Post New

div now.

SPY currently yields a bit above 1 percent, a historically low yield. IF brk yielded a bit below 1 percent brk shares would offer an even more compelling alternative to the risk of staying long SPY.

The added demand for the common as a result of the small quarterly dividend would create a taxable event for Americans in a taxable account however the increased demand for the shares would more than cover the taxable event of a dividend.

Buffett is the largest seller of brkb annually via the Foundations. HE will be the largest beneficiary of, increased demand for the common going forward.

5 of the Mag 7 stocks did not ask their shareholders if they should initiate a small quarterly dividend, they just did it.

NOW is the time for brk to initiate a 1$ a share quarterly dividend.

Can anyone site one suggestion I've made in the past 25 years that brks board didn't eventually agree to implement? WHY WAIT?

Disclosure, in the past ten days I increased my exposure to brk mostly in taxable accounts so yes, I'm talking my book.

Good luck and happy holidays to our board, and ALL our partners, let's see how long it takes to, do the right thing this time!

hclasvegas, who can be serious every now and then when necessary.

NOW is the time for brk to initiate a 1$ a share quarterly dividend

It wouldn't even soak up the cash coming in. (Isn't it like $1B per week?)

I would be interested to see a list and dates of some of your suggestions

I don't understand WANTING a dividend. You can sell enough each year.

" It wouldn't even soak up the cash coming in. (Isn't it like $1B per week?)"


The objective isn't to distribute a meaningful portion of our cash we can do that with a huge one-time dividend; I don't want that.

Early this year I posted that the correct play was long SPY short brkb.

IF brkb paid a quarterly 1$ dividend the less risky correct play now would be long brkb short spy.

We should be trying to make brkb a better alternative to spy.

Keep in mind there is a new fund that's short brkb, Buffett would love to crush those kaka roaches, this is how you do it!

" I would be interested to see a list and dates of some of your suggestions

I don't understand WANTING a dividend. You can sell enough each year."

Good morning, for all I know all my posts from the old Fools board were removed when they excommunicated me from their platform.

My old pal the stable genius and dozens of others here can repeat my resume.

IF I had suggested idiot nonsense the past 25 years, do you think we would be reading about it EVERY DAY right here?

IF I had the skills, I would try to find my, Foundation Sales Forever posts, but I don't.

Yo genius, guess where I'm headed, to the park bro, life is good!

If someone with deep pockets has a better reason to buy brkb today than me that's ok too, buy!

<<<You can sell enough each year >>>

Exactly. M.A.K.E Y.O.U.R O.W.N D.I.V

But it appears there’s some severe mental hang up with those attached to divided paying names. Take GE as the poster child of this. The fixation with receiving a dividend brought in blindness to the dividend paying ability. According to reports, GE was borrowing money to do this and share buybacks.

Buffett has alluded to this as the difficulty in stopping dividend once started.

Irrational behavior is rampant. Please keep Berkshire away from there. I’ll vote it down should it come up again.

I don't understand WANTING a dividend. You can sell enough each year.

A dividend is predictable, the share price is variable.

tecmo
...

A dividend is predictable, the share price is variable.

Though true, it doesn't really help that much. Management chooses the amount of the payout, which is guaranteed to be either higher than desired or lower than desired for the vast majority of shareholders.

A dividend is a great idea for a company with no ability to allocate capital, with a high-to-overvalued share price. It isn't entirely clear why companies with those two characteristics would be very attractive investments in general.

Jim

A dividend is a great idea for a company with no ability to allocate capital, with a high-to-overvalued share price. It isn't entirely clear why companies with those two characteristics would be very attractive investments in general.

I put a smallish amount into BP and WFC during the Macondo well blowout and the GFC, respectively, and have held onto them not as "investments" so much as an alternative savings account. Neither company is likely to go bankrupt and since recovering from their respective disasters, they pay dividends in excess of bank interest rates on my original purchase price. I suppose it's a form of diversification.

Sometimes, “blue chip” dividend payers can be a reasonably safe alternative to T-Bills when the latter yields next to nothing.

Even Buffett was buying stocks like Verizon and HP a few years ago. I doubt he bought them for their growth or significant undervaluation.

Plus the lower tax rate on qualified dividends tilts the scales further towards dividends over interest income.

Finally dividends will very likely grow in real terms, unlike yields on cash.

There will be an occasional bust up like GE, but so do investments selected for growth and undervaluation and other criteria, e.g OXY.

