Berkshire Hathaway and Dividends

[LaramieWind]

WB likes to buy dividend paying companies, what does he do with the dividends it receives from its holdings?

[Jack FFR1846]

2 things.

1) He pays taxes on these dividends

2) He swears because he lost money paying taxes, He wonders why he didn't just buy more Amazon (BRK owns $1.5B of AMZN) who doesn't pay dividends.

[Silk McCue]

Google says -

“While Berkshire Hathaway itself does not pay a dividend because it prefers to reinvest all of its earnings for growth, Warren Buffett has certainly not been shy about owning shares of dividend-paying stocks. Over half of Berkshire's holdings pay a dividend, and several of them have yields near 4% or higher.”

Not paying dividends makes Berkshire Hathaway a very tax efficient holding.

Cheers

[toddthebod]

WB likes to buy dividend paying companies, what does he do with the dividends it receives from its holdings?

What a strange question. Berkshire is a very large and diverse company that has income from many sources. Why would they do something with their dividends independently of what they do with any of their income?

Would you also ask, what does Berkshire do with the income from their railroad?

What does Berkshire do with the income from their insurance business?

[Wanderingwheelz]

He does what so many other people do with their taxable dividends. He reinvests them.

Berkshire can do whatever it wishes with its income and profits like any other company- which may include paying a dividend to shareholders, but that won’t likely happen during WBs lifetime. Bringing their website out of the dark ages may even happen, who knows? https://www.berkshirehathaway.com/

[JoMoney]

Berkshire allocates the cash flows to other areas of the business where they think it will be more profitable for the share owners than distributing them. When the time comes they don't believe they can continue doing so, they'll start distributing dividends.
Warren Buffett has written and spoken to questions about that topic specifically, many times.

[JoMoney]

... Bringing their website out of the dark ages may even happen, who knows? https://www.berkshirehathaway.com/

I sure hope not. Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

[LaramieWind]

... Bringing their website out of the dark ages may even happen, who knows? https://www.berkshirehathaway.com/

I sure hope not. Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

Agreed. So many websites are just full of nothing and waste my time trying to find valuable information.

[dukeblue219]

Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

That internet died around 2005 and is never coming back.

[GP813]

Buffet has been one of the very best allocators of capital. Why would he return it to shareholders in the form of a check when he can successfully as his track record has proven, acquire more of or wholly acquire productive businesses.

[seajay]

Buffet has been one of the very best allocators of capital. Why would he return it to shareholders in the form of check when he can successfully as his track record has proven, acquire more of or wholly acquire productive businesses.

Yes he fully understands and exploits stock price skewness and kurtosis to good effect, most private investors don't, accordingly it is better for BRK to not pay dividends and for it to asset allocate reserves on investors behalf. For dividends Buffett suggests DIY dividends, to the amount and timing of each individuals needs - by selling some shares. The structure of BRK was intentionally designed as it is, such that even after his retirement/departure asset allocating to good effect doesn't require exceptional ability, rather just mediocre ability, but where BRK will still retain individuals of exceptional ability.

Having a large reserve of 'free-money', insurance premiums paid in, in lieu of later claims being paid out, has been less of a moat under the last decade+ of near free-money for all. As interest rates rise so that moat widens. Collecting dividends adds to the amount of reserves it has to hand for when appropriate opportunities present.

[Whakamole]

Buffet has been one of the very best allocators of capital. Why would he return it to shareholders in the form of check when he can successfully as his track record has proven, acquire more of or wholly acquire productive businesses.

Buffet (and many other shareholders) would also start paying a large amount of tax if BRK paid dividends.

[abuss368]

WB likes to buy dividend paying companies, what does he do with the dividends it receives from its holdings?

If I recall, Berkshire Hathaway receives over $4 BILLION in dividends a year!

Think about that for a moment.

I recently watched a Warren Buffett interview where he discussed this. In terms of Berkshire paying a dividend, he said they have not (believe they did one year only way back) but that could change in the future.

At some point the growing mountain of cash will be under pressure to put to work or pay back to shareholders if it is not already.

Best.
Tony

[Valuethinker]

WB likes to buy dividend paying companies, what does he do with the dividends it receives from its holdings?

If I recall, Berkshire Hathaway receives over $4 BILLION in dividends a year!

Think about that for a moment.

