Coca Cola: Warren Buffett Earns 50% Annual Dividend From This Stockholder

, Coca Cola: Warren Buffett Earns 50% Annual Dividend From This Stockholder   And all at low risk. As it is known, Berkshire Hathaway BRK.A (NYSE) $412.375,94 -4.456,31 (-%1,07) (NYSE:BRK.B) holding, which was founded by Warren Buffett in 1965, does not pay dividends. Berkshire's cash has always been retained by Buffett. And he was able to use that money as an opportunity to redistribute it to new businesses, whether public or private. Considering the entire history of the company, it has been determined to be a very lucrative and sound policy. But that doesn't mean Buffett himself doesn't like his dividend stocks. And since Buffett is known for holding "forever" his favorite stocks in an ideal world, he's also known to take advantage of these types of stocks and make incredible returns. One of the most important of these is Coca-Cola  KO (NYSE) $54,44 +0,02 (+%0,04), which is both lucrative and one of the safest stocks around, bringing an annual dividend of 50%.

The Invincible Truth for Dividends

Due to its 1988-89 gains, the stock quickly became Berkshire's largest holding by the end of that year, outstripping both GEICO and ABC/Capital Cities. Although it certainly looks cheap today compared to the cheap stocks always favored by Buffet, it was bought at a high value at the time. It's worth noting that Coca-Cola actually increased each year between 1980 and 1988, consolidating 18,7% over the five years prior to Buffett's acquisition. So much for value investment!

And yet, the stock was grossly undervalued.

Despite being a large company already, Coca-Cola continued to generate spectacular returns for Berkshire. Based on today's dividend, Berkshire will receive $672 million in Coca-Cola dividends for its 400 million shares.

Coca Cola: Warren Buffett Earns 50% Annual Dividend From This Stockholder

  All this makes him a Dividend King, not a Dividend Aristocrat.

Lessons to be Learned

First, clearly, in 1988, Buffett was able to see that Coca-Cola is a competitively advantageous brand, that its products have pricing power, and that the company needs a long time to grow in international markets. Another lesson is the power of long-term investment. Being able to predict that buying and maintaining quality can yield huge returns for long-term financial health, both literally and figuratively, as Buffett's investment in Coca-Cola demonstrates.  

Source: The Motley Fool

 

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