I feel a diversified basket of “blue chip” dividend payers can be a better alternative to the formulaic allocation to bonds in many portfolios.

I have been indoctrinated in REALLY WANTING the stock to go down.

I am 40%+ in Berkshire

For a company that doesn't issue shares, loathes stock based compensation, I can't think of a better way to increase value for us than for it to go down and have them buy in at very good prices.

I don't want it up, I don't want people buying it now.

For folks who own bitcoin, they should want people to buy it, its the only way for them to get out, same with the overpriced garbage that is out there, but for us, that's a different story

I have been indoctrinated in REALLY WANTING the stock to go down.

Yes 👏

“ Exactly. M.A.K.E Y.O.U.R O.W.N D.I.V”

Amen! Just did it yesterday afternoon on Fidelity app & took 5 minutes to specify lots and enter limit order & bingo, liquidated enough to get the ideal cash needed for upcoming expenses- too easy and done on Our terms & timing. We’re all in quite different circumstances in life and age so let’s all do it our own unique way.

they pay dividends in excess of bank interest rates on my original purchase price.

What does the "original purchase price" have anything at all to do with allocating the capital today??? If it is currently worth $100 and pays $2.50, or a 2.5% dividend, then if safety and "interest" (yield) are paramount, why not put the capital into Treasury Bills at 3.8% instead? Or into some other safe dividend distributing stock, or whatever you feel is a safe investment today?

What does the "original purchase price" have anything at all to do with allocating the capital today?

(a) Cap gains on the WFC stock, which is selling for ca. 3x what I purchased it for. Not so much the BP. Now that I'm in Portugal, cap gains rate is 28% unless I succeed in gaining the IFICI tax status and that acts as I understand it to on foreign cap gains.
(b) I expect yields and bank interest rates in the US will continue falling as the Orange Thing thrashes about destroying everything in sight to enrich himself, and eventually seizes full control of the Fed.
(c) Together they represent something like 5% of net assets, not worth spending much time thinking about.

YMMV.

"I have been indoctrinated in REALLY WANTING the stock to go down."

100%!! If there is an AI bubble-- and at the least I think we can all agree the market is rather frothy-- a precipitous drop in Berkshire's stock price would be most welcomed.

I used to get a nice “dividend” when brokerage houses offered big bonuses for new accounts. I had an A share I moved from one to another every six months or so and picked up the bonus. A bit of a time waster but amusing.

Actually the reason I moved into BRK in a major way was because it did not have a dividend, and tax brackets, ACA income brackets etc. made it well worth investing in a safe place with no dividends.

"I don't understand WANTING a dividend. You can sell enough each year."

You can until you run out of shares to sell. And, in doing so you are giving up a piece of your ownership in the business each time you sell.

"<<<You can sell enough each year >>>

Exactly. M.A.K.E Y.O.U.R O.W.N D.I.V

But it appears there’s some severe mental hang up with those attached to divided paying names. Take GE as the poster child of this. The fixation with receiving a dividend brought in blindness to the dividend paying ability. According to reports, GE was borrowing money to do this and share buybacks.

Buffett has alluded to this as the difficulty in stopping dividend once started.

Irrational behavior is rampant. Please keep Berkshire away from there. I’ll vote it down should it come up again."

GE's behaviour was probably motivated more to help hide the fact it was fiddling its earnings figures, which was the bigger issue at play there.

I'm sure though we can just as easily find plenty of examples of companies that are well run and pay dividends as we can find ones that aren't, so I can't see why we should assume BRK couldn't perform as one of the former, if management and shareholders were to agree upon dividends being paid.

(just for the record, I'm not saying BRK should start paying dividends, I'm totally OK with it continuing not to pay them as it is part of the culture here - but like an earlier post said, it shouldn't be something that is forever off the table.

As Charlie once said, he hopes hopes is not around for the sad day when brk. declares a dividend.

I don't understand WANTING a dividend. You can sell enough each year.

Bear in mind that the OP wasn't so much interested in the income from a dividend. His thesis is that the dividend will increase demand for the stock such that there will be a (permanent?) bump up in the stock price.

If it is true that 90% of shareholders voted against a dividend then I would question whether there would be a net increase in demand for the stock.

Maybe it would be win-win in the sense that a temporary bump up in the stock price would incentivize those who are pissed about the dividend to sell their shares.

