After a strong first half, where both the Nasdaq Composite ($NASX) and S&P 500 Index ($SPX) delivered double-digit returns, we have seen some volatility return to markets. Along with rich valuations, political uncertainty ahead of the looming November political elections seems to be making markets jittery.

Dividend stocks can be a good bet for risk-averse investors. Arguably, stocks with fat dividend yields have underperformed the markets over the last couple of years. The underperformance can be partially attributed to high interest rates, which lowers the appeal for dividend stocks. Also, high dividend stocks invariably happen to be value names in the old economy – an asset class that roaring tech giants have overshadowed.

Safe Warren Buffett Dividend Stocks

As the wider markets turn volatile, Coca-Cola (KO) and Kraft-Heinz (KHC) look like two safe dividend stocks worth buying. Incidentally, both of these stocks happen to be among the top 10 holdings for Berkshire Hathaway (BRK.B), which is led by the legendary Warren Buffett. The conglomerate is the biggest shareholder of KHC, and it has been holding KO shares since 1988.

Coca-Cola Has a 3% Dividend Yield

Coca-Cola offers a 3% dividend yield, which is about twice the S&P 500’s dividend yield. Where Coca-Cola scores big is stability and consistency, as the global beverage giant has increased its dividend for 62 straight years - including a 5.4% increase earlier this year.

Notably, while many companies either suspended or lowered their dividends in 2020 amid the COVID-19 pandemic, Coca-Cola actually increased its payout from $1.60 to $1.64. Its current annualized dividend is $1.94.

The company has a well-laid-out capital allocation policy. The first on the list is reinvesting for sustainable growth, which is followed by dividends in the second place. Mergers and acquisitions (M&A) stand in the third place, followed by share repurchases.

Arguably, the stock’s price action has been dismal; KO has gained just about 65% over the last 10 years, which lags the returns of broader markets. However, if you are looking for a safe stock that continues to pay dividends across economic cycles, KO would fit the bill.

Warren Buffett Admitted to a “Mistake” in Kraft-Heinz

While Buffett has faced flak for holding onto Coca-Cola despite the stock’s underperformance, he himself admitted to making a “mistake” in Kraft-Heinz. The investing legend acknowledged that he overpaid for Kraft during the merger with Heinz in 2015. 

Notably, 2019 was a particularly troublesome year for the multinational food giant, as it marked down its brands by $15 billion, disclosed an SEC investigation into its accounting policies, and also slashed its dividend.

While 3G Capital, which was Berkshire’s partner in acquiring Heinz in 2013, has since exited KHC, the Warren Buffett-led company continues to hold its 26% stake. And while KO stock has still delivered positive returns over the last 1-year, 2-year, and 3-year periods, KHC is in the red across all of these time frames, and is just about flat over the last 5 years.

In the past, I have been bearish about KHC due to its massive debt burden, low moat compared to some of the other consumer staple companies, and falling volumes. However, I believe that at a next 12-month price-to-earnings (PE) multiple of a mere 10.6x, the negatives look priced in, and the stock now has limited downside. 

KHC also brings its 4.9% dividend yield to the table, which is quite healthy compared to broader markets as well as its peers.

Kraft-Heinz Trades Below the Street-Low Target Price

Of the 16 analysts covering Kraft-Heinz, 8 have a “Strong Buy” rating while 8 rate it as a “Hold.” The stock’s mean target price of $38.19 is 16.4% higher than today's closing prices, while the Street-high target price of $43 represents a potential upside of over 31%. Importantly, the stock trades even below the Street-low target price of $34.

Overall, while I don’t expect Kraft-Heinz’s business to turn around in a hurry, its low valuations and high dividend yield qualify it among the safe dividend stocks to buy as broader markets turn volatile.