Berkshire’s 65% yield on cost shows what dividend growth pays

By Julia Santos · Founding Editor, DividendsTimes

Educational analysis, not personalized investment advice.

A 65% yield on cost sounds like a typo, but it is just arithmetic applied to patience. Motley Fool reported on October 27, 2026 that three long-held Berkshire Hathaway positions, Coca-Cola (KO), American Express (AXP) and Moody’s (MCO), now generate between roughly 41% and 65% a year on what Berkshire originally paid, based on the outlet’s calculations. The range matters to income investors because it shows how a modest starting yield can outrun a high one over a long enough holding period.

How yield on cost gets to 65%

Yield on cost divides today’s annual dividend by the price you originally paid. It says nothing about what the stock yields to a new buyer. Berkshire’s filings show it bought these stakes decades ago, and the outlet’s math treats the purchase price as frozen while the dividend kept rising.

The mechanism is easy to see without any special inputs. Buy a stock with a modest yield, let the dividend grow every year, and never sell. Each raise lifts the cash you receive, but your cost basis stays where it was. Run that for a few decades and the payout can be many times the original, so the ratio of dividend to cost climbs far above anything the stock yields today. To land at a figure like 65%, the dividend has to multiply many times over. That takes a very long holding period, a very low original price, or both. Berkshire had both: it started early, paid prices that look tiny today, and never sold.

So the outlet’s headline figures are real, but nobody can repeat them on a normal timeline. Buy Coca-Cola today and you will not see anything like that return on cost in your lifetime.

High starting yield versus growing payout

Here is the comparison that matters for your own portfolio. Picture four hypothetical holdings kept for the same long stretch. These are descriptions of shape, not company data:

• A very high starting yield with a flat dividend never moves on cost. It pays the same year after year.
• A high yield with a token raise each year creeps upward, but slowly.
• A moderate yield with solid annual raises pulls ahead somewhere in the second decade.
• A low yield with fast growth starts last and needs the most patience, but it can end up close to the moderate grower.

The high-yield, no-growth holding wins in the early years. The moderate grower passes it later than most people expect, and that assumes every raise arrives on schedule. They rarely do. A very high yield is usually the market pricing in a cut, and one cut resets the whole calculation. Berkshire’s trio sits at the opposite end: businesses with pricing power, modest payout needs and cash flows that supported steady raises.

This is also where yield on cost misleads. It flatters the holder and hides opportunity cost. If Coca-Cola’s shares have appreciated several-fold, the money tied up in that stake could earn more elsewhere. Berkshire probably tolerates that because selling would trigger large capital gains taxes, and a steady dividend stream has its own value. An individual investor in a tax-advantaged account faces a different trade-off.

What it means for dividend investors

First, judge dividend growth by the rate of increase, not the current yield. A company with a modest yield that raises its payout briskly every year will usually deliver more income over a decade than a richer yielder that barely moves it. Check the dividend growth history in each company’s investor materials, and compare it with earnings growth. A payout that grows faster than earnings eventually runs out of room.

Second, check coverage. Look at the payout ratio on free cash flow, not just earnings, using the latest annual and quarterly reports. For financial companies such as American Express and Moody’s, regulatory capital and credit conditions matter as much as the ratio. For consumer staples, watch volume trends and currency swings that can squeeze cash flow.

Third, track your own yield on cost, but put the current yield on today’s price next to it. If your original purchase has become a handsome yield on cost while the stock yields much less on market value, ask whether that capital would do more work elsewhere. The answer is often to keep holding. Still, ask the question on purpose, not by default.

Fourth, be honest about time horizon. Retirees who need income now cannot wait decades for a low starting yield to compound. A blend works better: core holdings with solid current yields and steady growth, plus smaller positions in faster growers that lift income in the later years of retirement.

Finally, remember the survivorship problem. Berkshire’s three picks are the winners. For every Coca-Cola there are companies that grew their dividends for years and then cut them. Reviewing a position once a year against payout coverage is cheaper than discovering a problem after the announcement.

What to watch

The next real data points are each company’s dividend declarations and Berkshire’s filings. Berkshire files its quarterly holdings report with the SEC after each quarter closes, so the position sizes for the period ending September 30 should appear by mid-November. Any trimming of these stakes would be notable, since Berkshire has held them for so long.

On the company side, Coca-Cola, American Express and Moody’s each announce dividend decisions on their own calendars. Compare the size of the next increase with the last one. A slowdown in the growth rate is the early signal that the compounding story is weakening, even before any yield changes.

Frequently asked questions

Can I get a 65% yield on cost on my own Coca-Cola shares?

Not by buying today. The figure reflects Berkshire’s decades-old purchase price and a long run of dividend increases, as calculated by Motley Fool. Your yield on cost starts at whatever the stock yields when you buy, and it grows only as fast as the company raises its payout.

Is a high yield on cost a reason to keep a stock?

Not on its own. It describes the past and ignores the current price. Compare the dividend growth outlook and payout coverage with alternatives, and consider taxes before selling. A rising dividend with solid coverage is the stronger reason to hold.

Why not just buy the highest starting yield?

Very high yields often signal that the market expects a cut. A cut permanently lowers the base your future raises compound from. A moderate yield with steady growth has historically been the safer way to build income, though it takes longer to pay off.

Educational analysis, not personalized investment advice.