings should grow at a healthy clip. That's why analysts believe that Mondelez's earnings will compound at 5.1% annually through the next five years.
And the stock's 2.4% dividend yield is also appetizing. This is especially the case considering that the dividend payout ratio will be just 49% for 2022, which builds a margin of safety into the dividend.
Despite Mondelez's quality as a company, the stock doesn't appear to be getting the respect that it deserves from the market. Mondelez's forward P/E ratio of 20.8 is less than the confectioner industry average forward P/E ratio of 22.4. This makes the stock an excellent buy in a market downturn.
