3 Warren Buffett Dividend Stocks to Buy on Every Dip

Warren Buffett, the legendary "Oracle of Omaha," has a knack for picking stocks that stand the test of time. His Berkshire Hathaway (BRK.B) equity portfolio is estimated to be worth roughly $400 billion, with a focus on high-quality companies that offer consistent returns.

Among Buffett's top holdings, we find three dividend stocks that deserve special attention: The Coca-Cola Company (KO), The Kroger Co. (KR), and American Express Company (AXP). These companies not only represent key sectors of the economy, but they also showcase Buffett's preference for businesses with strong fundamentals, reliable dividend payouts - and a focus on the consumer.

While some of these stocks are currently trading close to Wall Street's mean price targets, prospective investors should keep a close eye out for potential pullbacks to established support. Why? Because in the world of investing, timing can be everything. Buying these Buffett picks during dips could provide an excellent opportunity to snag quality dividend stocks at more attractive prices.

Let's take a closer look at why these three Warren Buffett dividend stocks are worth adding to your portfolio on every dip.

#1. The Coca-Cola Company (KO): A Refreshing Dividend Powerhouse

Coca-Cola (KO) is a global beverage giant, known for its iconic brands like Coke, Sprite, and Fanta. This multinational company manufactures, markets, and distributes over 500 beverage brands across the world.

Over the past year, Coca-Cola's stock has been fairly tame, with a 52-week gain of just 5.4%. This year, the stock has returned 6.8%, and trades just 2% away from its highs. 

With a market cap of $274.65 billion, Coca-Cola is a blue-chip stock that is reasonably priced, trading at a forward P/E of 22.59, compared to its trailing P/E of 23.36.

The Dividend King's latest quarterly payout was $0.485 on June 14, 2024. The annualized dividend stands at $1.94, which works out to a forward yield of about 3%.

In its first quarter 2024 earnings report, Coca-Cola showcased solid performance, including a 1% increase in unit case volume, a 3% growth in net revenues to $11.3 billion, and an 11% expansion in organic revenues. EPS grew 3% to $0.74, and comparable EPS increased 7% to $0.72. 

Chairman and CEO James Quincey expressed optimism about the start of the year, noting that Coca-Cola delivered "another quarter of volume, topline, and earnings growth amidst a dynamic backdrop."

Coca-Cola recently announced a five-year strategic partnership with Microsoft(MSFT) to accelerate cloud and generative artificial intelligence (AI) initiatives. This partnership underscores Coca-Cola's ongoing technology transformation, with a $1.1 billion commitment to the Microsoft Cloud and its generative AI capabilities.

Analysts are bullish on KO stock, with 20 analysts offering recommendations. The overall consensus is a “strong buy,” with 14 suggesting a “strong buy,” 1 suggesting a “moderate buy,” and 5 suggesting a “hold.” The mean target price is $66.83, indicating a potential upside of 6.1% from the current price.

#2. The Kroger Co. (KR): Grocery Giant with Growing Dividend Potential

Kroger (KR) is a big player in the American grocery scene. They've got supermarkets, multi-department stores, and convenience stores all over the country. What sets them apart? A mix of their brands, a huge store network, and a growing online presence. It's all about giving shoppers what they want at prices that won't break the bank.

KR stock is up 13.6% so far in 2024, bringing its 52-week return to 10.1%.

With a market cap of $37.41 billion, KR stock still isn't too expensive from a valuation perspective, priced at 11.70 times forward earnings and 0.25 times sales.

They're also taking care of their shareholders, recently bumping up their quarterly dividend by 10%. Based on the newly hiked payout of $0.32 per share, Kroger yields 2.47% annually, backed by over 15 years of consecutive dividend growth.

Kroger's Q1 2024 earnings report, released on June 20, revealed total sales of $45.3 billion, a slight increase from the previous year. EPS arrived at $1.29, with adjusted EPS of $1.43 beating Wall Street's estimates. Kroger reaffirmed its full-year 2024 guidance, projecting identical sales growth without fuel of 0.25% to 1.75%, and adjusted EPS of $4.30 to $4.50.

As the grocery giant awaits a final judicial ruling on its Albertsons merger, Kroger is broadening its healthcare offerings. They launched senior-focused primary care services in eight clinics in Atlanta, partnering with Better Health Group on the initiative. Additionally, Kroger is now a new player in the fast-growing GLP-1 market, too.

Wall Street analysts have a consensus "moderate buy" rating on KR. Based on 17 analyst recommendations, 10 suggest a “strong buy,” 6 recommend a “hold,” and 1 advises a “strong sell.” The mean target price for KR stands at $57.47, about 10.6% higher than current prices. 

#3. American Express Company (AXP): Financial Strength and Consistent Dividend Growth

American Express Company (AXP) is a global leader in payment services, offering a diverse range of credit cards, charge cards, and travel-related services. The company's business model revolves around its integrated payments platform, connecting millions of consumers and businesses worldwide. 

AXP's stock is on fire, up 38.1% over the past year, and sporting a 25.2% gain in 2024 alone.

With a market cap of $169.49 billion, it's no small fry. AXP is valued at a forward P/E ratio of 18.23 - a premium to the sector median, but lower than its trailing P/E of 19.42. 

AXP's taking care of its shareholders, too. They recently announced a $0.70 dividend per share, which works out to a 1.20% annual yield - not too shabby for a solid, growing company.

The company's Q1 2024 earnings report, released on April 19, showed revenue increasing by 11% to $15.8 billion, with EPS rising by 39% to $3.33. The company reaffirmed its full-year 2024 guidance, projecting revenue growth of 8% to 10% and EPS growth of 15% to 17%, underlining its continued business momentum and positive outlook.

In recent developments, AXP agreed to acquire Tock, a reservation and event management technology provider, for $400 million from Squarespace (SQSP). Additionally, American Express Global Business Travel launched a new integration aimed at streamlining spend management for small businesses, further solidifying its position in the business services sector.

Wall Street analysts maintain a consensus "moderate buy" rating on AXP. Based on 24 analyst recommendations, 9 suggest a “strong buy,” 2 recommend a “moderate buy,” 11 say “hold,” and 2 vote for a “strong sell.” The average price target is $230.36, a modest discount to Monday's close.

Conclusion

Warren Buffett's dividend stocks can offer a much-needed sweet spot for investors seeking stability, growth, and income. KO, KR, and AXP are rock-solid picks with consistent dividend growth and robust business models. So, any time you see these dividend powerhouses pull back, consider jumping in – it could be a smart move for your portfolio.