馃攳
How Warren Buffett Doubles His Money With Dividends - YouTube
Channel: Dividend Data
[0]
warren buffett is widely considered one
[2]
of the greatest investors of all time
[4]
with a staggering net worth of 80
[6]
billion dollars
[7]
if you're a fan of the channel then you
[8]
know i like to learn from the experience
[10]
of buffett and his partner in crime
[12]
charlie munger much of their success
[14]
comes from investing in companies with
[15]
sustainable competitive advantages and
[17]
holding them long term
[19]
although his company berkshire hathaway
[21]
chooses not to pay a dividend a
[22]
significant number of their holdings do
[25]
in fact his investments are generating
[27]
more than 4 billion
[28]
a year in dividend income throughout
[30]
this video i'm going to explain how
[32]
buffett's massive cash flow
[34]
lets him consistently double his money
[36]
on many stocks
[37]
my name is zach and you should leave a
[38]
like and subscribe to the channel if you
[40]
enjoy the video
[41]
today i want to show you how warren
[43]
buffett's long-term investing strategy
[45]
generates significant dividend income
[47]
with
[48]
huge yields on cost warren buffett is
[50]
what's known as a value investor
[52]
this investment strategy involves
[54]
picking stocks that are trading for less
[56]
than their intrinsic or book value
[58]
however his strategy evolved over time
[60]
with a great deal of influence from
[62]
charlie munger
[63]
i've been taught by ben graham to buy
[66]
things on a quantitative basis look
[68]
around for things that are
[69]
cheap and
[72]
that i was taught that say in 1949 or
[75]
they made a big impression on me so i
[76]
went around looking for what
[78]
i call use cigar butts of stocks
[82]
and the cigar but approach to buying
[84]
stocks is that you walk down the street
[86]
and you're looking around for cigar
[87]
butts and you find this honestly this
[89]
terrible looking soggy ugly
[92]
looking cigar one puff left in it
[95]
but you pick it up and you get your one
[96]
puff disgusting you throw it away
[99]
but it's free i mean it's cheap and then
[101]
you look around for another soggy
[103]
you know one puff cigarette well that's
[104]
what i did for years
[106]
it's a mistake uh although you make
[109]
money doing it but you can't make it
[110]
with big money it's so much easier just
[112]
to buy wonderful businesses so now i
[114]
would rather buy a wonderful business at
[116]
a fair price
[117]
than a fair business at a wonderful
[118]
price you really want to be in a
[120]
wonderful business because
[121]
the time is the friend of the wonderful
[122]
business you keep compounding it keeps
[124]
doing more
[125]
business and you keep making more money
[126]
this transition to focusing on the
[128]
quality of the underlying business was
[130]
learned through their investment and
[132]
seized candy
[133]
but we both kept learning all the time
[136]
so that
[138]
the man we were five years earlier
[141]
was less sensible than the man who
[144]
ultimately was there
[146]
and see's candy did teach us both
[149]
a wonderful lesson and it'll teach you a
[152]
lesson if i tell you the full story
[156]
if sea's candy had asked one hundred
[159]
thousand dollars more
[162]
born and i would have walked that's how
[164]
dumb we were
[166]
at that time ten thousand more
[172]
and one of the reasons we didn't walk
[175]
is while we were making this wonderful
[177]
decision we weren't going to pay a dime
[178]
more
[179]
ira marshall said to us you guys are
[183]
crazy
[185]
there's some things you should pay up
[187]
for
[188]
you're underestimating quality
[192]
well warren and i instead of behaving
[195]
the way
[196]
they do in a lot of places we listened
[199]
to the criticism
[201]
we changed our mind and that is a very
[204]
good lesson for
[206]
for anyone the ability to take
[209]
criticism constructively
[213]
is a well think of all the money we made
[215]
from
[216]
accepting that one criticism and if you
[218]
count the indirect effects
[220]
from what we learned from buying seas
[223]
you can say
[224]
that berkshire's been built partly by
[227]
learning from criticism now i'll tell
[229]
you exactly why walking away from seized
[231]
candy would have been a
[232]
terrible idea in 1972 they bought the
[235]
entire company for 25 million dollars
[238]
that year the business had 31 million
[240]
dollars in sales and made 2.083 million
[244]
dollars in profits after taxes
[246]
additionally the business needed a
[247]
working capital of 8 million
[249]
to operate based on buffett's valuation
[251]
of seas he was unwilling to pay more
[253]
than the 25 million dollars he offered
[256]
as of 2007 c's candy has earned
[258]
berkshire hathaway
[260]
1.35 billion dollars in pre-tax earnings
[264]
that year c's sales were 383 million
[267]
netting over 82 million dollars in
[269]
pre-tax
[270]
profit so buffett is well over tripling
[272]
his initial investment in c's candy
[275]
every single year based on this it was
[277]
totally irrelevant whether he paid one
[280]
hundred thousand
[280]
one million or heck even ten million
[282]
dollars more
[284]
in 2019 buffett said that seas has
[286]
produced well north of two billion
[288]
dollars in pre-tax earnings and the
[290]
chocolate company remains a cash
[292]
cow for berkshire hathaway c's candy
[294]
exemplifies what buffett looks for in a
[296]
business
[297]
the company has built a competitive
[298]
advantage through significant brand and
[300]
customer loyalty
[302]
buffett has said long-term competitive
[304]
advantage in a stable industry is what
[306]
we seek in a business
[307]
if that comes with rapid organic growth
[310]
great but even without
[311]
organic growth such a business is still
[313]
rewarding we will simply take the lush
[315]
earnings the business and use them to
[317]
buy similar businesses elsewhere
[319]
this is exactly what he did with c's
[321]
candy see's candy has paid everything
[323]
virtually
[324]
out to us that they've earned because
[325]
they do not have the ability within
[327]
sea's candy to use large sums which they
[331]
earn
[332]
uh intelligently in their business so
[335]
it'd be an enormous mistake for c's
[336]
candy to retain
[338]
money so they distributed berkshire and
[340]
we hope
[342]
that we move that around in some other
[344]
area
[345]
where that dollar becomes worth a dollar
[347]
ten cents or a dollar twenty cents in
[348]
terms of present value terms
[350]
if c's candy were a stand-alone company
[353]
we would simply pay out a lot of the the
[356]
earnings practically all of the earnings
[358]
and dividends just like we do now except
[360]
it goes to berkshire
[361]
the company had limited potential for
[362]
scaling but was able to provide a
[364]
reliable cash flow
[365]
this mindset of buying great businesses
[367]
at fair prices would bleed into all of
[370]
buffett's future investments
[371]
warren buffett does not specifically
[373]
target dividend stocks yet the majority
[375]
of his holdings pay dividends this
[377]
correlation comes from the types of
[379]
businesses he targets
[380]
dividend stocks are often highly
[382]
profitable and mature companies with
[384]
proven business models this overlaps
[386]
heavily with buffett's investment
[387]
preferences
[388]
as i mentioned at the beginning of the
[389]
video warren buffett's berkshire
[391]
hathaway earns around 4 billion dollars
[393]
in annual dividends
[394]
this number doesn't even include returns
[396]
from companies where they have full
[398]
ownership
[398]
like sea's candy one of buffett's best
[400]
performing stocks is the coca-cola
[402]
company which he's owned since 1988.
