Few (if any) Wall Street money managers trust in the U.S. economy and the stock market more than Berkshire Hathaway (BRK.A 0.24%)(BRK.B 0.38%) CEO Warren Buffett. The affably dubbed "Oracle of Omaha" has delivered a stunning cumulative return of 6,325,426% for Berkshire's Class A shares (BRK.A) since becoming CEO six decades ago.
While Warren Buffett's company has handily outperformed Wall Street's leading stock indexes over the long run, what's equally impressive is its returns on a year-to-date basis. Whereas the benchmark S&P 500 has slumped by 10.2% since 2025 began, as of the closing bell on April 17, Berkshire's stock is up 15%!
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Berkshire's returns are even more eye-popping when set side-by-side with the growth-fueled Nasdaq Composite (^IXIC 0.93%). The Nasdaq has shed 15.7% of its value on a year-to-date basis, and firmly dipped into a bear market on April 8, relative to its all-time closing high.
How has Warren Buffett been so successful navigating bouts of historic volatility on Wall Street? His not-so-subtle secret is his affinity for dividend stocks.
Berkshire's chief has a penchant for seeking out businesses with strong management teams and well-defined competitive advantages. Coincidentally, these companies tend to be profitable on a recurring basis and possesses long-standing capital-return programs.
In The Power of Dividends: Past, Present, and Future, researchers at Hartford Funds, in collaboration with Ned Davis Research, compared the performance of dividend stocks to non-payers over 51 years (1973-2024). They found that dividend payers more than doubled the annualized return of non-payers during this stretch: 9.2% for dividend stocks vs. 4.31% for non-payers.
The long-term stability of dividend stocks, coupled with Buffett's preference to concentrate Berkshire's portfolio into his best investment ideas, has set his company up to collect nearly $3.3 billion in dividend income over the next 12 months from four remarkable businesses.
NYSE: OXY
Key Data Points
Occidental Petroleum: $933,463,774 in dividend income (includes preferred stock income)
Whereas financial stocks have historically been the dividend income breadwinners in Berkshire's portfolio, the company expected to dole out the largest cumulative payments to Buffett's company over the next year is integrated oil and gas titan Occidental Petroleum (OXY 0.91%). Berkshire is on pace to collect more than $254 million in income from the close to 265 million common shares of Occidental stock it owns. Meanwhile, it'll net an 8% yield (about $679.1 million) on the $8.489 billion in Occidental preferred stock currently held.
Although Occidental is an integrated operator, it generates a disproportionate percentage of its revenue from its upstream drilling operations. This makes it especially sensitive to notable swings in the spot price of crude oil. Buffett's sizable wager on Occidental is likely based on growing global demand for oil, coupled with years of capital underinvestment by global energy majors following the pandemic, which had led to tight supply.
On the flipside, Occidental does have some degree of hedging capabilities. The company's pipeline assets and downstream chemical plants offer a source of steady cash flow and/or growing demand when the spot price of crude oil declines.
Buffett is also a huge fan of pouncing on perceived price dislocations. Keeping in mind that the "earnings" component of oil stocks could vacillate quite a bit in the coming quarters, Occidental is trading at a reasonably low multiple of 12 times forecast earnings for 2026.
Image source: Coca-Cola.
Coca-Cola: $816,000,000 in dividend income
Beverage behemoth Coca-Cola (KO +0.34%) is the Oracle of Omaha's longest-held stock (since 1988), as well as one of the eight companies he's described as an "indefinite" holding. It's also a company set to generate $816 million in dividend income for Berkshire Hathaway over the next 12 months.
Stability and predictability are truly the name of the game for Coca-Cola. It's able to generate highly predictable operating cash flow in developed countries, and is capable of moving the organic growth needle in faster-growing emerging markets. In terms of geographic diversity, it has an operating presence in all but three countries around the globe (North Korea, Cuba, and Russia).
Coca-Cola's marketing team is also among the best in the world. It's been able to lean into social media channels and artificial intelligence to connect with younger audiences, while relying on more than a century of storied history, along with well-known brand ambassadors, to engage with its mature consumers.
Best of all, selling a basic necessity product (beverages) has allowed Coca-Cola to increase its dividend for 63 consecutive years. Based on Berkshire Hathaway's cost basis of less than $3.25 per share in Coca-Cola, and Coke's cumulative annual dividend of $2.04 per share, Buffett's company is netting a cool 63% annual yield relative to cost.
NYSE: CVX
Key Data Points
Chevron: $811,296,053 in dividend income
Another remarkable stock that's expected to generate a boatload of dividend income for Berkshire Hathaway over the next year, as well as keep Buffett's company firmly in the outperform column amid the Nasdaq bear market, is integrated energy major Chevron (CVX 0.08%). Chevron has increased its base annual payout for 38 consecutive years, and is currently on pace to dole out more than $811 million in income to Buffett's company over the coming 12 months.
Although a higher spot price for crude oil would generate juicy margins, Chevron is a considerably more revenue-diversified company than Occidental Petroleum. Collectively, it generates more in combined sales from its midstream (transmission pipelines) and downstream assets (chemical plants and refineries) than it does from its drilling operations. This means it's well-hedged in the event that the spot price of crude oil and/or natural gas declines.
Further, Chevron has one of the best balance sheets among big oil companies. Its net-debt ratio stood at a little over 10% to close out 2024. The company's highly predictable operating cash flow and well-hedged operations affords it a level of financial flexibility that most energy companies would envy.
The icing on the cake for Berkshire's chief is that Chevron is a big proponent of share buybacks. In January 2023, its board approved a $75 billion share repurchase program. For businesses with steady or growing net income, buybacks can increase earnings per share and make a company more fundamentally attractive to investors.
NYSE: BAC
Key Data Points
Bank of America: $707,442,930 in dividend income
The fourth remarkable company that's become something of a dividend darling for Warren Buffett and can help Berkshire Hathaway outperform with the Nasdaq in a bear market is Bank of America (BAC 0.87%). BofA, as Bank of America is more commonly known, is on track to pay more than $707 million in dividend income to Berkshire Hathaway over the next year.
Bank of America's success (and that of most financial stocks) is a function of the nonlinearity of economic cycles. While recessions are normal, healthy, and inevitable, they're most notably short-lived. Since the end of World War II, the average recession has lasted about 10 months. In comparison, the typical economic expansion has stuck around for approximately five years. This disparity is what allows banks to prudently grow their loan portfolios over time.
BofA also happens to be the most interest-sensitive of America's money-center banks. When the Federal Reserve undertook its most-aggressive rate-hiking cycle in four decades, from March 2022 through July 2023, no large bank enjoyed a bigger bump in its interest income than Bank of America. Even with the Fed now in a rate-easing cycle, the slow and telegraphed moves by the nation's central bank is affording BofA ample time to generate high-interest loans.
Lastly, Bank of America is trading just 3% above its book value, as of the March-ended quarter. Banks are traditionally considered to be cheap if they're trading around or below their listed book value.