I recently watched a Warren Buffett interview where he discussed this. In terms of Berkshire paying a dividend, he said they have not (believe they did one year only way back) but that could change in the future.

At some point the growing mountain of cash will be under pressure to put to work or pay back to shareholders if it is not already.

Best.
Tony

Whilst Buffett is still CEO, BH will distribute cash to shareholders via buybacks.

One of his letters explains how this is equivalent to paying dividends. But also more tax efficient, generally. This is in line with first year MBA corporate finance theory - Modigliani + Miller Dividend Irrelevance theorem. The underlying model is quite beautiful in its simplicity and elegance.

A dividend is a "credible signal". In Game Theory terms, it's sending a signal from management to outside parties about valuing the shareholders' money. It's a way of overcoming an inherent asymmetry of information between outsider shareholders and insider management. You can call a dividend the purest signal of quality of underlying profits that you can send.

Buffett is already credible as a careful user of shareholder funds, and is the largest shareholder in his own company. Why would he give himself a tax problem he does not need?

Note that when Founders cease to be managers of companies (Gates at Microsoft, Steve Jobs' inheritors at Apple) is the moment when often growth companies start to pay a dividend. Founders can usually find better things to do with the cash - in terms of opportunities within the business.

It will be interesting to see where Amazon and Google go in the next 5-10 years. And Facebook. Tesla too, I suppose.

[Nowizard]

Since Buffett holds stocks for long periods of time, he receives the benefit of corporations that increase dividends on a regular basis. HIs dividends provide a significant amount of capital for use with various decisions. Since dividends are a percentage of the stock basis, the percentage amount of the dividend relative to that basis increases, often to a significant annual "guaranteed" return so long as dividends are not eliminated or reduced by the corporation paying them.

Tim

[seajay]

WB likes to buy dividend paying companies, what does he do with the dividends it receives from its holdings?

If I recall, Berkshire Hathaway receives over $4 BILLION in dividends a year!

Think about that for a moment.

I recently watched a Warren Buffett interview where he discussed this. In terms of Berkshire paying a dividend, he said they have not (believe they did one year only way back) but that could change in the future.

At some point the growing mountain of cash will be under pressure to put to work or pay back to shareholders if it is not already.

Best.
Tony

The model is scalable, cash is accumulated until either its a good time to buy back shares, or a good time to buy another stock.

Consider Buffett's 90/10 suggested asset allocation, tends to broadly compare to 100% stock. He also suggests not lumping in, but averaging in over a period of 10 years. Savers average in naturally, accumulate more over many years; For those with a lump sum dropping a third immediately in, the remainder added in over the following 9 years until 100% all-in, and that averages (near) 90/10 over a total 30 years. During those first years opportunities to buy the likes of 25% pull-backs will occur. By averaging in two-thirds at a average 25% discount, mid/longer term rewards are elevated.

Newly retired would tend to do well by follow a similar model. Buy and hold is no different to the costless lumping in every day. If at retirement you adjust to 33/67 and then upped the weighting yearly, through 44/66, 55/45, 66/34, 77/23, 88/12, 100/0 .. every 18 months, picking depressed at the time holdings in each case, then you both reduce earlier year bad sequence of returns risk and tend to uplift the longer term rewards from the assets invested in.

[Valuethinker]

Since Buffett holds stocks for long periods of time, he receives the benefit of corporations that increase dividends on a regular basis. HIs dividends provide a significant amount of capital for use with various decisions. Since dividends are a percentage of the stock basis, the percentage amount of the dividend relative to that basis increases, often to a significant annual "guaranteed" return so long as dividends are not eliminated or reduced by the corporation paying them.

Tim

But the same result could be achieved by his subsidiaries buying back shares?

With quoted/ listed companies, the key is credibility. The company announces buybacks (which are more tax efficient for shareholders) but will it actually execute on them? With Buffett, and no doubt many of the public companies he holds shares in, they will.

On his unquoted investments, where presumably he is 100% shareholder, then it really does depend on tax. Does BH the holding company pay more tax if paid a dividend as opposed to a capital restructuring (share buyback)? Over to his advisers.