[405]
this year that investment will pay more
[407]
than 656
[409]
million dollars in dividend income with
[411]
an initial cost basis of three dollars
[413]
and 24 cents per share
[415]
buffett now boasts a 50.5 dividend yield
[419]
on cost
[420]
this means that he will be more than
[421]
doubling his initial investment
[423]
every two years through dividends alone
[426]
coca-cola has been consistently growing
[427]
their dividend for over 58 years and
[430]
there seems to be no indication that
[431]
this will stop anytime soon
[433]
this is a classic example of investing
[435]
in a company with strong competitive
[437]
advantages and holding long term
[439]
if you want to learn more about
[440]
coca-cola i did a full stock review on
[443]
the company and will provide a link in
[444]
the description of this video
[446]
in 2016 warren buffett invested heavily
[448]
into apple and berkshire
[450]
hathaway now owns over 5.9 percent of
[452]
the company
[453]
he's already seen a significant return
[455]
on investment but i think it's poised to
[457]
be his next coca-cola
[458]
this year he's set to earn 822 million
[461]
dollars in dividends which is the most
[463]
of all
[464]
his holdings i don't know his exact cost
[466]
basis but given the time he invested i
[468]
assume the yield on cost is currently
[470]
around two to two and a half percent
[472]
apple is currently the most valuable
[473]
brand in the world and has massive
[475]
customer loyalty
[476]
additionally it has nine years of
[478]
dividend growth and a 10.5 percent
[480]
five-year compound annual growth rate i
[482]
would not be surprised at all if in 30
[484]
years buffett would be doubling his
[486]
initial investment every two years
[488]
through dividends
[489]
similar to coca-cola if you want to
[490]
learn more about apple i also did a
[492]
stock review on that company and will
[494]
provide a link in the description as
[496]
well
[496]
buffett has many other dividend stocks
[498]
with a huge yield on cost
[500]
this is accomplished through the
[501]
long-term nature of his investments
[503]
moody's the credit rating risk
[504]
assessment and data analytics company is
[507]
another cash cow for berkshire hathaway
[509]
this year it will pay over 55 million
[512]
dollars in dividend income with an
[514]
initial cost basis of only 10 dollars
[516]
and 5 cents a share
[517]
berkshire's annual yield on cost is 22.3
[520]
percent
[521]
buffett doubles his initial investment
[523]
through dividends every four and a half
[524]
years
[525]
considering the current price of moody's
[527]
is around 270 dollars with a 0.8
[530]
dividend yield his investment is a prime
[532]
example of how long-term
[533]
investing can net massive yield on cost
[536]
american express is another one of
[538]
buffett's holdings which pays
[540]
260 million dollars in annual dividend
[543]
income
[543]
at an initial cost basis of 8.49
[546]
per share berkshire hathaway has a 20.3
[550]
dividend yield on cost this means that
[553]
in just under five years they will
[554]
double their initial investment through
[556]
dividends alone
[557]
other notable investments such as bank
[559]
of america pay 743.6
[562]
million in annual dividends wells fargo
[564]
pays 659.3 million
[566]
craft heinz pays 521 million u.s bank
[570]
court pays 222.5 million
[572]
and jpmorgan chase pays 214.2 million
[576]
these are just some of the many dividend
[578]
stocks in warren buffett's portfolio the
[580]
main takeaway here is that when you
[581]
invest in companies with sustainable
[583]
competitive advantages
[585]
over a long time horizon you can receive
[587]
huge yields on cost and massive
[590]
returns i hope this video provides some
[592]
interesting ideas to think about
[594]
and let me know in the comments if you
[595]
like this topic thank you for watching
[597]
dividend data i greatly appreciate if
[598]
you could leave a like and subscribe to
[600]
the channel
[601]
if you follow me on twitter link in the
[602]
description you can get real-time
[604]
updates of my buys and dividends coming
[606]
in you can support the channel on
[607]
patreon and be a part of making these
[609]
videos happen
[610]
the link is in the description please
[612]
leave a comment below and thank you for
[616]
watching
[623]
you
Most Recent Videos:
You can go back to the homepage right here: Homepage