Want $2750 per Year in Passive Income? Invest $25,000 in These 2 Warren Buffett Stocks

If any investor has stood the test of time, it’s Warren Buffett, and with good reason. For years, the Oracle of Omaha has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway Inc. (NYSE: BRK-B) shareholders meeting draws thousands of loyal fans who are investors. They were stunned at this year’s meeting when Buffett announced that he would be stepping down as CEO of the investment giant at the end of the year. While he will remain the board chair and continue to have a voice in the day-to-day operations, his pre-announced successor, Greg Abel, will assume the chief executive position at the end of the year.

Long-time investors and Buffett mavens know that his favorite holding for an S&P 500 stock is forever. So, it is not surprising that for all the success and stature Berkshire Hathaway has in the investment world, just seven top companies make up almost 75% of the fund’s total holdings. While much more concentrated than most portfolio managers would consider, the strategy has worked well for Berkshire Hathaway investors for years and is likely to continue doing so.

Two of Buffett’s top dividend holdings are excellent options for investors seeking safe stocks to generate passive income. According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade, business, or investment in which the individual does not materially participate. It can also include income from limited partnerships, stocks, bonds, and other similar enterprises in which the investor is not actively involved.

We determined that a $25,000 investment in each of two companies will generate approximately $2,750 per year in passive income. A significant positive is that the two companies declare their dividends in the same month, ensuring that the ex-dividend and payment dates are close together on a calendar basis, allowing for dividend payments to be made close to each other.

Why do we cover Warren Buffett stocks?

There are few investors with the results and reputation that Buffett has garnered over the past 50 years. While investing has evolved over the past half-century, buying good companies with products and services recognized worldwide, while paying dividends, will always remain a timeless approach. 

Chevron

This American multinational energy company predominantly specializes in oil and gas. This integrated giant is a safer option for investors looking to position themselves in the energy sector, as it pays a substantial dividend. Chevron Corp. (NYSE: CVX) recently raised that payout by 5%. It operates integrated energy and chemicals businesses worldwide through two segments.

The Upstream segment is involved in the following:

• Exploration, development, production, and transportation of crude oil and natural gas
• Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
• Transportation of crude oil through pipelines, and transportation, storage
• Marketing of natural gas, as well as operating a gas-to-liquids plant

The Downstream segment engages in:

• Refining crude oil into petroleum products
• Marketing crude oil, refined products, and lubricants
• Manufacturing and marketing renewable fuels
• Transporting crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car
• Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives

It also involves cash management, debt financing, insurance operations, real estate, and technology businesses.

Chevron announced in late 2023 that it has entered into a definitive agreement with Hess Corp. (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion. The Federal Trade Commission approved the deal in October, and it is expected to close soon.

$25,000 will purchase 175 shares at current trading levels. Each share pays $6.84 per year. That comes to $ 1,197 per year, paid quarterly.

Kraft Heinz

Kraft Heinz Co. (NYSE: KHC) is the third-largest food and beverage company in North America and the fifth-largest globally. It derives 76% of its revenues domestically and 24% from the International segment. Needless to say, even in difficult times, everybody has to eat, and this company consistently stands to benefit while paying a substantial dividend. Kraft Heinz was formed via the merger of H.J. Heinz and Kraft Foods.

The company is a leading global food company with estimated annual revenues of $25 billion, derived from well-known brands such as Kraft, Heinz, Oscar Mayer, and Maxwell House.

Kraft Heinz’s additional brands include:

• ABC
• Capri Sun
• Classico
• Jell-O
• Kool-Aid
• Lunchables
• Ore-Ida
• Philadelphia
• Planters
• Plasmon
• Quero
• Weight Watchers
• Smart Ones
• Velveeta

$25,000 will purchase 978 shares at current trading levels. Each share pays $1.60 a year. That equals $1,564 per year in dividends, paid quarterly.

The combined dividend income from the two stocks will equal $2,761. That yields 5.52% on a $50,000 investment. Both stocks are trading significantly below their 52-week highs and offer outstanding entry points now. They also offer some solid upside potential for patient investors.

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