What I have heard is that Buffett is *ruthless* on capital allocation. If you run a business unit that is part of BH, you have to justify every $1 of free cash flow that you want to spend on investment or an acquisition, vs paying it back to corporate center. That is his pitch to managements: you can work for me, and have minimal interference with operational decisions, but you will have 2 of the world's toughest finance people looking over your shoulder when you spend money (Munger and Buffett). But if you work for a Private Equity backed business, you will be on a track to exit in say 3-7 years -- they will sell on the business. Whereas with BH they will own you forever, as long as your return on capital exceeds their estimate of the cost of capital ie you make a "spread on WACC" in the jargon.

[seajay]

Since Buffett holds stocks for long periods of time, he receives the benefit of corporations that increase dividends on a regular basis. HIs dividends provide a significant amount of capital for use with various decisions. Since dividends are a percentage of the stock basis, the percentage amount of the dividend relative to that basis increases, often to a significant annual "guaranteed" return so long as dividends are not eliminated or reduced by the corporation paying them.

Tim

There are also advantages in having enough cash in order to buy a entire business, or at least a controlling interest, as then BRK can move capital/assets between the businesses more tax efficiently.

[smitcat]

Since Buffett holds stocks for long periods of time, he receives the benefit of corporations that increase dividends on a regular basis. HIs dividends provide a significant amount of capital for use with various decisions. Since dividends are a percentage of the stock basis, the percentage amount of the dividend relative to that basis increases, often to a significant annual "guaranteed" return so long as dividends are not eliminated or reduced by the corporation paying them.

Tim

There are also advantages in having enough cash in order to buy a entire business, or at least a controlling interest, as then BRK can move capital/assets between the businesses more tax efficiently.

What are the major holdings of BRK?

[rich126]

I know some people who hold Berkshire because it doesn't pay dividends. They live in countries where taxes on dividends are very high so they try to avoid them.

He has probably shown that he can invest the extra cash better than most stockholders.

[seajay]

I know some people who hold Berkshire because it doesn't pay dividends. They live in countries where taxes on dividends are very high so they try to avoid them.

He has probably shown that he can invest the extra cash better than most stockholders.

Extreme shifting of bond risk over to the stock side, cold hard cash instead of T-Bills (CASHX), and 20% BRK that pays no dividends 80% hard cash for some can be more tax efficient

[seajay]

Since Buffett holds stocks for long periods of time, he receives the benefit of corporations that increase dividends on a regular basis. HIs dividends provide a significant amount of capital for use with various decisions. Since dividends are a percentage of the stock basis, the percentage amount of the dividend relative to that basis increases, often to a significant annual "guaranteed" return so long as dividends are not eliminated or reduced by the corporation paying them.

Tim

There are also advantages in having enough cash in order to buy a entire business, or at least a controlling interest, as then BRK can move capital/assets between the businesses more tax efficiently.

What are the major holdings of BRK?

I assume you're alluding to high weighting to AAPL shares, that BRK acquired a substantial number of at a very good price/deal. Buffett's never been inclined to shy away from a high weighting ... provided its a good deal.

[Valuethinker]

Since Buffett holds stocks for long periods of time, he receives the benefit of corporations that increase dividends on a regular basis. HIs dividends provide a significant amount of capital for use with various decisions. Since dividends are a percentage of the stock basis, the percentage amount of the dividend relative to that basis increases, often to a significant annual "guaranteed" return so long as dividends are not eliminated or reduced by the corporation paying them.

Tim

There are also advantages in having enough cash in order to buy a entire business, or at least a controlling interest, as then BRK can move capital/assets between the businesses more tax efficiently.

What are the major holdings of BRK?

The ones listed in the Report & Accounts.

Apple in particular.

[HanSolo]

... Bringing their website out of the dark ages may even happen, who knows? https://www.berkshirehathaway.com/

I sure hope not. Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

There's been an effort to start a text-based alternative to the HTTP-based web, using a new protocol called Gemini. It hasn't caught on much yet.

Whilst Buffett is still CEO, BH will distribute cash to shareholders via buybacks.

One of his letters explains how this is equivalent to paying dividends.

He didn't say that exactly. He does buybacks only if the price is right, and said that buybacks when a company is overvalued destroys shareholder value.

[Valuethinker]

... Bringing their website out of the dark ages may even happen, who knows? https://www.berkshirehathaway.com/

I sure hope not. Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

There's been an effort to start a text-based alternative to the HTTP-based web, using a new protocol called Gemini. It hasn't caught on much yet.

