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Collecting Dividends Like Warren Buffett Works

06/05/2013 10:11 am ET | Updated Aug 04, 2013

Warren Buffett is considered by many to be the best long-term investor of his generation. Mr. Buffett consistently invests in companies he believes will still be earning big profits fifteen years from now. Most of the companies Mr. Buffett chooses to invest in also pay dividends.

Warren Buffett's approach to collecting dividends works for small investors as well. Most investors are familiar with the idea that stocks are assets that build wealth over time as they rise in value. However, what some may not know is that every quarter some publicly traded companies issue a payment to shareholders which is a portion of net profit after all expenses are paid. That payment is called a dividend.

AT&T (T) and Coca Cola (KO) are real world examples of two Dow stocks that pay healthy dividends. AT&T pays its shareholders $.44 cents per share and Coca Cola pays its shareholders $.28 per share in quarterly dividends.

If you're a smaller investor and you own one hundred shares of Coca Cola, your quarterly payment would be $28. As you purchase additional shares of Coca Cola your dividend checks will increase over time.

Over time Mr. Warren Buffett has accumulated millions of shares of Coca Cola. In fact, he's one of the largest shareholders. As of May 15, 2013 he owns 400,000,000 shares of Coca Cola. That means Warren Buffett's quarterly dividend payment is over 17 Million dollars per quarter.

Dividends are yet another way the super-rich accumulate wealth and residual income. Any investor can prosper through owning stocks. All wealth is taught; alas not traditionally through our current education system. It's just a matter of getting a financial education and setting goals.

Content concerning financial matters, trading or investments is for informational purposes only and should not be relied upon in making financial, trading or investment decisions.