Taking inspiration from legendary determine Warren Buffett isn’t the worst factor buyers can do. In any case, the ‘Oracle of Omaha’ has made a fortune by specializing in a couple of easy ideas.

On this article, I’ll spotlight two that I’d comply with to purpose for constant dividends.

Deal with blue-chip firms

Buffett’s holding firm, Berkshire Hathaway, owns many companies outright. These vary from railroad and sweet firms to insurance coverage teams.

Berkshire additionally holds a large portfolio of shares value over $300bn. Within the second quarter, the overwhelming majority of these have been companies that pay dividends.

The fourth-largest holding, value a whopping $25.4bn, was Coca-Cola (NYSE: KO).

The 138-year-old smooth drinks powerhouse is the very definition of a blue-chip inventory. It’s raised its annual payout for 62 consecutive years, which simply grants it dividend royalty standing.

Buffett began shopping for Coke shares approach again in 1988 and nonetheless holds them immediately. Extremely, Berkshire is now incomes a 60% annual yield on its stake, relative to its authentic $1.3bn price foundation.

In different phrases, it’s raking in round $776m every year in dividends!

Contemplate high quality client staple shares

Now, I’m not saying I’d fly out and snap up Coca-Cola shares for the dividend. The yield is barely 2.7% for buyers shopping for the inventory immediately. And the agency’s near-term earnings may very well be impacted if the US financial system have been to enter a recession.

However it’s no accident that Buffett has chosen to not promote his big Coca-Cola holding. The corporate’s portfolio of manufacturers is simply unbelievable: Sprite, Fanta, Oasis, Dasani, Costa Espresso, and lots of extra.

As a client staples agency, it gives on a regular basis merchandise that guarantee steady income streams. And its model energy provides it pricing energy to assist protect revenue margins over time.

Turning to the FTSE 100

Within the UK, prime FTSE 100 client shares embody Diageo (LSE: DGE) and Coca-Cola HBC (LSE: CCH).

Diageo is the world’s largest spirits firm by way of its possession of top-tier manufacturers like Johnnie Walker and Tanqueray. The opposite is a bottling accomplice for Coca-Cola in Europe and components of Africa.

Each at present provide a potential dividend yield of three.1%. This implies I’d count on to obtain round £310 a yr from a £10,000 funding. Whereas which may not sound thrilling in comparison with some high-yield FTSE 100 shares, these client shares have constantly grown their dividends over a few years.

Coca-Cola HBC, for instance, upped its payout by 19% final yr. In the meantime, Diageo has been shelling out a rising dividend for actually a long time.

Working some figures

After all, no particular person dividend is assured. And every agency would face challenges throughout a pointy financial downturn, particularly if cash-strapped shoppers began discovering their key manufacturers too expensive.

However let’s assume these two shares collectively return a median of 8% yearly over the subsequent 20 years by way of dividends and rising share costs. On this situation, my £10,000 would develop to roughly £46,610.

I reckon that’s a stable final result. But when I additionally determined to take a position one other £500 a month, reaching the identical return over the equal time-frame, then my whole could be £331,248. Even when factoring in future inflation, that’s nonetheless more likely to be a sizeable sum in 20 years’ time.

Even higher, my returns could be tax-free have been I to take a position inside a Shares and Shares ISA.

Please observe that tax therapy is dependent upon the person circumstances of every shopper and could also be topic to vary in future. The content material on this article is offered for info functions solely. It’s not supposed to be, neither does it represent, any type of tax recommendation. Readers are accountable for finishing up their very own due diligence and for acquiring skilled recommendation earlier than making any funding selections.