Whilst Buffett is still CEO, BH will distribute cash to shareholders via buybacks.

One of his letters explains how this is equivalent to paying dividends.

He didn't say that exactly. He does buybacks only if the price is right, and said that buybacks when a company is overvalued destroys shareholder value.

Apologies. I knew that but should have been more explicit.

I believe what he says is that *if* he wishes to distribute cash to shareholders, buybacks are a more efficient way to do this than dividends. (That's a conclusion straight out of textbook Corporate Finance theory -- Modigliani & Miller).

He also says that he will only do such distributions if by doing so he enhances (his) shareholder value. So buying shares back at a discount to his estimate of their true value. Having a large cash "float" from his insurance operations means he has a lot of cash to fund opportunistic acquisitions, and he will wait years for the right one. Meanwhile he will sometimes even buy US Treasury bonds (If he thinks they are too cheap).

"Dividends if necessary. But not necessarily dividends" is how one might phrase it.

That said, Precision Castparts (aerospace) was an expensive deal - had to be written down by billions.

[seajay]

... Bringing their website out of the dark ages may even happen, who knows? https://www.berkshirehathaway.com/

I sure hope not. Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

There's been an effort to start a text-based alternative to the HTTP-based web, using a new protocol called Gemini. It hasn't caught on much yet.

Whilst Buffett is still CEO, BH will distribute cash to shareholders via buybacks.

One of his letters explains how this is equivalent to paying dividends.

He didn't say that exactly. He does buybacks only if the price is right, and said that buybacks when a company is overvalued destroys shareholder value.

Many businesses commission a web site, but get a restricted product. If the paid for product doesn't support visitors using phones, laptops and textual browsers, then the business is shutting out potential customers.

Doesn't require a new protocol, can all be accommodated as-is. Rather its more a case of a broad expanse of poor quality developers. Businesses also need to be more particular when being demonstrated the product, ask for the visitor experience to be shown when using a phone, laptop/tablet, text browser.

[Greentree]

Mr. Buffett believes his ability to reinvest and get high returns on capital are better than the typical shareholder. Companies that aren't growing as fast typically pay a dividend. Their ability to reinvest that capital is not as great. He takes those businesses and uses their dividend to make more money, and he does it well.

[Boglegrappler]

I assume you're alluding to high weighting to AAPL shares, that BRK acquired a substantial number of at a very good price/deal. Buffett's never been inclined to shy away from a high weighting ... provided its a good deal.

It's worth noting or clarifying that all of the Apple shares owned by BRK were purchased in the open market at prices available to anyone. That said, the purchases may have been a good deal in terms of the overall decision.

[comeinvest]

... Bringing their website out of the dark ages may even happen, who knows? https://www.berkshirehathaway.com/

I sure hope not. Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

There's been an effort to start a text-based alternative to the HTTP-based web, using a new protocol called Gemini. It hasn't caught on much yet.

Whilst Buffett is still CEO, BH will distribute cash to shareholders via buybacks.

One of his letters explains how this is equivalent to paying dividends.

He didn't say that exactly. He does buybacks only if the price is right, and said that buybacks when a company is overvalued destroys shareholder value.

Many businesses commission a web site, but get a restricted product. If the paid for product doesn't support visitors using phones, laptops and textual browsers, then the business is shutting out potential customers.

Doesn't require a new protocol, can all be accommodated as-is. Rather its more a case of a broad expanse of poor quality developers. Businesses also need to be more particular when being demonstrated the product, ask for the visitor experience to be shown when using a phone, laptop/tablet, text browser.

www.berkshirehathaway.com is the best, easiest to navigate, and easiest to read web site that I have seen in a long time. Perhaps along with Craigslist and bogleheads.org.

[drk]

^ It's simple, but it's still a bad website because of the complete lack of information architecture. Why are Charlie's old Wesco updates and the Activision letter given the same weight as current letters and filings?

[comeinvest]

^ It's simple, but it's still a bad website because of the complete lack of information architecture. Why are Charlie's old Wesco updates and the Activision letter given the same weight as current letters and filings?

I couldn't care less, as long as my significant BRK-B position performs well. I'm glad that they don't waste money on web developers or on ESG tasks.

