The Buffett Indicator Is Flashing Red. These 3 Dividend Stocks Could Be Safe Havens.

Source Motley_fool

Key Points

  • The Buffett indicator considers the stock market’s value in relation to economic output.

  • Certain dividend stocks offer you safety and guaranteed income during any economic and market environment.

  • 10 stocks we like better than Target ›

Investors listen to Warren Buffett because he has demonstrated his sharp understanding of the stock market over time. Leading Berkshire Hathaway for six decades, he delivered market-beating returns. Buffett retired at the start of the year, but today he's chairman emeritus and remains involved in the investing world.

And Buffett's words of wisdom still ring true, meaning it's an excellent idea to refer to them as needed when investing. Right now may be a particularly good time to do this. This is because Buffett once said the market was "playing with fire" when it did something that it's doing again right now. The Buffett indicator, a measure of the stock market's total value in relation to the size of the U.S. economy, has surpassed 200%. In fact, it's now at 281%. This signals that stocks might be overvalued relative to economic output.

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In such an environment, with the Buffett indicator flashing red, declines may be on the horizon. Here are three dividend stocks, companies that offer you passive income, that could be safe havens.

An investor works at a desk at home.

Image source: Getty Images.

1. Target

Target (NYSE: TGT) has proven its commitment to rewarding shareholders as it has lifted its dividend for more than 50 straight years -- and this has landed it on the list of Dividend Kings. With such a track record, it's likely the company will aim to maintain this momentum. So, when you buy Target stock, you can be pretty confident that you'll see dividend growth year after year. This year, Target paid out a little more than $1 billion in dividends in the first half.

The retail giant pays a dividend of $4.64 per share, representing a yield of 2.9%, greatly surpassing the S&P 500 dividend yield of about 1%.

Investors also will like Target's recovery story. The company has struggled to grow in recent years amid various headwinds, but new chief Michael Fiddelke launched a plan earlier this year that's starting to bear fruit. The company is revamping store displays and refreshing merchandise, leaning into AI to improve growth, and lowering prices on many items. This, along with Target's offering of essentials, may boost revenue in the quarters to come.

2. Johnson & Johnson

Johnson & Johnson (NYSE: JNJ) is another Dividend King you can count on for passive income growth and earnings strength. The pharma giant pays a dividend of $5.36 per share, at a yield of 1.9%. The company's free cash flow of more than $19 billion on a trailing 12-month basis shows it has the financial strength to keep this going.

You'll also like J&J for its leadership in pharmaceutical products, through its innovative medicine business, and in medtech. Including the impact of currencies, these businesses helped J&J's revenue to advance 6% in the recent quarter to $25 billion. This, along with 29 products generating $1 billion or more in revenue annually, put the company on track for more than $100 billion in revenue this year -- that's a first for J&J. These current products, as well as a strong pipeline, are reason to be confident that growth may continue from this point. And that makes J&J an excellent stock to add to your portfolio in any environment.

3. Coca-Cola

Coca-Cola (NYSE: KO) is another Dividend King -- and this company also is a longtime Warren Buffett favorite. Buffett added the beverage giant to his portfolio in the late 1980s, and it remains one of Berkshire Hathaway's top holdings.

You probably know Coca-Cola best for its eponymous beverage, but it also sells a wide variety of well-known drinks across the non-alcoholic spectrum, including Fuze tea and Dasani water. Its commitment to classics such as Coca-Cola, its moves to offer products designed to suit the needs of individual markets, and marketing efforts to keep the brand fresh in consumers' minds have helped the company grow revenue over the years.

As for the dividend, Coca-Cola pays $2.12 per share, at a yield of 2.2%, and thanks to its financial strength and track record, the company is likely to keep the growth going well into the future. So, with the Buffett indicator flashing red, this stock is a fantastic safe haven.

Should you buy stock in Target right now?

Before you buy stock in Target, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Target wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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*Stock Advisor returns as of November 10, 2026.

Adria Cimino has positions in Target. The Motley Fool has positions in and recommends Berkshire Hathaway and Target. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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