When it comes to generating a passive income from ASX shares, investors could learn a lot from Warren Buffett.

The Oracle of Omaha receives huge pay checks from his investments each year and there’s nothing to stop you from doing the same.

Passive income the Buffett way

Warren Buffett has a penchant for making buy and hold investments in high quality companies with positive long term outlooks that are trading at fair prices and pay sustainable dividends.

A prime example of this is Buffett’s long term investment in Coca-Cola Co, which comprises approximately 400 million shares.

In 2022, his Berkshire Hathaway business received a whopping US$704 million in dividend income from Coca-Cola Co.

But what makes this particularly impressive is that these dividends come from an original investment of US$1.3 billion.

This means the Buffett earned more than half his original investment back in dividends last year.

And if you include the many dividends that have been paid since he bought his shares in the late 1980s, Buffett has received approximately US$10 billion from Coca-Cola Co’s shares alone.

That’s almost seven times his original investment and you can bet that there’s plenty more to come.

But don’t worry if you don’t have US$1.3 billion down the back of the sofa to invest! Smaller investments would still have been very rewarding.

For example, had you invested a more modest $10,000 at the same time as Warren Buffett, you would have received $5,400 in dividends last year. You would also have received almost $70,000 in dividends in total during your investment period. All from sitting patiently on a single $10,000 investment!

What about ASX shares?

While we may not have Coca-Cola on the Australian share market (anymore), there are plenty of ASX shares that have characteristics that Buffett looks for when making investments.

A few for investors to look closely at include energy infrastructure company APA Group (ASX: APA), drinks company Endeavour Group Ltd (ASX: EDV), industrial property company Goodman Group (ASX: GMG), and wine giant Treasury Wine Estates Ltd (ASX: TWE).

The post How to generate passive income the Warren Buffett way with ASX shares appeared first on The Motley Fool Australia.

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More reading

• 2 ASX 200 stocks on the move following earnings updates
• 3 ASX 200 shares that could drive strong returns in an inflationary world: expert
• Should I buy Endeavour shares following the ASX 200 company’s stellar results?
• Why CBA, Corporate Travel Management, Treasury Wine, and Westpac shares are dropping
• Treasury Wine share price sinks 7% despite solid earnings growth

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has positions in and has recommended Apa Group. The Motley Fool Australia has recommended Berkshire Hathaway, Goodman Group, and Treasury Wine Estates. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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