[drk]

I couldn't care less, as long as my significant BRK-B position performs well. I'm glad that they don't waste money on web developers or on ESG tasks.

That's fine! I suppose "best, easiest to navigate, and easiest to read web site" is in the eye of the beholder.

BTW, they have a link for "ESG tasks" on the home page.

[comeinvest]

I couldn't care less, as long as my significant BRK-B position performs well. I'm glad that they don't waste money on web developers or on ESG tasks.

That's fine! I suppose "best, easiest to navigate, and easiest to read web site" is in the eye of the beholder.

BTW, they have a link for "ESG tasks" on the home page.

If you found the link, then the site was easy to navigate for you I think Buffet was not the one who authorized the ESG tasks, if you watch the Youtube video where he comments on ESG.

[placeholder]

I sure hope not. Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

Many sites benefit from switching to reader mode if available.

[comeinvest]

I know some people who hold Berkshire because it doesn't pay dividends. They live in countries where taxes on dividends are very high so they try to avoid them.

He has probably shown that he can invest the extra cash better than most stockholders.

Extreme shifting of bond risk over to the stock side, cold hard cash instead of T-Bills (CASHX), and 20% BRK that pays no dividends 80% hard cash for some can be more tax efficient

I'm not understanding your chart. BRK returned significantly more than cash since 1987, right? On your chart it looks like they were almost equal.

[mindboggling]

... Bringing their website out of the dark ages may even happen, who knows? https://www.berkshirehathaway.com/

I sure hope not. Honestly, I hope a trend starts, or returns to, a style of predominately text based web pages, without the unnecessary, bandwidth wasting, animated fluff and scripts/code that make it difficult to parse out information because they put too much weight on being flashy.
If your web page isn't just as functional in a Lynx browser, it's a bad web page IMO.

A company's website is primarily a sales and marketing tool. Any benefit to the customer is purely incidental.

[Alpha4]

I know some people who hold Berkshire because it doesn't pay dividends. They live in countries where taxes on dividends are very high so they try to avoid them.

He has probably shown that he can invest the extra cash better than most stockholders.

Extreme shifting of bond risk over to the stock side, cold hard cash instead of T-Bills (CASHX), and 20% BRK that pays no dividends 80% hard cash for some can be more tax efficient

I'm not understanding your chart. BRK returned significantly more than cash since 1987, right? On your chart it looks like they were almost equal.

I think (I could be wrong here) that he was showing that over the long term a mixture of 20% BRK-A and 80% actual cold hard cash (not Treasury bills but rather plain non-interest bearing paper cash i.e. Benjamins) returned a bit more than T-Bills (CASHX) did.

Presumably this was done for tax efficiency purposes since neither cash (obviously, since it pays zero inrerest since it's just pieces of paper) nor BRK-A (since it pays no dividend) has any current tax liability.

I'm not sure, though, if the two assets are rebalanced each year (in which case there would be at least some tax liability unless the person was in the 0% LTCG/QD bracket) or if they merely start at 20% BRK-A and 80% cash and are never rebalanced and BRK-A is simply left to become a larger and larger part of the portfolio as it grows. In the latter case, the portfolio would actually become riskier in potential standard deviation and maxDD terms over time (since a volatile asset--Berkshire stock--would come to make up more and more of the portfolio and cash less and less) and as such this would not be a particularly fitting alternative to T-Bills.

In any event, this portfolio is kind of cheating; Berkshire beat the market soundly since 1987 but in 1987 no one would've known that would happen for sure since no one can with 100% accuracy see/predict the future.

[comeinvest]

I know some people who hold Berkshire because it doesn't pay dividends. They live in countries where taxes on dividends are very high so they try to avoid them.

He has probably shown that he can invest the extra cash better than most stockholders.

Extreme shifting of bond risk over to the stock side, cold hard cash instead of T-Bills (CASHX), and 20% BRK that pays no dividends 80% hard cash for some can be more tax efficient

I'm not understanding your chart. BRK returned significantly more than cash since 1987, right? On your chart it looks like they were almost equal.

I think (I could be wrong here) that he was showing that over the long term a mixture of 20% BRK-A and 80% actual cold hard cash (not Treasury bills but rather plain non-interest bearing paper cash i.e. Benjamins) returned a bit more than T-Bills (CASHX) did.

