Three Stocks with Dividend Increases Overseen by Warren Buffet, Reaching New Peak Levels in 2025, Potentially Showing Further Expansion Opportunities
Investors often look to Warren Buffett's Berkshire Hathaway for insights on market trends and top stocks, and it's no secret that the financial sector has always held a special place in Berkshire's portfolio. Companies like American Express, Visa, and Mastercard fall under this category and have consistently been part of Berkshire's investment strategy.
Despite changing market conditions, these three dividend-paying growth stocks have continued to excel, and there's a good chance they could continue to do so in the coming years.
A Berkshire favorite
American Express has been a part of Berkshire's holdings since 1991, making it one of Buffett's longest-held investments, alongside Coca-Cola. In 2024, American Express saw a staggering 58.4% return, making it the third-best performer in the Dow Jones Industrial Average that year.
Buffett's enthusiasm for American Express can be seen in how it has climbed to become Berkshire's second-largest public equity holding, surpassing positions in major tech stocks like Apple and Bank of America. The increase in American Express's size in Berkshire's portfolio is mainly due to its lower price back in 1991, rather than any recent buying sprees by Buffett.
American Express vs. Visa and Mastercard
Although all three companies operate in the payment services industry, they have distinct business models. American Express operates a closed-loop payment network, which means it issues its own cards and has more control over merchant fees and interest income. In contrast, Visa and Mastercard work with banks to issue cards and earn transaction fees.
The difference in business models has led to varying revenue and profitability. American Express has a higher revenue but lower margins than Visa and Mastercard. However, its revenue growth in recent years has outpaced the S&P 500, reaching a total return of 154% over the last decade, beating its competitors, including Bank of America and Apple.
Why invest in these financial stocks?
One compelling reason to consider investing in these growth stocks is the strong market positions they have established. American Express, Visa, and Mastercard are each leaders in their respective segments, maintaining wide moats that protect them from competing threats.
Moreover, these stocks offer reasonable valuations, with American Express having a forward P/E ratio of just 20.5. The companies also have a strong track record of returning capital to shareholders through dividend increases and share buybacks.
The payment processing industry is also poised to benefit from the ongoing transition from cash and checks to digital and mobile payments. Secure and easy-to-use digital payment options are becoming increasingly prevalent, and these three companies are well-positioned to take advantage of this trend.
Which stock is the best buy?
Deciding which stock to invest in ultimately depends on individual investor preferences and risk tolerance. While it's hard to go wrong with any of these three financial giants, some investors may prefer the growth potential and brand recognition associated with American Express. Others may favor the dominant market position and solid financials of Visa or the wide distribution and global reach of Mastercard.
Depending on your investment goals, paying close attention to each company's unique strengths and weaknesses can help guide your investment decisions.
In conclusion, American Express, Visa, and Mastercard have proven themselves as solid investments for long-term growth and income generation. Their strong market positions, economic trends, and strategic initiatives make them attractive choices for investors seeking growth opportunities in the financial services sector.
These words are frequently used in discussions about the investment strategies of Warren Buffett's Berkshire Hathaway: 'money', 'finance', 'investing'. For instance, American Express, a long-term investment of Berkshire Hathaway, consistently delivers strong returns, making it an attractive option for those focusing on 'investing' in finance sectors. Buffett's enthusiasm for American Express even led to it becoming Berkshire's second-largest public equity holding, highlighting the company's potential for generating 'money' and 'returns'.
