Here's Exactly How Much $10,000 Invested in Coca-Cola Has Paid Out in Dividends Since 1988

Dividend growth stocks have the potential to turn relatively modest investments into meaningful sources of annual income for patient investors, given time. Coca-Cola (NYSE: KO) is one of the finest examples. The company has raised its annual dividend payouts for 64 consecutive years.

The company's stable free cash flow and generous capital return program are among the many factors that have attracted investors, including Warren Buffett, to the stock. The Oracle of Omaha began buying Coca-Cola stock for Berkshire Hathaway's (NYSE: BRKA) (NYSE: BRKB) portfolio in 1988. Over the next few years, he spent a total of $1.3 billion on his company's stake in the business, and he hasn't touched it since. The position has distributed a growing payout to Berkshire every year, and this year alone, it's on track to return $848 million to Berkshire.

Even if you started with a much more modest investment in 1988, you'd have received quite a substantial sum from Coca-Cola over the years. Here's exactly how much $10,000 invested in Coca-Cola in 1988 would have paid out in dividends over the many years since.

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Coca-Cola's dividend payments

When Buffett bought into Coca-Cola in 1988, he paid an average of $41.81 per share. If you used $10,000 to buy Coca-Cola stock at the same average price, you'd end up with 239 shares of the stock (and a bit of cash left over).

Those 239 shares paid a total of $286.80 that year, for a yield of 2.9%. That might sound pretty good, but remember that in 1988, the 10-year Treasury note yielded an average of 8.85%. Buffett has long eschewed bonds in favor of stocks, even when yields are high. This was a lesson he learned investing in longer-dated Treasuries in the 1970s. The 2.9% yield for Coca-Cola was just a starting point.

Coca-Cola raised its dividend by 13% in 1989, 18% in 1990, and 20% in 1991. Not to mention, the stock's value has climbed remarkably as well. It also split its shares 2-for-1 four times over those years. Anyone who invested in 1988 and held on until today would now have 16 times as many shares as they started with.

Here's the incredible reality of holding Coca-Cola stock since 1988. A $10,000 investment made in Coca-Cola before its first dividend distribution of 1988 has paid out $123,266.64 in total dividends over the almost 39 years that followed. What's more, as of this writing, the shares are worth about $336,000. And they'll pay out another $2,026.72 on Oct. 1.

For some added perspective, consider this. As mentioned above, Buffett's original $1.3 billion investment is set to pay out $848 million in dividends to Berkshire this year. That's a 65.3% yield on the original investment, more than 30 years after completing the purchase. There's no other instrument in the world that can reliably pay that kind of yield. That's the power of great dividend growth stocks like Coca-Cola.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.