Warren Buffett has always favored businesses with long-term competitive advantages, reliable cash flows, and shareholder-friendly business models. These two Buffett stocks may not pay very high dividend yields. But their combination of earnings growth, massive cash generation, and consistent capital returns make them capable of paying sustainable passive incomes to investors.
Let's take a closer look.
Warren Buffett Stock #1: American Express (AXP)
One of Warren Buffett’s longest-held investments is American Express (AXP), and the stock remains one of Berkshire Hathaway’s (BRK.A) largest holdings today. American Express is a financial services company that operates a closed-loop payments ecosystem combining card issuance, payment processing, merchant relationships, and lending all under one brand. This unique business model gives the company valuable customer data, strong pricing power, and higher spending from affluent cardholders.
With a forward yield of 1.2%, American Express may not offer the highest dividend yield on the market. However, its dividend growth is what makes AXP stock attractive for long-term passive-income investors. The company has consistently raised its dividend over recent years as earnings and cash flow have expanded. In the most recent first quarter, net income per share increased by 18% to $4.28. American Express paid out $700 million in dividends in Q1. With the confidence that its business model will continue generating sustainable earnings, the company also increased its dividend by 16% in the quarter.
Analysts expect earnings to increase by 14% in fiscal 2026, then rise further by another 14% in fiscal 2027. Management has also maintained a relatively conservative payout ratio of 20%, leaving plenty of room for future growth. This matters because consistent dividend payouts are what make a stock a sustainable passive-income investment rather than high yields. American Express also aggressively repurchases shares, which helps boost EPS and supports additional dividend growth in the future. The company repurchased $1.7 billion worth of shares in Q1.
On Wall Street, AXP stock remains an overall "Moderate Buy." Out of the 29 analysts who cover the stock, 10 rate it a “Strong Buy,” two have a “Moderate Buy” rating, 16 rate it a “Hold,” and one analyst has a "Strong Sell" rating. The stock has a mean target price of $363.62, implying 17% potential upside, while the high estimate of $450 suggest 45% potential upside from here.
Warren Buffett Stock #2: Chevron (CVX)
Berkshire Hathaway has also maintained long-term positions in the energy sector, and Buffett has long-favored companies with durable assets, healthy balance sheets, and the ability to generate cash across different economic cycles. Chevron (CVX) fits that profile well.
Chevron is one of the world’s largest integrated energy businesses, operating across oil production, refining, transportation, chemicals, and liquefied natural gas. Chevron’s biggest attraction for many investors is its dividend. Chevron is officially a Dividend Aristocrat, having increased its dividend for 39 consecutive years. Its forward dividend yield is also appealing at 3.6%.
The company’s diversified business model reduces earnings volatility compared to smaller exploration-focused energy companies. In Q1, the firm generated adjusted free cash flow of $4.1 billion, paying out $6 billion to shareholders in dividends and share repurchases. Chevron also announced a 4% increase in its quarterly dividend. While the ongoing Iran war has benefited energy companies like Chevron, the company is capable of thriving even in a post-war scenario, thanks to its diversified business model.
On Wall Street, CVX stock has earned a "Moderate Buy" consensus rating. Of the 26 analysts covering the stock, 16 rate it a “Strong Buy,” three have a “Moderate Buy,” six rate it a “Hold,” and one analyst has a “Strong Sell" rating. The stock has an average target price of $214.28, pointing to 12% potential upside, with a high estimate of $236 that suggests a possible 24% gain.
