If you're like Warren Buffett, you favor solid companies that perform over the long term -- and, at the same time, reward investors with passive income. Buffett has made his fortune -- and the fortune of others as Berkshire Hathaway chairman -- by sticking to that idea. He also believes in holding on to stocks for the long term and adding to positions when opportunities arise.
Well, an opportunity is here for two Buffett favorites. Shares of pharmaceutical giant Johnson & Johnson (JNJ -1.26%) and beverage powerhouse Coca-Cola (KO 0.32%) have both declined so far this year. Yet their long-term outlooks are as bright as ever. Let's take a closer look at these market leaders to buy on the dip.
1. Johnson & Johnson
Johnson & Johnson has reached an important transition point. The pharmaceutical giant is spinning off its consumer health business into a separate entity called Kenvue. Consumer health products like Tylenol painkillers and Band-Aid bandages may make J&J part of your everyday life. But they aren't what's driving revenue at the company.
Consumer health has actually made up the smallest share of revenue -- and it's been growing more slowly than J&J's other two businesses, pharmaceuticals and medtech. So, the decision to spin this business off is a smart one, allowing the company's overall revenue to climb.
Meanwhile, J&J is making moves to boost growth in pharmaceuticals and medtech. In pharma, it has more than 100 candidates in the pipeline. It expects its current blockbusters and newer products to help it grow pharmaceuticals revenue to about $60 billion over the next few years. That's from $52 billion today.
As for medtech, it recently acquired heart pump specialist Abiomed. This gives J&J 12 medtech platforms with annual sales of more than $1 billion.
You'll also like J&J for its status as a Dividend King, meaning it's lifted its dividend for more than 50 straight years. The stock has slipped more than 11% this year, offering you a fantastic buying opportunity for passive income and a new wave of growth ahead.
2. Coca-Cola
Coca-Cola is another player that promises you passive income growth. The world's biggest non-alcoholic beverage maker is also a Dividend King. Why is this status so important? It shows a company is committed to growing its dividend. And that means it's likely to stick with this policy.
You won't necessarily buy Coca-Cola for major earnings growth. This big, established company isn't growing by leaps and bounds. But it does offer you steady earnings progress, and there's something to like about that too.
KO Net Income (Annual) data by YCharts
In the most recent quarter, net revenues rose 5% and earnings per share climbed 12%. Coca-Cola also gained market share in the non-alcoholic ready-to-drink beverages market. Even lifting prices to combat higher inflation hasn't halted demand for Coca-Cola's beverages. Case volume increased 3%. The company's brand strength has helped it weather today's difficult market.
Speaking of growth, Coca-Cola may benefit from demand in emerging markets down the road. In the developing and emerging markets, only 30% of drinks are commercialized. And Coca-Cola has a 6% volume share. This represents a significant potential market for the company.
Coca-Cola stock has lost about 5% this year. That leaves it trading for about 23 times forward earnings estimates. This is a reasonable price to pay for a stock that's rewarded Buffett over the years -- and that could reward you over the long term too.
