Warren Buffett Earns a 20% Dividend on This Reopening Stock

Warren Buffett's Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) doesn't pay a dividend, but Buffett himself loves dividend stocks. In fact, Berkshire's top nine holdings all pay a dividend back to headquarters on a regular basis, providing Buffett and his investment team a consistent stream of new cash to reinvest.

Although Buffett does love dividend stocks, he often doesn't seek out the highest-yielding stocks in the market. Typically, he targets high-quality companies that generate large returns on capital, producing high and growing free cash flow due to entrenched competitive advantages. That's because a high return on capital affords great companies not only the ability to pay dividends, but also to repurchase stock and reinvest in growth.

So while Buffett's picks might not shoot the lights out in terms of their current yield, when these dividends grow over the course of decades, that yield on his initial cost basis can grow to some pretty impressive heights.

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Source Fool.com