“ Bear in mind that the OP wasn't so much interested in the income from a dividend. His thesis is that the dividend will increase demand for the stock such that there will be a (permanent?) bump up in the stock price.” Bingo, you are close enough to be worthy of a response. The objective is to make brkb a safer less volatile alternative to spy which currently yields 1 percent. Times change, situations change, who cares what Buffett and Charlie thought in 1999? Back to my original question, why do 5 of the Mag 7 pay a dividend, why? How did their stocks react to the news that they were initiating a small quarterly dividend? This is complicated, even here, this is complicated? Btw, I’m out hence I’m on my cell phone, let the buyer beware.

Marc, have Buffett call me, let’s make brkb great again, I’ll convince him. Thank you, Hc, your favorite partner.

Has anyone else noticed how well brkb trades when the broad market sells off? Just think after brkb goes ex next year I won’t have to sell three brkb every month to pay the rent on my unfurnished double wide in the hood. Thank you uncle Warren.

Amen! Just did it yesterday afternoon on Fidelity app & took 5 minutes to specify lots and enter limit order & bingo, liquidated enough to get the ideal cash needed for upcoming expenses- too easy and done on Our terms & timing. We’re all in quite different circumstances in life and age so let’s all do it our own unique way.


What would be your plan if the stock was trading at 1.2x book?

tecmo
...

His thesis is that the dividend will increase demand for the stock such that there will be a (permanent?) bump up in the stock price.

The people who are emotionally attached to dividends are unlikely to be buying a $500 stock. Let alone a $736,000 stock.

Heck, my co-workers rejected the idea of buying a stock at $100, back when AMZN and GOOG were there, pre-split.

Short spy long brkb looks pretty good today even without the dividend being initiated.


Just sayin.

“What would be your plan if the stock was trading at 1.2x book?”

Good Question, tecmo. I’d sell something else if BRK is at 1.2x book, probably AAPL or SPY which are our similar #2/3 positions.

We now need to generate cash for life expenses as we are now in the early draw down phase and solely living off equity investments. We own only minimal dividend payers.

BRK still represents 2/3 of our total investment assets. Our plan is to “conservatively” annuitize the Berkshire position based on its “true” valuation (as Jim has generously shared his commentary in the past). We hope not “touch” the principal.

Btw, as I recall, Jim said on average you could have sold off 6% annually based on his data and still not have touched the principal, but I highly doubt we would draw down that much consistently. We’re not fans of selling and generating LTCG!

Good Question, tecmo. I’d sell something else if BRK is at 1.2x book, probably AAPL or SPY which are our similar #2/3 positions.


And what if there was "nothing to sell" - meaning the entire market was in a tank? My point is that dividend payouts are MUCH more stable than stock prices - and hence they have SOME value in SOME circumstances.


tecmo
...

And what if there was "nothing to sell" - meaning the entire market was in a tank?

An old saying:
Sometimes you get the bear, sometimes the bear gets you.

In this context, anyone selling a little stock periodically over the next 20 years will, by construction, realize an average valuation multiple equal to the average for that security in the next 25 years. Which is all anyone should really expect. A few sales will be better, a few will be worse, but it averages out.

So, if you have nothing to sell, (nothing at a decent valuation level), it's not because prices are currently bad, but because your portfolio is unfortunately not large enough (and never was) for the withdrawal plan you're using.

Jim
(having lived from my portfolio for 25 years)

While I was at the park I came up with another brilliant idea. In the press release Buffett, the most generous unselfish control person in my 50 plus years around wall street, tho Kirk Kerkorian was close, can disclose that he will not be taking the div on his A shares. The stock pops 2- 5 % maybe more on that news, we all win. Buffett sells 5 billion plus at higher valuations annually via the foundations, and I sell fewer Bs monthly to pay the rent on my unfurnished double wide.

It's a win win, do the right thing team brk, bury that fund that's short brk, punish them for their ignorance.

hc, your favorite partner who is always looking out for the team.

I've never had to sell BRK at distressed prices and I hope that my fellow BRK investors also keep a sufficient cash cushion that they never have to do so. As long as you do this (and consider tightening your belt when the times call for it), you shouldn't ever have to sell at too low a price.

I'd hope that if BRK was in the tank for a long time that it also means that most other stocks are there, too, meaning our company is spending down its cash hoard to buy strong companies at advantageous prices.

SD

A passing thought.

Let's assume that BRK management decided they did need to issue some dividends to consume cash flow. What if they made the dividends only apply to B shares?

