Warren Buffett, known as the “Oracle of Omaha”, has established an illustrious reputation for selecting stocks that endure the test of time. His firm Berkshire Hathaway (BRK.B) boasts an equity portfolio valued at approximately $400 billion, emphasizing high-quality companies that offer consistent returns.

Highlighted within Buffett’s top holdings are three dividend stocks that have captivated investor interest: The Coca-Cola Company (KO), The Kroger Co. (KR), and American Express Company (AXP). Not only do these companies represent vital sectors of the economy, but they also embody Buffett’s fondness for businesses with robust fundamentals, reliable dividend payments, and a focus on consumer engagement.

While some of these stocks are presently hovering near Wall Street’s average price targets, prospective investors are advised to monitor potential pullbacks to established support levels. The reason is simple – in the realm of investing, timing often becomes the differentiating factor. Seizing the opportunity to acquire these Buffett-endorsed stocks during downturns could facilitate the procurement of high-quality dividend stocks at more appealing prices.

#1. Coca-Cola Company (KO): Savoring the Flavor of Dividend Dominance

Coca-Cola (KO) stands tall as a global beverage behemoth, recognized for its iconic brands such as Coke, Sprite, and Fanta. This multinational corporation produces, markets, and distributes over 500 beverage brands worldwide.

Coca-Cola’s stock has shown stability over the past year, with a modest 52-week gain of 5.4%. It has delivered a 6.8% return this year, trading just 2% below its peak.

With a market capitalization of $274.65 billion, Coca-Cola stands as a blue-chip stock available at a reasonable price, trading at a forward P/E of 22.59 versus its trailing P/E of 23.36.

The recent quarterly dividend paid by the Dividend King was $0.485 on June 14, 2024. Currently, the annualized dividend amounts to $1.94, translating to a forward yield of approximately 3%.

In its first-quarter 2024 earnings release, Coca-Cola demonstrated a commendable performance including a 1% rise in unit case volume, a 3% surge in net revenues to $11.3 billion, and an 11% boost in organic revenues. The EPS climbed by 3% to $0.74, with comparable EPS witnessing a 7% upturn to $0.72.

Acknowledging the impressive results, Chairman and CEO James Quincey expressed optimism about the company’s trajectory, highlighting another quarter of volume, topline, and earnings growth in a dynamic business environment.

Coca-Cola has recently forged a strategic partnership with Microsoft (MSFT) focused on accelerating cloud and cutting-edge artificial intelligence (AI) initiatives. This collaboration underscores Coca-Cola’s commitment to technological evolution with a $1.1 billion investment in Microsoft Cloud and its AI capabilities.

Support for KO stock remains strong among analysts, with 20 analysts issuing recommendations. The prevailing consensus leans towards a “strong buy,” with 14 suggesting “strong buy,” 1 indicating a “moderate buy,” and 5 advising a “hold.” The mean target price is estimated at $66.83, signaling a potential 6.1% upside from the current valuation.

#2. The Kroger Co. (KR): Grocery Emporium Embracing Dividend Growth

Kroger (KR) commands a significant presence in the American grocery landscape, boasting supermarkets, multi-department stores, and convenience outlets spanning the nation. What distinguishes them? A blend of proprietary brands, an extensive retail network, and an expanding online footprint. It’s all about catering to consumer needs at affordable prices.

KR stock has surged by 13.6% in 2024 thus far, elevating its 52-week return to 10.1%.

Possessing a market cap of $37.41 billion, KR stock represents a compelling valuation proposition, characterized by a forward price-to-earnings ratio of 11.70 and a price-to-sales ratio of 0.25.

Demonstrating their commitment to shareholders, Kroger recently raised their quarterly dividend by 10%. Anchored by the enhanced payout of $0.32 per share, Kroger currently yields 2.47% annually, sustained by over 15 consecutive years of escalating dividend distributions.

Following the release of Kroger’s first-quarter 2024 earnings report on June 20, the company disclosed total sales amounting to $45.3 billion, marking a slight uptick from the previous year. The EPS settled at $1.29, with adjusted EPS reaching $1.43, surpassing analysts’ projections. Kroger has reaffirmed its full-year 2024 guidance, anticipating identical sales growth without fuel between 0.25% and 1.75%, alongside adjusted EPS spanning from $4.30 to $4.50.

While awaiting a definitive judicial ruling on the Albertsons merger, Kroger is expanding its healthcare offerings, launching primary care services tailored for seniors in eight clinics in Atlanta, in collaboration with Better Health Group. Additionally, Kroger has entered the burgeoning GLP-1 market.

Wall Street analysts have collectively endorsed a “moderate buy” rating on KR. Of the 17 analyst evaluations, 10 advocate a “strong buy,” 6 recommend a “hold,” and 1 advises a “strong sell.” The mean target price for KR is estimated at $57.47, reflecting a potential 10.6% surge from the current price levels.