In his 2022 letter to shareholders, Warren Buffett celebrated Berkshire Hathaway’s 3,787,464% return, and noted consistently rising dividends in his “secret sauce.”
Buffett singled out Coca-Cola and American Express, which had grown payouts by 836% and 637% since 1994, calling them “highly likely” to continue hiking dividends.
These companies are well positioned to keep growing their dividends, thanks to growing earnings, low payout ratios, and shareholder-friendly management.
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Each year since 1977, Warren Buffett has written an annual letter to Berkshire Hathaway shareholders. In them, he explains investing decisions, touts wins, and takes responsibility for losses.
In his 2022 letter, the Oracle of Omaha had much to celebrate. Since Buffett took the helm in 1965, Berkshire Hathaway had returned 3,787,464%. For context, that’s enough to turn every $1,000 invested in 1965 into $37,875,640 in 2022.
Calling his own capital allocation decisions “no better than so-so,” Buffett attributed these results to a dozen or so “truly good decisions.”
Then he invited readers to “peek behind the curtain.”
Image source: The Motley Fool.
In his letter, under a heading titled “The Secret Sauce,” Buffett invoked his 400 million-share investment in Coca-Cola (NYSE: KO). In 1993, Berkshire finished its seven-year buying spree of Coca-Cola shares. Berkshire paid $1.3 billion for them, which Buffett called “then a very meaningful sum at Berkshire.”
In 1994, those shares paid Berkshire $75 million in dividends. And as Coca-Cola hiked its dividend each year, that income stream grew exponentially. By 2022, the dividend had grown to $704 million, thanks to dividend increases that Buffett called “as certain as birthdays.”
Another “secret sauce” investment was American Express (NYSE: AXP), which, coincidentally, Berkshire also put $1.3 billion toward in the early 1990s. Calling it “much the same story,” Buffett recounted how $41 million in dividends collected from it in 1995 had grown to $302…
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