Presumably this was done for tax efficiency purposes since neither cash (obviously, since it pays zero inrerest since it's just pieces of paper) nor BRK-A (since it pays no dividend) has any current tax liability.

I'm not sure, though, if the two assets are rebalanced each year (in which case there would be at least some tax liability unless the person was in the 0% LTCG/QD bracket) or if they merely start at 20% BRK-A and 80% cash and are never rebalanced and BRK-A is simply left to become a larger and larger part of the portfolio as it grows. In the latter case, the portfolio would actually become riskier in potential standard deviation and maxDD terms over time (since a volatile asset--Berkshire stock--would come to make up more and more of the portfolio and cash less and less) and as such this would not be a particularly fitting alternative to T-Bills.

In any event, this portfolio is kind of cheating; Berkshire beat the market soundly since 1987 but in 1987 no one would've known that would happen for sure since no one can with 100% accuracy see/predict the future.

A totally irrelevant and meaningless comparison and chart then, unless you are in a country with a tax rate of 100%. I think I'm signing out of this thread here.

[LaramieWind]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

[TomatoTomahto]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

And … that’s what makes horse races.

I have not calculated what effect dividends would have had if our one share of BRK.A had instead been invested in Total Stock, or a dividend forward stock fund, many many years ago. I don’t think we will be adding to our one share, but the thought has crossed my mind. In any case, our kids will love the massive stepped up basis when we die.

[toddthebod]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

Berkshire Hathaway did not invest in Apple because they pay dividends.

[LaramieWind]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

Berkshire Hathaway did not invest in Apple because they pay dividends.

Reread my post.

[usnaron]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

He invests in some companies that happen to pay dividends but his decision to invest in them has nothing to do with the fact thatcher pay a dividend. If he had the choice to buy Apple A shares with a dividend and Apple B shares with no dividend, based on his interviews on Thai topic, I believe he would choose the B shares because it would give him more control over his tax drag.

[toddthebod]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

Berkshire Hathaway did not invest in Apple because they pay dividends.

Reread my post.

I don't understand your point then. If you are not implying that Buffett is chasing dividends, are you asking why he buys stocks that pay dividends? Because it's pretty much impossible to avoid.

Besides, nobody says dividends are verboten, but why would you prefer to have someone else choose when you have to recognize gains instead of choosing for yourself?

[loukycpa]

Buffett talks a whole lot less about dividends then he talks about what he calls "owner earnings". He talks about how he prefers to own a controlling interest in a business so that he can control capital allocation, but in either case whether he owns a minority position or 100% of the company it is this "owner earnings" calculation he is focused on. Dividends are just a portion of those owner earnings that are being return to him as a shareholder rather than reinvested in the business. Buying back stock is another way of returning owner earnings, and he has written extensively on this, when it makes sense and when it doesn't.

When he is a minority owner and doesn't control capital allocation, he is focused like a laser beam on what management is doing with his "owner earnings". He strongly believes management and the board should do what is best for shareholders and maximize value. If they don't have profitable investment opportunities for those owner earnings, yes he absolutely believes those earnings should be returned to shareholders. If the company's stock is trading substantially below intrinsic value, he wants a buyback. If not, paying a dividend makes sense.

So if in the above sense you want to say Buffett likes dividend stocks, sure. But if you think he sits around like a lot of unsophisticated posters on this site and prefers one stock over another, mainly because the yield is 3.5% instead of 1%, you're a long way from understanding how he thinks. He only cares about dividends as a function of how management is allocating capital.

[LaramieWind]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

He invests in some companies that happen to pay dividends but his decision to invest in them has nothing to do with the fact thatcher pay a dividend. If he had the choice to buy Apple A shares with a dividend and Apple B shares with no dividend, based on his interviews on Thai topic, I believe he would choose the B shares because it would give him more control over his tax drag.

Well no one is forcing him to buy those evil and useless dividend paying stocks. They obviously have a value or he would just buy more growth stocks.

[LaramieWind]

Buffett talks a whole lot less about dividends then he talks about what he calls "owner earnings". He talks about how he prefers to own a controlling interest in a business so that he can control capital allocation, but in either case whether he owns a minority position or 100% of the company it is this "owner earnings" calculation he is focused on. Dividends are just a portion of those owner earnings that are being return to him as a shareholder rather than reinvested in the business. Buying back stock is another way of returning owner earnings, and he has written extensively on this, when it makes sense and when it doesn't.

