It’s not easy trying to build a passive income stream these days.
Thanks to historically low interest rates, savings accounts pay next to nothing. And currently, the average S&P 500 company sports an annual dividend yield of just 1.3%.
But that doesn’t mean you have to go home empty-handed.
One man who’s made a lot of money from dividend stocks is legendary investor and Berkshire Hathaway CEO Warren Buffett.
In fact, the majority of Berkshire’s holdings are now dividend-paying companies. And that means each year, the Oracle of Omaha collects billions of dollars just from dividends.
You don’t need to be a billionaire investor to earn dividend checks. There are plenty of trading apps that allow you to invest as much as you want.
Here are three companies in Buffett’s portfolio that provide a particularly generous passive income stream to investors.
Verizon Communications (VZ)
Verizon is one of the new additions to Buffett’s portfolio in 2021. And it’s a pretty chunky stake: At the end of June, Berkshire owned nearly 159 million shares of the telecom giant.
The company is a household name. Its 4G LTE network covers 99% of the U.S. population. And while we’re still in the early stages of 5G adoption, more than 230 million people are already covered by Verizon’s 5G network.
Massive recurring revenue means Verizon is well-positioned to pay regular dividends. Right now, Verizon has a quarterly dividend rate of $0.64 per share, translating to an annual yield of 4.7%.
Of course, Verizon isn’t the highest yielder in the space. AT&T, for instance, yields an even juicier 7.6%.
Cell phone bills are on the rise. And what’s the old saying? If you can’t beat them, join them.
If you’re not happy with what you pay Verizon or AT&T every month, collecting dividends from these companies — even by using just spare change — might be a small way to get even.
Johnson & Johnson (JNJ)
When it comes to delivering recession-proof returns, few companies have done a better job than healthcare giant Johnson & Johnson.
The stock has been trending up for decades and for good reason. Johnson & Johnson’s business grows consistently through thick and thin.
Over the past 20 years, Johnson & Johnson’s adjusted EPS has increased at a steady pace of 8% annually.
And that means shareholders can look forward to higher dividends every year.
Johnson & Johnson announced its 59th consecutive annual dividend increase this April. The stock currently yields 2.6% — about twice as much as the average yield of the S&P 500.
That said, Johnson & Johnson is not the highest yielder in the healthcare sector. To put things in perspective, Merck currently yields 3.5%, Pfizer pays 3.6%, while Novartis offers an even higher yield of 3.9%.
Store Capital (STOR)
Being a landlord is one of the oldest ways to earn a passive income.
If you want to collect rental income without worrying about the headaches that come with tenants, consider using real estate investment trusts (REITs) — companies that own and manage income-producing real estate.
Buffett has a sizable stake in a REIT called Store Capital.
Store has a large portfolio consisting of investments in over 2,700 properties diversified across 49 states.
The company collects rent on these properties and passes it along to shareholders in the form of dividends. The stock is offering a handsome yield of 4.8% at the current price.
Store’s tenants tend to be leading national and regional companies with large revenue bases. Notably, one of the company’s top 10 tenants is movie theater giant AMC Entertainment Holdings, whose shares are highly monitored these days.
And because Store’s portfolio is leased to 529 tenants coming from 118 different industries, the REIT can maintain its dividend even if one tenant or industry enters a downturn.
If Store sounds enticing, but you’re still cautious about stock market investing, some investing apps will give you a free share of STOR just for signing up.
The ultimate “forever asset”?
Warren Buffett once said that his favorite holding period is forever.
But forever is a long time, and since companies rise and fall, growing your wealth by never selling a share may not be the best strategy.
Even Buffett trims his positions from time to time.
But there might be one asset that’s worth holding forever — U.S. farmland.
No matter what happens to the economy, people still need to eat. And it just so happens that Buffett’s good friend Bill Gates is America’s largest private owner of farmland.
These days, new platforms allow you to invest in U.S. farmland by taking stake in a farm of your choice.
You’ll earn cash income from the leasing fees and crop sales. And of course, you’ll benefit from any long-term appreciation on top of that.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
