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Cramer’s top 5 Buffett-owned dividend stocks

As the market enters an environment of uncertainty in the second quarter, Jim Cramer thought it was time to dig into his bag of tricks on the best way to fight a slowdown.

What is one thing he knows about slowdowns? Stocks with dividends tend to outperform.

This is because if when the economy slows down, most investors assume there will be lower interest rates, which means stocks with higher dividends face less competition from the bond market.

Now this doesn't mean that Cramer thinks investors should just jump on board with any stock out there with a good dividend. Instead, the "Mad Money" host took a cue from the Oracle of Omaha himself to help navigate the market of uncertainty.





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Approximately one week ago, TheStreet.com put together a list of Warren Buffett's 10 top yielding stocks.

"As much as I respect Buffett, I don't believe that all 10 stocks are necessarily worth owning, which is why I want to narrow that list down to my top five Buffett-approved dividend stocks that you can circle wagons around if you are worried about a slowing economy," Cramer said.

One important thing to keep in mind is that the list may not represent Buffett's current positions. But if history is any indication, Cramer knows Buffett likes to buy and hold and has already weighed the pros and cons of each position.

To start Cramer lumped together the fourth and fifth positions, Coca-Cola and Procter & Gamble. They yield 3.2 percent and 3.1 percent respectively and thus are practically indistinguishable. And while both companies are challenged with currency risk outside of the U.S., Cramer does think they have potential.

The third best Buffett-approved dividend stock was General Motors. This stock sports a hefty 4 percent yield and while the slowdown in the U.S. could create hard times for General Motors, Cramer is sticking by this stock. He likes it because it is basically a cash machine in the way it returns cash to shareholders.

"A slowdown could stymie that goal, but I still expect a dividend boost soon, which could make GM a winner all by itself," the "Mad Money" host said.

Cramer's second favorite is Verizon, with its delicious 4.45 percent yield. However he is torn on Verizon because while it has that attractive yield, it is really constrained by its competition.

The number one dividend pick with the Buffett seal of approval is Wells Fargo. Cramer's charitable trust also owns the bank's stock.

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"I view Wells Fargo as the embodiment of everything Buffett likes about a holding: an honest, well-run company that's the best of breed in its space," Cramer added.

Plus, Wells Fargo loves to raise its dividend and it also gobbles up its stock in buybacks. A double whammy!

So now that the market has reached a point where the economy is showing signs of slowing, Cramer thinks it is time for investors to consider buying dividend stocks. Using names approved by Buffett and blessed by Cramer, will ensure that you buy the best of the best for your portfolio.

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