Many Australians don't have a stream of passive income coming their way. Fair enough, many streams of passive income are hard to come by and even harder to keep open. That's why I'd tell anyone who wants a secondary income to look to ASX shares, just like the legendary Warren Buffett.
Warren Buffett has made a sport of building an ever-increasing stream of passive income at his company Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B). And Buffett's impressive track record makes for a great template for following in his footsteps and using ASX shares to obtain decades of dividends.
Warren Buffett knows how to pick a winner
So let's start with a few examples. Warren Buffett is famous for his long-term investing ideology. Many of his holdings at Berkshire Hathaway have been owned for decades. For example, Buffett bought a large chunk of US payments giant American Express Company (NYSE: AXP) way back in the 1960s. He still holds this stake today.
This is the perfect example of how Buffett has held this stock for decades, all while collecting an ever-rising stream of passive income from these shares. In 1989, American Express paid out annual dividends worth a total of 19.05 US cents per share. By 2022, this passive income stream had risen by more than 10 times to US$1.99 per share.
Last month, we looked at another example. Another Buffett favourite is Coca-Cola Co (NYSE: KO). Buffett first bought his stake in Coca-Cola in the late 1980s. Buffett originally invested around US$1.3 billion in Coca-Cola stock back then.
Also last month, we looked at how Buffett is on track to receive US$736 million in dividend income from this stock in 2023. That represents a 56.6% income yield on his original investment in just one year – helped out by Coca-Cola's 60-year streak of annually increasing its dividends.
Now, of course, we can't all be Warren Buffett. But we can use his superlative track record as an inspiration to build our own passive income streams.
There aren't nearly as many companies listed on the ASX that have the dividend track records of your American Express' or your Coca-Colas. However, there are a few shares that have done extremely well for ASX investors in terms of rising income.
Which passive income stocks have been raising their dividends on the ASX?
Take Commonwealth Bank of Australia (ASX: CBA) for instance. Over 2022, CBA shares yielded a total of $4.20 in dividend income per share. But go back 20 years, and we can see this $4.20 that investors just enjoyed has grown from 2002's total of $1.50 per share. And even more from 1992's 40 cents per share.
An investor who bought back then would be looking at a very much improved yield on their cost today. It's a similar story to the other major ASX banks.
A more recent example is Coles Group Ltd (ASX: COL). Coles only listed on its own right in 2018, and paid its first dividends in 2019, doling out 35.5 cents per share. But by 2022, this had risen to a far more impressive 63 cents per share.
And we can't not mention the king of ASX dividend shares, Washington H. Soul Pattinson and Co Ltd (ASX: SOL). This ASX investment house has the best track record of paying out dividends on the ASX. It hasn't missed a dividend payment since it was first listed on the ASX back in 1903.
Further, it has increased its annual dividend every single year since 2000. As we looked at last month, an investor who bought Soul Patts shares back at the turn of the millennium would be enjoying a yield on cost today of more than 20%.
So we can all use Buffett's track record of investing for passive income to find our own ASX winners, who increase their shareholder payments like clockwork. Building up a stream of passive income from ASX shares takes time. But it certainly rewards the patient.
