Investors listen to Warren Buffett because he has demonstrated his sharp understanding of the stock market over time. Leading Berkshire Hathaway for six decades, he delivered market-beating returns. Buffett retired at the start of the year, but today he’s chairman emeritus and remains involved in the investing world.
And Buffett’s words of wisdom still ring true, meaning it’s an excellent idea to refer to them as needed when investing. Right now may be a particularly good time to do this. This is because Buffett once said the market was “playing with fire” when it did something that it’s doing again right now. The Buffett indicator, a measure of the stock market’s total value in relation to the size of the U.S. economy, has surpassed 200%. In fact, it’s now at 281%. This signals that stocks might be overvalued relative to economic output.
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In such an environment, with the Buffett indicator flashing red, declines may be on the horizon. Here are three dividend stocks, companies that offer you passive income, that could be safe havens.
1. Target
Target (NYSE: TGT) has proven its commitment to rewarding shareholders as it has lifted its dividend for more than 50 straight years — and this has landed it on the list of Dividend Kings. With such a track record, it’s likely the company will aim to maintain this momentum. So, when you buy Target stock, you can be pretty confident that you’ll see dividend growth year after year. This year, Target paid out a little more than $1 billion in dividends in the first half.
The retail giant pays a dividend of $4.64 per share, representing a yield of 2.9%, greatly surpassing the S&P 500 dividend yield of about 1%.
Investors also will like Target’s recovery story. The company has struggled to grow in recent years amid various headwinds, but new chief Michael Fiddelke launched a plan earlier this year that’s starting to bear fruit. The company is revamping store displays and refreshing merchandise, leaning into AI to improve growth, and lowering prices on many items. This, along with Target’s offering of essentials, may boost revenue in the quarters to come.
2. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) is another Dividend King you can count on for passive income growth and earnings strength. The pharma giant pays a dividend of $5.36 per share, at a yield of 1.9%. The company’s free cash flow of more than $19 billion on a trailing 12-month basis shows it has the financial strength to keep this going.
