For those who want to make money while they sleep, dividend stocks can be an excellent choice. But what separates the good from the great?

According to Warren Buffett, the best stocks are those that pay out more to investors over time. Finding them can be the difference between doing well and earning huge amounts of passive income.

Buffett’s secret sauce

Coca-Cola AND American Express there were two Berkshire Hathawaybest profitable investments. In his 2023 shareholder letter, Buffett explained why.

According to Buffett, the reason is that companies have managed to enhance their profits over time. As a result, they now pay larger dividends than before.

Even for companies that are not growing, investors can reinvest the dividends they receive to enhance their profits. This can be a powerful strategy in the long run.

The best investments, however, are those that return more cash each year without having to buy more shares. This is what happened with Coca-Cola and American Express.

Thanks to Coca-Cola, the company returned Berkshire $75 million in 1994 to $204 million in 2025, and that was without Buffett’s team buying any more shares.

The company continued to grow, and Berkshire was able to invest the cash into other opportunities. That’s why it is such a good investment that generates passive income.

What now?

Are there any companies like Coca-Cola that investors can buy today? I think they may exist – and may even appear on the UK stock exchange.

Information (LSE:INF) is one example. The FTSE100 the company may not be widely known, but it has a lot to offer as a company that can generate passive income for investors.

The company operates in the Events industry. In particular, it organizes trade fairs and conferences for various industries, from concrete products to luxury yachts.

Importantly, the company has relatively low capital requirements. It does not own the facilities where the events take place, which means it does not bear the associated maintenance costs.

This type of business may be exposed to economic downturns. And that means the potential for increased tensions or even a full-blown international trade war is a significant risk.

However, Informa has proven to be a resilient business. Since the end of the Covid-19 pandemic, this number has been increasing significantly and I think there may be even more.

Capital efficiency

Companies with low capital requirements often decide to make good investments. However, this is especially crucial for dividend investors looking for passive income.

Reinvesting dividends is one way to grow your portfolio. The best companies, however, return more cash to shareholders without needing additional cash from investors.

One example is Informa, which has relatively little maintenance equipment. That’s why I have it in my portfolio and I plan to expand it in the future.