Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 4
https://www.ft.com/content/1a6f4bd9-b9c7-462e-8152...I was able to read without a sub
“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” he said. “Outside the US, there are essentially no candidates that are meaningful options for capital deployment at Berkshire.
No. of Recommendations: 2
“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,”
I expect Berkshire to establish about a 3% dividend when Warren passes. It would solve the excess cash flow problem while putting a floor on the stock price.
No. of Recommendations: 4
“I expect Berkshire to establish about a 3% dividend when Warren passes. It would solve the excess cash flow problem while putting a floor on the stock price.”
Rationalwalk had a piece on dividends this week, and brought up an idea I hadn’t thought of. If Berkshire is cheap then buybacks are the sensible way of returning excess cash. But what if Berkshire is expensive, and for a long period? Unlikely, I know, but if it happened, dividends could make sense.
A dividend any time soon would really mess up my tax planning. I wouldn’t be the only one. On the other hand, Berkshire holding excess cash when there is, apparently, no real chance of deployment isn’t attractive, either.
I was surprised that there are no non-US companies on Berkshires radar. Are there really none big enough?
No. of Recommendations: 22
I expect Berkshire to establish about a 3% dividend when Warren passes. It would solve the excess cash flow problem while putting a floor on the stock price.
I personally think you will be wrong about that, for a good long time to come. I expect them to up the pace of buybacks instead, if it should ever be needed to "burn off" excess cash.
(it isn't currently, in that the cash and short-term fixed income pile is currently smaller, not larger, than historically typical as a fraction of the size of the firm)
No level of dividend is the right level for any but a tiny minority of shareholders. Always either too high or too low.
Buybacks work for everybody pretty equally by comparison: those who sell some stock (whatever amount suits them), and those who don't.
What's unusual is that Berkshire seems to recognize this.
Jim
No. of Recommendations: 13
I was surprised that there are no non-US companies on Berkshires radar. Are there really none big enough?
The quote was "meaningful options", so I take that as entailing the whole list of key prerequisites: size, liquidity, investability, and in an industry with some control of its pricing and longevity. He's not going to put money into commodities, and almost certainly not banks, which cuts the list of big global firms by quite a bit. At some point I could see him putting money into Nestle, perhaps, but it's rarely cheap relative to its likely rate of progress of value.
I suspect investability is the key one here in terms of shortening the list. Mr Buffett is very keen on a company being based somewhere with a legal/political/cultural/governance setup that gives extreme reliability to ownership of the fruits of the business. I don't think he even feels comfortable putting material capital into Canada or the UK.
Jim
No. of Recommendations: 2
Maybe Buffett sees the value of transnational assets like Bitcoin. Hehehe. Just kidding.
I find it funny that so many warn about the dangers of CPC confiscation of assets like Alibaba and overlook the confiscatory perils present in certain US states and federal regulators.
No. of Recommendations: 2
"I personally think you will be wrong about that, for a good long time to come. I expect them to up the pace of buybacks instead, if it should ever be needed to "burn off" excess cash.
(it isn't currently, in that the cash and short-term fixed income pile is currently smaller, not larger, than historically typical as a fraction of the size of the firm)"
I agree that the cash pile has been larger relative to Berkshire's size in the past.
However, as Berkshire grows larger, the chances the cash can be deployed sensibly in a reasonable time frame decrease. Buffett himself essentially said as much in the letter regarding potential targets.
A first class problem to have and it will be interesting to see how this plays out.
No. of Recommendations: 1
I personally think you will be wrong about that, for a good long time to come. I expect them to up the pace of buybacks instead …
You might be right, but the market is likely to discount Berkshire significantly at his demise, especially because the market is going to worry about how well his successor will do at deploying such large amounts of capital. While buybacks are probably a better use of surplus capital, dividends send a very clear signal about underlying value in a way that buybacks don’t.
Shall we place a small wager? I hope it’s not settled for a decade, but it could soon.
No. of Recommendations: 2
By the way, this little comment, along with the recognition that substantial capital cannot be deployed outside of economic crises, has me pretty convinced that dividends are coming:
"Berkshire does not currently pay dividends, and its share repurchases are 100% discretionary."
No. of Recommendations: 17
Re Dividends, it seems clear that such would result in taxable income to the Buffett family and many other long term shareholders in very large amounts that they don't need and don't want. With no tax advantages over buybacks.
And that also counts for a lot of us lower tier shareholders. See non-Buffett shareholder voting when the question was asked. Overwhelming not wanted.
This is an old point, but it doesn't seem to be getting the weight it deserves in these dividend discussions.
Buffett has made his position clear, with examples. If you want a dividend, create your own by selling stock according to the dividend level you desire.
I know I'm plowing old ground. It forms the basis for buybacks being preferred.
WHY would this change in the next decade or so?? I fail to see any advantages for dividends. The disadvantage is that they basically reduce the dry powder on an ongoing basis. Buybacks have the flexibility of waiting until they are to ALL shareholders advantage. And stopping when better opportunities exist elsewhere.
After that, the Buffett family holdings will no longer control Berkshire. I guess a new generation of shareholders might feel differently then.
No. of Recommendations: 0
Nuance change in his language suggests something may be afoot.
No. of Recommendations: 1
"I fail to see any advantages for dividends. The disadvantage is that they basically reduce the dry powder on an ongoing basis"
Perhaps there might be a case for Special Dividends - i.e not a commitment to pay them annually but in years when cash has built up significantly and share buybacks are not considered to be an efficient method?
I would be surprised to see dividends brought in relatively near term. I think Abel and co. would probably want to go as long as possible without initiating one in respect of Warren's views. Also, in today's letter, Warren didn't say that there wouldn't be growth, just its unlikely to be outsized, which to me implies, we're still unlikely to see dividends any time soon.
One thing I was wondering about was where dividends were paid as return of capital - does that still attract favourable tax status and if so is that for the investor or for the company paying them out?
No. of Recommendations: 5
Buffett had a vote for a dividend, nobody wanted it. Will he skip the vote this time? Anyone who thinks he’ll (or his successor) will skip the vote this time call me and I’ll sell you something 😀 (nobody will want it this time either). Dividends are for know nothing investors!
No. of Recommendations: 1
“ Dividends are for know nothing investors!“ priceless, it’s a good thing Coke, Amex, Chevron and Apple don’t pay a dividend. 🍿🥲☮️.
No. of Recommendations: 11
"Dividends are for know nothing investors!"
That's a rather sweeping statement. Should probably read "in the case of Berkshire shareholders, dividends are likely not the best deployment of capital".
Not all dividends are the same and Warren himself usually cites the dividends we collect in the annual letter. That's because they are a very real part of Berkshire's earnings and are justified from the companies paying them. Again, it's about how and why that capital is being deployed in the form of dividends.
No. of Recommendations: 18
"dividends send a very clear signal"
The main signal that dividends send is "government can deploy 23.8% of your capital better than we can". If anyone really needs a dividend, just sell a few shares every now and then. It's functionally equivalent, except that YOU choose rather than someone else choosing FOR YOU.
No. of Recommendations: 0
