Buffett Collects A 50% Dividend Yield… From The Coca-Cola Company (KO)?!

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Not many people know that Warren Buffett collects a 50% dividend yield on his shares of The Coca-Cola Company (NYSE:KO).

That's because it seems impossible. If you or I were to buy shares today, we'd earn a yield of less than 3%.

How does Buffett do it? Did he cut a behind-closed-doors deal with the legendary soft drink maker? Did he receive special dividends? To get a yield that high, you might even be tempted to think he did something unethical to get it.

But actually, it's none of the above. The answer is much simpler than you might think.

He uses a simple tool that many successful investors use. It's one you can use today to potentially earn yields as high as 10%, 20% or more on a handful of your investments in just a few years.

Let me show you how it works...

When most investors want a big dividend check, they look at stocks with the highest yields. They think bigger equals better.

To some extent they're right. Clearly, a higher dividend puts more cash in your pocket.

But you also need to consider a company's dividend growth -- and the likelihood it will continue that growth going forward. Given enough time, this can turn a lower-yielding stock into an even bigger income producer than some of the highest yielders on the market -- and with a lot less risk.

Warren BuffettSavvy investors know this and use it to their advantage. When Buffett bought shares of The Coca-Cola Company (NYSE:KO) in 1988, it paid less than 8 cents per share annually in dividends, yielding a modest 4%. But since then the company has grown its dividend by an incredible 1,300%, giving Buffett more than a 50% yield on his original investment today.

Fortunately, thanks to the "dividend vault" phenomena -- which StreetAuthority co-founder Paul Tracy originally explained in this essay -- investors have a chance to do exactly what Buffett did -- earn outrageously large yields by owning solid companies with large cash hoards that will grow their dividends by a sizeable amount over time.

Let me explain...

You see, starting from the financial crisis of 2007-2008, corporate America has been in a frenzy to hoard cash to protect their businesses from the worst. Over the five years following the crisis, many companies were still not seeing the demand that they wanted from consumers, so they just kept hoarding more cash.

Today, corporations in America hold close to a record $1.7 trillion worth of cash in the bank -- an amount larger than the GDP of 180 countries. Because the economy is still on uncertain ground, many of these companies will choose to only use a small amount of this cash to expand their business. Instead, they'll likely use most of it to reward shareholders in the form of dividends and share repurchases.

The companies most likely to do this are mature, steady growing businesses -- companies like The Coca-Cola Company (NYSE:KO) and Microsoft, for example. In fact, we've identified 13 companies that are likely to use their billion-dollar cash hoards -- or their own personal "dividend vaults" -- to reward shareholders.

We expect these "dividend vault" companies to be some of the fastest dividend growers on the market over the next 10 years. And that could easily lead to double-digit yields in just a few short years for investors who buy companies like these today.

Take "Dividend Vault" stock Cisco Systems, Inc. (NASDAQ:CSCO) for example. It has a $47 billion "vault" -- more than twice the size of The Coca-Cola Company (NYSE:KO)'s cash reserves.

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