When he is a minority owner and doesn't control capital allocation, he is focused like a laser beam on what management is doing with his "owner earnings". He strongly believes management and the board should do what is best for shareholders and maximize value. If they don't have profitable investment opportunities for those owner earnings, yes he absolutely believes those earnings should be returned to shareholders. If the company's stock is trading substantially below intrinsic value, he wants a buyback. If not, paying a dividend makes sense.

So if in the above sense you want to say Buffett likes dividend stocks, sure. But if you think he sits around a lot of unsophisticated posters on this site and prefers one stock over another, mainly because the yield is 3.5% instead of 1%, you're a long way from understanding how he thinks. He only cares about dividends as a function of how management is allocating capital.

I made no such assertions on how WB thinks, that's all on you.

[loukycpa]

Buffett talks a whole lot less about dividends then he talks about what he calls "owner earnings". He talks about how he prefers to own a controlling interest in a business so that he can control capital allocation, but in either case whether he owns a minority position or 100% of the company it is this "owner earnings" calculation he is focused on. Dividends are just a portion of those owner earnings that are being return to him as a shareholder rather than reinvested in the business. Buying back stock is another way of returning owner earnings, and he has written extensively on this, when it makes sense and when it doesn't.

When he is a minority owner and doesn't control capital allocation, he is focused like a laser beam on what management is doing with his "owner earnings". He strongly believes management and the board should do what is best for shareholders and maximize value. If they don't have profitable investment opportunities for those owner earnings, yes he absolutely believes those earnings should be returned to shareholders. If the company's stock is trading substantially below intrinsic value, he wants a buyback. If not, paying a dividend makes sense.

So if in the above sense you want to say Buffett likes dividend stocks, sure. But if you think he sits around a lot of unsophisticated posters on this site and prefers one stock over another, mainly because the yield is 3.5% instead of 1%, you're a long way from understanding how he thinks. He only cares about dividends as a function of how management is allocating capital.

I made no such assertions on how WB thinks, that's all on you.

I've read and listened to what he has to say, and have learned a lot. He seems to have a personal mission to help people become better investors, and I find that admirable.

[burritoLover]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

He invests in some companies that happen to pay dividends but his decision to invest in them has nothing to do with the fact thatcher pay a dividend. If he had the choice to buy Apple A shares with a dividend and Apple B shares with no dividend, based on his interviews on Thai topic, I believe he would choose the B shares because it would give him more control over his tax drag.

Well no one is forcing him to buy those evil and useless dividend paying stocks. They obviously have a value or he would just buy more growth stocks.

Why would dividend paying stocks be evil and presumed to not have any value? That's an odd conclusion. The dividend payment itself is irrelevant - that doesn't mean you shouldn't invest in dividend-payers. The only evil thing thing is it is forced tax event but asset location can mitigate that somewhat and you don't want to let the tax tail wag the investment dog by tilting towards growth stocks solely for tax savings.

[loukycpa]

If I understand correctly, WB invests in dividend paying stocks and they uses that money as he sees fit, which is to invest in companies for better return. Many BH approve of this.

Why then is it a bad move for a BH to invest in dividend paying stocks and use the money as they see fit? If dividends are so verboten why would WB even buy them for the BRK portfolio? Obviously there is some value to dividend stocks.

He invests in some companies that happen to pay dividends but his decision to invest in them has nothing to do with the fact thatcher pay a dividend. If he had the choice to buy Apple A shares with a dividend and Apple B shares with no dividend, based on his interviews on Thai topic, I believe he would choose the B shares because it would give him more control over his tax drag.

Well no one is forcing him to buy those evil and useless dividend paying stocks. They obviously have a value or he would just buy more growth stocks.

Believe me, Warren Buffett is all about growth. He doesn't bother with buying companies where he doesn't expect corporate earnings to grow. In his view of the world, all intelligent investing is value investing. Growth is a component of value, and they are joined at the hip. He doesn't believe in splitting the investment universe into value stock versus growth stocks at all. Companies that are growing faster are more valuable. Companies where future earnings are more certain are more valuable then companies where the future of earnings are less certain. That is his view of the world.

Dividends? I promise you that's not even on his radar, except again as part of capital allocation. He's completely agnostic.