For a long time now, Berkshire Hathaway CEO Warren Buffett has been making heaps of money for his shareholders. Shares of the holding company have gained an unimaginable 3,371,367% since he took the reigns in 1965.
Buffett prefers buying great businesses whole, but Berkshire Hathaway also sports a large equity portfolio chock-full of income-generating stocks. Here are two stocks Berkshire owns that look like smart ones to buy now and hold for the long run.
Johnson & Johnson
Johnson & Johnson (JNJ -1.15%), or J&J, recently spun out its consumer health unit into a new company called Kenvue. Now, the 137-year-old business can focus on operating segments that are growing much faster -- medical technology and pharmaceuticals.
Drug sales don't always move in a positive direction, and one of J&J's top-selling cancer drugs, Imbruvica, is losing ground to similar treatments more recently launched by competitors. Its blockbuster prostate cancer treatment, Zytiga, is also losing market share to cheap generic competition.
Over the years, J&J has expertly funneled profits from established drugs into the development of new ones, such as Darzalex. First-quarter sales of this multiple myeloma treatment grew 22% year over year to an outstanding $2.3 billion. With a big push in the right direction from more recently launched products, first-quarter pharmaceutical sales rose 7.2% year over year, once adjusted for the negative effects of a stronger U.S. dollar.
J&J's medical tech and pharmaceutical products generate a lot of profits, and the company is committed to sharing as much as possible with shareholders while investing for a brighter future. In the first quarter, the company was able to invest $3.6 billion into research and development and return $5.4 billion to shareholders in the form of dividends and share buybacks.
J&J stock currently offers a 3% dividend yield, and you can bank on the payout rising over time. In April, the company raised the quarterly payout for the 61st year in a row.
You can buy J&J shares for just 14.7 times forward-looking earnings expectations right now. This is a pretty good price for a well-established dividend payer you can reasonably expect to grow by a mid-single-digit percentage over the long run. Adding some shares to your portfolio and holding them for the next 137 years looks like a smart move.
Bank of America
Buffett's interest in banks has waned in recent years, but he's still a big fan of Bank of America (BAC -1.07%). It's the second-largest holding in Berkshire Hathaway's equity portfolio.
Finance industry professionals once turned up their noses at Bank of America's somewhat stodgy attitude toward market expansion. Buffett, though, is far more interested in a consistent performance.
Bank of America CEO Brian Moynihan appreciates consistency as much as Buffett does. He recently reported the bank's seventh straight quarter of positive operating leverage, and profits are soaring.
Bank of America is sitting on $1.9 trillion of deposits, and its savings accounts still offer consumers an interest rate of just 0.04% or less. Now that the federal funds rate has soared past 5%, this bank's low-interest deposit base is practically a license to print money.
Shares of Bank of America currently offer a 3.1% yield. The bank slashed its dividend during the global financial crisis, but the payout has moved in a positive direction since Moynihan became CEO in 2010, including an impressive 46% gain over the past five years.
First-quarter net income surged 15% year over year, and an unusually wide net interest margin made continued gains seem likely. Despite its encouraging performance, the stock is trading for just 8.6 times trailing earnings. At this low valuation, long-term investors could receive market-beating gains even if profits never rise from present levels.
