The market crash that followed President Donald Trump's tariff announcement on April 2 was a disaster for short-term-minded investors. For those of us who like to buy and hold dividend-paying stocks for years, though, market crashes create relative bargains out of stocks that previously seemed a little too pricey.
Warren Buffett took control of Berkshire Hathaway in 1965, and since then, shares of the holding company have produced a 19.9% average annual return. The legendary investor and his team produced this result despite seven official recessions and even more market crashes.
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Buffett's outstanding track record makes the Berkshire Hathaway portfolio a great place to look for recession-resistant stocks. Constellation Brands(NYSE: STZ) and Coca-Cola(NYSE: KO) are two relatively reliable beverage stocks in the Berkshire portfolio that everyday investors should want to pounce on if the market crashes again.
Constellation Brands
Constellation Brands is the beer maker behind Modelo Especial, the leading brand in the U.S. market, and Corona Extra. The company brews all its beer south of the border, which could be a huge problem due to a new 25% tariff on imported beer.
Fear of what a 25% tariff could do to imported beer sales is pressuring Constellation Brands' stock price. Shares of the beer, wine, and spirits business have been trading more than 30% below the peak they reached last June.
The stock market beating would make sense if price-sensitive consumers bought Modelo and Corona, but this isn't the case. I don't expect higher prices on all imported beer to push many Modelo drinkers toward domestic brands.
Long-term investors could take solace that the present administration enacted the new beer tariff via executive order, not by signing a bill from Congress into law. The new tariffs could therefore end when Trump's current term ends in early 2029 -- if they don't end sooner -- if the next president takes steps to end them. At recent prices, you can start a position in this dividend grower at the unusually low price of about 17.6 times trailing free cash flow.
In 2015, Constellation Brands initiated a quarterly dividend, and the company is committed to raising the payout every year. At recent prices, the stock offers a 2.2% yield. Tarrifs could cause the dividend to rise slowly over the next four years -- and dividends are never guaranteed -- but rapid profit growth could come roaring back once beverage tariffs end. After all, this will still be the only company selling the popular Modelo Especial brand.
In the fourth quarter of 2024, Berkshire Hathaway acquired over 5.6 million shares of Constellation Brands. That seems like a lot, but the position makes up less than 1% of the overall portfolio. If you're going to take a chance on this up-and-coming beverage giant, it's best to take a similarly conservative approach and build a position slowly in case I'm wrong about the effect tariffs could have on imported beer sales. Or wait for the next market crash to bring its price down.
Coca-Cola
Buffett knows a thing or two about how lucrative leading beverage brands can be for patient investors. He famously invested in Coca-Cola stock during the late 1980s and early 1990s. If you include all the dividends it's paid, the stock has delivered a market-beating 6,090% return since the end of 1988.
This February, Coca-Cola raised its dividend payout for the 63rd year in a row. At recent prices, it offers a 2.8% yield, plus a heap of confidence that comes with six decades of steady dividend payout raises.
The stock fell several percentage points immediately after the White House announced new tariff rules on April 2, but quickly rebounded. It only took a few days for investors to remember that Coca-Cola customers don't expect its most popular products to be produced abroad.
With several of the world's most recognized soft drink brands, Coca-Cola investors can rely on strong margins and steady sales. That said, the stock has been trading for about 29.5 times trailing-12-month earnings. That's a historically high valuation, which isn't what you want when investing in a well-established business that you expect to grow slowly.
While now might not be a terrific time to buy Coca-Cola, it belongs on your list of dividend growers to buy if another market crash drags it lower again.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.