Most of the unwanted dividends probably apply to those holding large estates, primarily in A shares. This would let them, and their heirs, continue to avoid dividends and the resulting taxes. Buffett himself is an example, but there are many early investors like him. If they actually wanted some dividends, just covert A to B shares, controlling the amount of dividends. This would also apply to their heirs. It would also generate dividend income for the foundations

I recognize this would change the "economic equality" of the A and B shares. But it would also let BRK management better manage the amount of dividends they wish to issue at least initially. Down the long road, most A shares will ultimately be converted to B shares through the generations anyway - really just a long pathway. BRK will probably someday need to issue dividends, so this could be an interim approach?

Just a hypothetical thought for discussion. I personally am also in the group that doesn't want dividends. I'll create my own as needed, and have done so for a long time.

Tex

" Let's assume that BRK management decided they did need to issue some dividends to consume cash flow. What if they made the dividends only apply to B shares?"

Brk couldn't do that but again, any A long could refuse the div if given an option which brk probable wouldn't do. Buffett could refuse the div on his A shares which would allow the foundations to enjoy higher proceeds from the sale of his donated shares annually.

Buffett has successfully made many of you anal with respect to a small taxable event to enjoy the benefit of greater demand for your common, going forward.

Buffett has successfully made many of you anal with respect to a small taxable event to enjoy the benefit of greater demand for your common, going forward.

yo bud & partna. YOU ARE THE ONLY ONE that wants greater demand for the common! Let that sink in.

I was curious as to when the last pro or con dividend vote by Berkshire owners occurred & here was Gemini’s response:

“In a 2014 vote on the matter, a proposal to pay dividends was overwhelmingly rejected by 98% of voters, showing strong alignment with the management's philosophy.”

I would be curious what the 2026 voting results would be if it were on the Proxy. I’d imagine there would continue to be a majority against dividends, but I doubt as high as 98%.

" yo bud & partna. YOU ARE THE ONLY ONE that wants greater demand for the common! Let that sink in."


Yo professor, there is a kid named Warren Buffett who sells 5 BILLION plus of his life's work via the foundations annually forever going forward.

WHY would he want the foundations to enjoy lower proceeds from his stock sales, this is complicated?

Are you serious or kidding us?

in 2014 SPY was yielding about 1.85 %. Current yield like below 1.1%. Google it,!.1 percent is substantially below 1.85, trust me, your partner hc.

As someone who has only been able to buy B shares (I first came into some money in 1996), I would prefer no dividend no way no how. When I need money --or sense that my cash reserves could go a bit lower than comfortable -- I sell when the price is favorable to me. I see no reason why others can't go the same.

I don't want the tax consequences that come with a dividend. I'm sure plenty of BRK.B holders craft their selling to be under what the limits are for ACA help and/or SS tax penalties.

I suppose if us B shareholders were allowed a one-time conversion to A shares to mitigate an upcoming B share dividend that *might* work out.

SD

three minutes after the close a 1 million share block traded at 493, the unstable genius getting bullish?

I think the references to the 2014 dividend proposal aren't super helpful. Shareholders were voting on a specific proposal, not making a principled forever statement about dividends in any form. From the proxy statement (https://www.sec.gov/Archives/edgar/data/1067983/00...):
RESOLVED: Whereas the corporation has more money than it needs and since the owners unlike Warren are not multi billionaires, the board shall consider paying a meaningful annual dividend on the shares.

I would have voted against the proposal for two reasons:
1. I don't think that the company's dividend policy should be based on the fact that some owners aren't wealthy, and may need cash.
2. I am not in favor of regular, annual dividends.

But I'm surprised that so many people seem so opposed to dividends on principle. Two things can be true (and are true for me):
- I wish we were in a world where Berkshire had the ability to make good (i.e., at reasonable prices) and meaningful (i.e., sufficiently large to suck up incoming cash) investments in wholly-owned companies, marketable securities, add-ons to existing companies, and/or repurchases. You know, the things that Buffett says in his 2012 annual letter are superior to dividends (https://www.berkshirehathaway.com/letters/2012ltr...., starting on page 19).
- In a world where those conditions are not met over a sustained period of time, and when there's no obvious indication that things will change, I believe the company should pay a dividend. What might offer evidence of such a world? A multi-year buildup of cash far in excess of any needs for our existing operations.

If things continue on as they currently are (i.e., little attractive opportunities for investment within or outside the company, including Berkshire's own stock, as demonstrated by a continued buildup in cash), I think there are really only a couple of alternatives:
- Expand the universe of possible investments (including investments in broad-based market index funds)
- Relax the constraints for repurchasing stock (be willing to pay higher prices)
- Consider large, irregular cash dividends

I really don't see any defense for a *principle* that dividends shouldn't be paid, ever. Berkshire paying dividends isn't super appealing to me. But none of the other options are appealing to me either. I wish we weren't in the world we are in, where attractive investments are so hard to find. But I also am not interested in a Berkshire Hathaway that continues to retain all generated cash despite no demonstrated ability/willingness to invest it.

