How Warren Buffett Receives a Staggering 54% Yield From This Dividend Aristocrat

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He could be an income investor. Many dividend stocks that generate significant income have been bought by the legendary investor. The Apple position made $790 million in dividends.

Apple is the largest holding of the company. There are other stocks in which the conglomerate has smaller stakes that generate a lot of income. Here's how Buffett gets a huge dividend yield.

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Not a typo

I'm talking about Coca-Cola, a company that has a good track record of paying dividends. The yield mentioned is not a mistake. It's true that it's 50% and not 4.9%.

Coca-Cola's yield is only around 3.2%. That is its current yield. An effective yield is the number thatBuffett gets.

What is the difference between an effective yield and a run-of- the-mill yield? The cost basis is what determines the latter. The cost basis is the amount of money spent to buy the stock.

Coca-Cola's cost basis is $3.25 per share, which is the lowest in the business. The soft drink giant was invested in by the man in 1988.

Coke's annual dividend was adjusted for stock splits at the time. The annual dividends of $1.76 are divided by the cost basis to arrive at the effective yield.

Two factors working to Buffett's advantage

The main reason that Coca-Cola's effective dividend yield is so high is that it's held on to by Warren Buffet. He has stated before that he loves holding periods. He has been with Coke for 34 years.

If Coca-Cola increased its dividends, time would be on the other side of the coin. The company was able to increase its payouts by a multiple of more than twenty five.

Coca-Cola increased its dividend so much in 1988 that could have been predicted by Warren Buffet. He wouldn't have been able to predict how much the dividends would increase. He probably could have predicted that Coke would increase its dividends.

There was a time when Coca-Cola was a Dividend Affirmative. Keeping the streak going is a high priority for companies that have a long history of raising their dividends. Coca-Cola has increased its dividends for 60 years in a row.

Following Buffett's example

For a long time,Buffett held Dividend Aristocrats. Coca-Cola is not the only company in the portfolio. The "secret portfolio" of stocks held by New England Asset Management is managed by Buffett.

He is not an income investor. His approach in this case could be useful for other investors who want to retire with a lot of income.

Any stock that is likely to increase dividends should be used. Coca-Cola is an outlier, but income investors can achieve high effective dividends with other stocks by following the example of billionaire investor Warren Buffet.

Speights has positions in both Apple and Warren Buffet's company. There are positions in and recommendations for Apple and B shares. The following options are recommended by The Motley Fool: long January 2023 $200 calls on B shares, long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple. There's a disclosure policy at the Motley Fool.