Berkshire Hathaway (BRK.A -0.34%) (BRK.B -0.01%) CEO Warren Buffett is a legend within investing circles, and for good reason. Over the past 57 years, Berkshire has delivered a compound annual return of 19.8% versus 9.9% for the benchmark S&P 500, thanks to Buffett's stock-picking acumen.
Which Buffett stocks stand out as no-brainer buys right now? Occidental Petroleum (OXY 0.58%) and Coca-Cola (KO 0.15%) are two names that should deliver solid returns for shareholders in 2023 and beyond. Read on to find out more about these two core Berkshire holdings.
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1. Occidental Petroleum
Occidental Petroleum is an international energy and chemical manufacturing company. Following its latest purchase, Berkshire now owns approximately 22.4% of Occidental's outstanding shares, making it one of the diversified holding company's top 10 holdings.
This energy and chemical manufacturer is a solid stock pick because of the company's strong fundamentals, top-notch shareholder rewards program, and attractive valuation. Keeping with this theme, Occidental generated a record $12.5 billion in net income, retired over $10.5 billion in debt, and completed a $3 billion share repurchase program over the course of 2022.
This year, Occidental announced a hefty 38% increase to its dividend to $0.72 per share on an annual basis. As a result, its stock now sports an annualized dividend yield of 1.16% at current levels. While this yield is well below average for the dividend-friendly energy sector, Occidental's minuscule payout ratio of 4.2% gives the company ample room to beef up its payout in the years ahead.
On the valuation side, Occidental's shares are presently trading at a mere 1.8 times 2024 estimated sales. By contrast, energy stocks as a whole trade at an average of 2.5 times forward-looking sales. Occidental stock, in turn, qualifies as a bargain on this key valuation metric.
2. Coca-Cola
Beverage titan Coca-Cola is currently Berkshire's fifth-largest holding. Buffett, along with his lead stock pickers Todd Combs and Ted Weschler, have made this beverage company a core holding for one simple reason: Coca-Cola's enormous branding power gives it a nearly insurmountable competitive moat over the field.
What's important to understand is that Coca-Cola's wide moat enables it to be extremely generous with shareholders. At current levels, Coca-Cola stock pays out an annualized dividend yield of 3.06%, which is well above the 1.74% average among stocks in the benchmark S&P 500.
Buffett, in his latest letter to shareholders, noted that Berkshire's cash dividend from Coke has grown from $75 million in 1994 to an astronomical $704 million in 2022. He added, "We expect that those checks are highly likely to grow." That's a ringing endorsement from one of the best investors in the world.
Apart from its solid dividend and entrenched competitive position, Coke stock is also attractively valued at a reasonable 22.6 times forward earnings. Wall Street analysts, in turn, think this beverage stock could appreciate by a noteworthy 14% over the next 12 months.