Anyway, the discussion in the 2012 letter is very good. An excerpt:

A profitable company can allocate its earnings in various ways (which are not mutually exclusive). A
company’s management should first examine reinvestment possibilities offered by its current business – projects to
become more efficient, expand territorially, extend and improve product lines or to otherwise widen the economic
moat separating the company from its competitors.

I ask the managers of our subsidiaries to unendingly focus on moat-widening opportunities, and they find
many that make economic sense. But sometimes our managers misfire. The usual cause of failure is that they start
with the answer they want and then work backwards to find a supporting rationale. Of course, the process is
subconscious; that’s what makes it so dangerous.

Your chairman has not been free of this sin. In Berkshire’s 1986 annual report, I described how twenty
years of management effort and capital improvements in our original textile business were an exercise in futility. I
wanted the business to succeed and wished my way into a series of bad decisions. (I even bought another New
England textile company.) But wishing makes dreams come true only in Disney movies; it’s poison in business.

Wow! By far the longest thread in a looong time - about such a petty thing. And that at the exactly wrong time, when the time seems to come ever closer when the cash hoard can be deployed. The Berkshire board losing faith in their company. Amazing --- and hopefully a sign I might soon be able to buy back the shares I sold beginning of the year.

POS to zero (as William used to say)

Look up the proposal and read how poorly it was written. Even those leaning toward favoring a dividend probably voted against it.

“ the board shall consider paying a meaningful annual dividend on the shares.“. For the record I never suggested that Brk “ pay a meaningful dividend.” Relative to our current cash position one dollar a share quarterly isn’t , material, but would be competitive to what spy currently yields. How much cash did Brk have in 2014? What did spy yield in 2014? What was the p/e of the top 10 holdings of spy in 2014? What is it now? Does Buffett still believe his wife should be 90 percent spy after he passes at today’s valuation? I think not. That’s why Uncle Warren should shock the world and agree to do a zoom call and address questions that long time partners have for the most generous control person of a public company during the past 50 years. Marc can screen the questions , no got yas, no tricks, it would be a terrific ending to an incredible life story. Come on Marc make this happen. Hc

“ Consider large, irregular cash Consider large, irregular cash dividends”. I do not propose “ large irregular” taxable events no way. I’m proposing a small quarterly div that is competitive to what spy currently yields, period, nothing more. Thank you for your attention to this matter lol.

" meaningful"

" having real importance or great consequences"

For the English majors here I looked it up, what I'm proposing is not material relative to our cash hoard.

A $1 per share annual dividend would be a rounding error. One could view the cash outflow as simply being one of Todd or Ted's money losing stock picks.

" A $1 per share annual dividend would be a rounding error. One could view the cash outflow as simply being one of Todd or Ted's money losing stock picks."


Correction, 1 $ quarterly dividend aka, 4 $ annual. It should be noted I did that math in my head!

Just a theoretical question: with dividend, one can hold the same numbers of share forever; with selling a small number of shares equal to 2% of dividend for example, the shares would eventually run out. How to explain this difference?

What is the point in debating dividends here? Nobody at Berkshire is paying any attention to what is debated or concluded here.
It's like Mrs. Johnson's 6th grade class deciding what Germany should do with their power plants.

Tex ,
Another hypothetical:
What if the dividend were to be offered in Stock (B shares)and not Cash??
SRH

Just a theoretical question: with dividend, one can hold the same numbers of share forever; with selling a small number of shares equal to 2% of dividend for example, the shares would eventually run out. How to explain this difference?


If company A pays out a 2% dividend, i.e. 2% of its share price, then it will lose 2% of it's value every year, compared to the alternative of an otherwise identical company B retaining all earnings. After 50 years, company A will be worth .98^50= 36.4% as much as company B. (Of course, if company A keeps growing in excess of 2% a year, its total value will be much higher, just not as high as company B. And despite the lower value of company A compared to company B, you will have received a lot of cash from company A, and if you don't pay too much tax and invest this money well, you may be doing just as well as if you owned company B.)

If, on the other hand, you own non-dividend paying company B and you make your own dividend by selling 2% every year, then you will end up owning .98^50 = 36.4% as many shares, with the same amount of cash as what you would have received from company A in dividends. Your value will be the same either way, except for the small difference in how dividends are taxed versus capital gains.

