3 Warren Buffett Dividend Growth Stocks That Just Hit All-Time Highs but Could Have More Room to Run in 2025

Core Insights - Berkshire Hathaway maintains a strong focus on the financial sector through its public equity portfolio and insurance businesses [1] - American Express, Visa, and Mastercard are key holdings in Berkshire's portfolio, with potential for growth in 2025 and beyond [2] Company Performance - American Express has been a core holding for Berkshire since 1991, achieving a 58.4% gain in 2024, making it the third best performer in the Dow Jones Industrial Average [3][4] - American Express constitutes 15.9% of Berkshire's portfolio, significantly larger than Visa at 0.9% and Mastercard at 0.7% [5] Business Models - American Express operates a closed-loop payment network, contrasting with Visa and Mastercard's open-loop systems [6] - American Express issues its own cards, allowing for greater control over merchant fees and interest income, while Visa and Mastercard rely on banks for card issuance [7][8] Financial Metrics - American Express has a market cap of $220 billion, compared to$482 billion for Mastercard and $619 billion for Visa [9] - Over the last five years, American Express has delivered a total return of 154%, outperforming Mastercard and Visa [9] Valuation and Dividends - American Express has a forward P/E ratio of 20.5, lower than Visa's 28.6 and Mastercard's 32.3, indicating a more attractive valuation despite lower margins [10] - All three companies have increased dividends significantly over the past decade while repurchasing shares, leading to faster earnings per share growth [12][13] Market Trends - The transition from cash to digital and mobile payments is a long-term advantage for these companies, with Visa and Mastercard being recession-resistant [14] - Financials were the second best performing sector in 2024, with payment processors potentially being better buys due to lower cyclicality [15] Investment Strategy - Investing equally in American Express, Visa, and Mastercard is a reasonable approach for new investors, though individual research is recommended [16] - Visa is highlighted as a top pick among the three, benefiting from sustained economic growth and lower regulations [17]