I’d invest £10k in these 2 Warren Buffett stocks for £365 in passive income a year

Warren Buffett loves dividend stocks. With passive income on my mind, I’m looking at Berkshire Hathaway’s portfolio for inspiration.

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Warren Buffett at a Berkshire Hathaway AGM

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Warren Buffett has amassed an enormous fortune over decades by investing in dividend stocks. Although his own company, Berkshire Hathaway, doesn’t pay dividends, many of the firms in its portfolio do.

I’m currently looking for ways to boost my passive income. If I had a spare £10,000 to invest, I think this pair of Buffett shares could help me achieve that goal. By splitting my investment evenly between the two, I’d earn almost £365 in annual dividend payouts at today’s yields.

So, let’s explore the outlook for both companies.

Kraft Heinz

Food and beverage manufacturer Kraft Heinz (NASDAQ:KHC) owes its existence to Warren Buffett, who was the driving force behind the 2015 merger between Kraft and Heinz.

Although the billionaire has said he overpaid for his stake in the tie-up, Berkshire still owns around a third of the company’s shares. A 34% slump in the Kraft Heinz share price over five years means the shares could be better value today for me. Plus, there’s a handy 4.17% dividend yield on offer.

The company’s brand portfolio comprises well-known names including Heinz ketchup, Philadelphia cream cheese, and Capri-Sun drinks. Brand familiarity appears to be helping the firm navigate the inflationary environment.

Following a 7.3% rise in net sales during Q1 to $6.49bn, Kraft Heinz lifted its adjusted earnings forecast to $2.83-$2.91 per share. That’s higher than the company’s previous target of $2.67-$2.75 per share.

What’s more, the business has successfully trimmed its net debt pile over recent years. That’s especially important considering interest rates continue to rise. But there’s still more work to do in this regard.

In addition, inflation remains a key risk. Although the group’s managed this challenge well so far, weighing any further price hikes against the threats posed by competitors like Unilever and Nestlé will remain a tricky balancing act for the foreseeable future.

Nonetheless, this dividend stock looks good value to me. If I had spare cash, I’d buy.

Johnson & Johnson

Healthcare giant Johnson & Johnson (NYSE:JNJ) also features in Buffett’s portfolio, as well as my own. It’s a Dividend Aristocrat with an unbroken 61-year dividend growth streak. Today, the stock yields 3.08%.

Johnson & Johnson is the world’s largest healthcare company. Its business spans pharmaceuticals, medical technology, and consumer products. The company’s widely regarded as a defensive investment due to robust demand for its products and services, even during periods of economic turbulence.

The firm’s Q1 results for 2023 were mixed. Worldwide sales increased 5.6% to $24.7bn and each division reported growth. In addition, the company boosted its full-year adjusted earnings forecast to $10.60-$10.70 per share, up from a previous target of $10.45-10.65.

However, the group also reported a $68m net loss, equating to three cents per share. That’s because of liabilities arising from cancer claims relating to the company’s baby talc products. Johnson & Johnson faces ongoing reputational and legal risks from this litigation, but there are signs the unfortunate saga could be drawing to a conclusion.

Ultimately, I think the business has deep enough pockets to survive its legal troubles. After all, it has a triple-A credit rating. With the share price down 14% in a year, I think the stock could climb higher once these difficulties are in the rear-view mirror.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Charlie Carman has positions in Berkshire Hathaway and Johnson & Johnson. The Motley Fool UK has recommended Unilever Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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