DTB

Once Greg is settled in as CEO does anyone not think that the dividend issue is going to be raised in a big way? Or do we seriously believe that Greg, Todd, Ted, etc. are going to deploy $250 billion making acquisitions, buying stocks, etc.? One way to do it would be to only have a special dividend....for example decided on in October, record date in November, and payable in December with the minimum amount being $1 per share. Each year at the October BOD meeting a decision would be made. And before this policy was initiated it would be clearly communicated to shareholders that it was not in any way guaranteed.

For those arguing for the "create your own dividend" I would say go back to when BRK purchased BNSF and did the 50-1 stock split for the B shares. For a LONG, LONG time the share priced was between $60-75 per share. At the time, especially with the BNSF earnings added in, I couldn't believe how undervalued BRK was and purchased as many shares as I could....still have them. What a terrible period that would have been to be selling pretending the sales were providing you a dividend.

with dividend, one can hold the same numbers of share forever; with selling a small number of shares equal to 2% of dividend for example, the shares would eventually run out. How to explain this difference?

Price

...plus the assumption that the stock in question will steadily grow over rolling 5-10 year periods.

(For the sake of simplicity, assume all of the following numbers are after tax and after inflation)

Let's say you have an income need of $10,000/year from the sale of 2% of your shares in year one, for a hypothetical stock that is selling at $100/share (i.e. you start out owning 5,000 shares, priced at $500,000)

The stock price grows, on average, 5%/year

So on Day One, you sell 100 shares @ $100, leaving you with 4900 shares.

One year later, you have 4900 shares, but the stock price is up 5% to $105, so the investment is worth $514,500.

You need $10,000. So you sell 95 shares, not 100. And, assuming the parameters hold (i.e. constant average rolling price growth), you never run out.

------------------

A modification of this is to say: I'll sell 2% of my currently owned shares each year.

So, year one you sell 100 shares of your 5,000.

Year two you sell 2% of your remaining 4,900 shares, or 98 shares. This nets you 98 * $105/share = $10,290

Year three you have 4,802 shares, now worth $110.25.

Selling two percent of that yields ~$10,600, and leaves you ~4,706 shares.

And, you never run out

--sutton

Your value will be the same either way, except for the small difference in how dividends are taxed versus capital gains.

...and any difference in the long run total return performance of the security because of the decision to pay a material dividend. Could be better (if they would otherwise have misallocated the money), could be worse (if they had been good/rational at such things).

Jim

<Selling two percent of that yields ~$10,600, and leaves you ~4,706 shares.

And, you never run out
>

That's interesting. My simple reasoning: if the share number is reduced every year, no matter how small, in finite time, the number will be reduced to a fraction. There is another way to explain it, if one sells 2% of shares a year, but the company also spits out extra 2% of share per share due to increasing value, then the total number of shares would remain the same.

<There is another way to explain it, if one sells 2% of shares a year, but the company also spits out extra 2% of share per share due to increasing value, then the total number of shares would remain the same.>

Maybe that's what BRK could do to satisfy those asking for dividends, split shares from 1 to 1.02 every year, and those want dividend could sell the 0.02 shares, those don't want dividend can keep the shares

Maybe that's what BRK could do to satisfy those asking for dividends, split shares from 1 to 1.02 every year, and those want dividend could sell the 0.02 shares, those don't want dividend can keep the shares

That's what I have been arguing with "Dividend Growth" investors for a long time. A dividend is just a tiny stock split where you don't have enough to get a whole share so you get the fractional share in cash.

Maybe that's what BRK could do to satisfy those asking for dividends, split shares from 1 to 1.02 every year, and those want dividend could sell the 0.02 shares, those don't want dividend can keep the shares

This fundamentally misunderstands the argument for considering dividends. I do not think that Berkshire should consider dividends because I want to get something valuable in my mailbox. Rather, I think the company is retaining cash far in excess of any demonstrated need or ability to deploy it. Issuing stock dividends does absolutely nothing to address this concern. At this point, I am still probably in favor of repurchases over dividends (and would prefer attractive investments in operations to both), but if the company is unwilling to repurchase at current prices and is unwilling/unable to deploy the cash elsewhere, I am left thinking that dividends are becoming more appealing every day as simply the lesser of two evils.

For those who are opposed to a cash dividend in any respect, 2 questions:
- Given that you seem comfortable with Berkshire holding cash indefinitely waiting for the opportunity to deploy it at some future date, are you in favor of large stock issuances right now when Berkshire is (as evidenced by a complete lack of repurchase activity at prices anywhere near here) not demonstrably undervalued? If not, why not? Did Berkshire just happen to land at exactly the right level of cash to be holding for future opportunistic deployment?

- Is there a maximum time horizon that you would be comfortable watching consistent cash inflow be retained rather than deployed in expansion, acquisitions, or repurchases? If so, how long is that horizon?

For those who are opposed to a cash dividend in any respect, 2 questions:
- Given that you seem comfortable with Berkshire holding cash indefinitely waiting for the opportunity to deploy it at some future date, are you in favor of...

I don't think anyone is in that camp...the word "indefinitely" is easily construed as forever, which would make it a bit of a straw man.

I'm happy for Berkshire to sit on cash for a while longer, because I think the "while" will be a reasonable time frame. It always has been in the past. They might cave in this time (they might have to), but I suspect not. And teh cash pile is huge, but not really that huge as a fraction of the size of the firm. Cash+fixed income as a % of investments has ranged from 31% to 65%, current figure 58%. Cash per se as a % of investments has generally been in the range of 19-39% this century, and only got above that about 5 quarters ago. The latest figure is definitely high at 56%, but this stretch with an unusually large cash allocation hasn't exactly been a long wait.

I strongly believe that cash will considerably outperform the great majority of equity investments over the next X months. Alas, I don't know what values of X make that prediction true. Wild guess 18 months plus or minus 18?

Jim
(just raised more cash today...)

I wonder how many posters here actually own brkb or follow the company, even just a little?

What are brkbs major holdings? Does aapl pay a quarterly div? Ko, AMX, BAC, CVX, KHC, V, IBM, WFC, has Buffett ever purchased any of those public securities? Buffett deliberately avoids stocks that pay a quarterly dividend?


This is even more embarrassing then when you all opposed my pounding the table for buybacks at material discount to IV in 2005.

Nothing here should shock us, unbelievable. Check the Mag 7, do any pay a small div?

I have an even more brilliant idea, a fake post that the company might respond too!

I Warren Buffett, in view of the current valuation of SPY, no longer believe it's prudent for retired investors to be 90 percent SPY. I have so much confidence in the management team I handpicked to follow me, I now believe it's more prudent to be 50 % spy 50 % brkb.

This portfolio should be less volatile and better diversified than all in SPY at this time, going forward.


Your Loving Uncle,

Warren Buffett.


Let's see if Buffett feels an obligation to update his all in SPY advice from decades ago.

Check the Mag 7, do any pay a small div?

I have always assumed that they pay a (usually trivial) dividend in the hope of broadening the investor base to include the dividend suckers, in a hope that it will pump the share price.

There is a large population of not-very-bright punters who assiduously seek dividends believing it's free extra money, seemingly forever incapable of understanding that it drives down the stock price by a corresponding amount so they are no better off.

There are many good reasons to invest in dividend payers and enjoy a cash stream, but it isn't exactly sophistication that would make an amateur buy Nvidia shares at over 50 times earnings because of the 0.02% yield. Or rule it out because there hadn't been one.

Jim

" I have always assumed that they pay a (usually trivial) dividend in the hope of broadening the investor base to include the dividend suckers, in a hope that it will pump the share price."


Can you name the last five large buys by Buffett that didn't include, sucker dividend payers?

You don't know that there are funds and private investors globally that cannot or will not buy non div paying stocks?



Does oxy pay a div? msft, aapl, meta,etc?

Suckers? Oh my.

Buffett may be buying AAPL and owning KO or AXP AND they happen to have a dividend. I have never heard him use the dividend as a reason to buy anything.

I think he likes receiving dividends. But he likes buying companies for a good price.

When he bought the Japanese stocks I don’t think he ever said they pay rich dividends as a reason. He thought the companies were too cheap.

<<< I think he likes receiving dividends. But he likes buying companies for a good price.>>>

Yes he does. But only after assuring himself that,
A) the company has a long history of the dividend paying ability. AKA, owner earnings.
B) are realistic about reinvesting excess A; for instance, in pear trees in an apple orchard.

Even inside of the Berkshire brood, a number of subs can’t allocate excess intelligently and simply send it upstairs. This is an acid test for managers in Buffett’s eyes.

In other words, the “Dividend suckers” (borrowed from Jim, previous post) ain’t no Buffett.

“ There is a large population of not-very-bright punters who assiduously seek dividends believing it's free extra money, seemingly forever incapable of understanding that it drives down the stock price by a corresponding amount so they are no better off.“ Dear Warren please start looking in the pink sheets for ideas and stop buying stocks that pay dividends, you sucker. This board is better than a weekend with Jlo or a comedy show in Vegas.

My simple reasoning: if the share number is reduced every year, no matter how small, in finite time, the number will be reduced to a fraction.

Well, technically, yes. But.

Take the model from my previous post https://www.shrewdm.com/MB?pid=-2&previousPostID=2... :

"Let's say you have an income need of $10,000/year from the sale of 2% of your shares in year one, for a hypothetical stock that is selling at $100/share (i.e. you start out owning 5,000 shares, priced at $500,000) (For the sake of simplicity, assume all of the following numbers are after tax and after inflation)"

To get below one share, a 2% annual depletion of 5,000 shares would take over 400 years.

More realistically: how long to get below a thousand shares? Above a thousand, one could sell 2% of the share count every year with three digits of precision and not have to divide single shares.

Well, 5,000 shares going to 1,000 is selling 80% of the position. At a straight arithmetic 2% year, using only the initial share count, it would still take forty years.

That's a long retirement. Call it Plan A

But, that's not what we're talking about. We're talking about selling two percent of the current share count each year.

With that Plan B approach, going from 5,000 to 1,000 shares would take almost eighty years.

-------------------

But (as they say on late-night TV ads), that's not all:

Remember that the security in question grows 5% after-tax, after-inflation each year

So, the $100/share stock you started with in forty years would be a $704/share security. At that time, you'll have a thousand shares (Plan A) or over 2,200 shares (Plan B)

Just about every stock* would have split a few times by then. Call it a net 7:1 split (not sure how you'd get there, but anyway), so you'd have either ~7,000 shares (A) or over fifteen thousand shares(B) of a $100 stock. In 2025 dollars.

So, no, you're not going to be worrying too much about a single, fractional share. For one thing, history suggests almost nothing* in this financial world can be reasonably expected to go forty years or more without significant rearrangements being necessary.

But it doesn't make a cogent argument for a dividend.

-- sutton

(*unless the ticker is late-20th/early 21st century BRK. And even those could be converted tax-free into B shares, for the same net effect to the typical retail owner)

Much of the conversation about the dividend thing is absurd, and wrong to boot. First of all, there is no evidence that a good company adding a dividend results in a higher stock price long-term. Second of all, a dividend results in a substantial drag over time when the owners plan to donate it at, or near, their death.

Take the Gottesman's for example (I've discussed this before a number of times), they owned Berkshire for about 50 years. Had Berkshire distributed a small dividend of 1.5% a year, then on average over the years, they would have paid roughly 0.5% a year in taxes. That comes to about 25% of the total overall. Furthermore, since the company would be distributing 1.5% a year, then growth would be about 1.5% lower (very roughly), then the company would have about 1.5% lower growth, so the stock price would be a little lower today. Instead of donating $1 billion to the medical school, they may have only been able to donate $600 million or so.

So if you claim that over time that foundations would receive MORE money by receiving dividend yielding stocks over non dividend stocks, that is probably an incorrect assertion.

Just a theoretical question: with dividend, one can hold the same numbers of share forever; with selling a small number of shares equal to 2% of dividend for example, the shares would eventually run out. How to explain this difference?

The shares would NOT run out, and financially it is almost the exact equivalent. Here's the numbers -

Let's say you own 10,000 shares of company A. And those shares are worth $100 each, and the company grows at 9%. If you want a 2% yield in cash from this investment, in the first year, you sell 200 shares for $20,000, or a 2% yield on that investment. In the second year, you sell 196 shares for $21,364, or a 2% yield on that investment. After 9% growth, that investment is now worth $1,068,200. In the 25th year, you will sell 123 shares for $97,430, or a 2% yield. And after 9% growth, that investment will be worth about $4.8M. In the 50th year, you will sell 74 shares for $507k. And at the end of that 50th year, the investment is worth about $25M.

Let's say you own 10,000 shares of company B. And those shares are worth $100 each, and the company grows at 9%. AND the company distributes a 2% dividend each year. In the first year, you will receive a 2% dividend of $20,000, and the value of the company will grow at 9% minus the 2% that it distributed. Same for the second year. Same for the 50th year. At the end of the 50th year, you will still receive that 2% yield, and you will have 10,000 shares, and the investment will similarly be worth about $25M.

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